On July 11, 2008, the Ninth Circuit affirmed dismissal of a franchisee’s tying claim regarding credit and debit card processing services that was nearly identical to a claim that Judge Posner rejected on June 23, 2008 in Sheridan v. Marathon Petroleum LLC. (See July 11, 2008 Post). In Rick-Mik Enterprises Inc. v. Equilon Enterprises, LLC, No. 06-55937, 2008 WL 2697793 (9th Cir. July 11, 2008), a franchisee claimed that the requirement that it use the franchisor’s credit and debit card processing services was tying in violation of Section 1 of the Sherman Act. The Ninth Circuit rejected this claim for the same reasons that the Seventh Circuit did in Sheridan. The Ninth Circuit affirmed dismissal because that the complaint lacked (1) allegations that Equilon had market power in the gasoline franchise market and (2) credit and debit card processing services was not a distinct product from the rest of the Equilon gasoline station franchise.

On June 23, 2008, the Seventh Circuit affirmed dismissal of a Marathon gas station franchisee’s claim that requiring the use of Marathon transaction processing equipment for transactions with Marathon gas cards violated the Sherman Act. Sheridan v. Marathon Petroleum Co. LLC, No. 07-3543, 2008 WL 2486581 (7th Cir. June 23, 2008). To state a claim for tying in violation of Section 1 of the Sherman Act, the franchisee had to plead, among other things, that Marathon had monopoly power and that sale of one product (the tying product) is conditioned on the purchase of another product (the tied product). Judge Posner found that the complaint lacked sufficient allegations of market power because “[n]o market shares statistics for Marathon either locally or nationally are given, and there is no information in that complaint that would enable local shares to be calculated.” Id. at *4. Judge Posner also found no tying because “[a]ll that [Marathon] has done is require its franchisees to honor Marathon credit cards and to process sales with them through the system designated by Marathon so that customers who use its cards have the same purchasing experience no matter which Marathon gas station they buy from.” There is no requirement that franchisees use the Marathon processing system for other credit cards. Although the issues in this case are straightforward, Judge Posner’s opinion is very useful in explaining under what circumstances a tying arrangement might be illegal.