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A lawsuit charging that the oil industry violated the Sherman Antitrust Act by sharing information on salaries for managerial, professional and technical workers has been reinstated by the 2nd U.S. Circuit Court of Appeals. Reversing a Southern District of New York judge’s dismissal of the antitrust action against Exxon Mobil, Texaco and 12 other oil producers, the court found that plaintiffs had alleged a triable case on the anti-competitive effects of a “Job Match Survey,” assembled by a third-party consultant for use by the industry. While the court reaffirmed that information-sharing by competitors is not per se anti-competitive, it also said it was troubled by the fact that the information in the survey in Todd v. Exxon Corp., 01-7091, was kept private. The decision will be published Monday. “In the instant case, dissemination of the information to the employees could have helped mitigate any anti-competitive effects of the exchange and possibly enhanced market efficiency by making employees more sensitive to salary increases,” said 2nd Circuit Judge Sonia Sotomayor. “No such dissemination occurred, however. The information was not disclosed to the public nor to the employees whose salaries were the subject of the exchange.” The name plaintiff in the class action was Roberta Todd, who charged that the exchange of salary information for managerial, professional and technical (MPT) workers, violated � 1 of the Sherman Act because it had the effect of keeping salaries artificially low. Southern District of New York Judge John E. Sprizzo granted the oil companies’ motion to dismiss, finding first that Todd failed to plead a “plausible product market,” and in so doing, hurt her claim that the oil producers controlled 80 percent to 90 percent of the relevant market. And even if the market were plausible, Judge Sprizzo said, Todd had failed to allege a market structure capable of being manipulated by collusive activity. The judge also found that Todd had failed to allege facts supporting an agreement by producers to fix salary levels and had also failed to show a detrimental effect on competition. But on the appeal, 2nd Circuit Judge Sotomayor said that Todd’s allegation “about the industry-specific expertise of MPT employees supports a plausible product market.” The judge cautioned that the court was not indicating whether Todd would succeed in proving the “alleged market.” “It remains to be seen whether every category of MPT employee in the plaintiff class can demonstrate the required degree of inelasticity,” Sotomayor said. “We find only that the allegation of a market limited to employers in the oil and petrochemical industry is plausible on its face.” The court said Judge Sprizzo, for purposes of the motion to dismiss, should have credited the plaintiff’s allegation that the oil industry’s own conduct and apparent perceptions “recognize the relatively low-level of cross-elasticity of demand for the services of MPT employees with experience in the oil and petrochemical companies … because they rely primarily on integrated oil and petrochemical industry salary information in setting salaries and wages.” The district court erred, she said, by requiring that “the different MPT jobs be interchangeable with one another, by rejecting plaintiff’s allegation about industry-specific experience on a Rule 12(b)(6) motion to dismiss, and by failing to consider allegations about industry recognition.” ON ‘SOLID GROUND’ Concerning Todd’s claim that the oil producers controlled 80 percent to 90 percent of the relevant market, Judge Sotomayor noted that “the Supreme Court has found that a data exchange can be unlawful despite a relatively large number of sellers,” in United States v. Container Corp. of America, 339 U.S. 333 (1969). “Given that the market concentration in this case is not radically different from that in Container Corp., and given that concentration is part of a rule of reason inquiry that also emphasizes the nature of the information exchanged, we do not think that 14 companies sharing an 80-90 percent market share is so unconcentrated as to warrant Rule 12(b)(6) dismissal where the nature of the exchanges appears anticompetitive,” Judge Sotomayor said. The judge said it was “unsurprising that data exchange cases may involve a number of participants that begins to push the boundaries of oligopoly.” “These players are MOST in need of such data exchange arrangements in order to facilitate price coordination,” she said. “A very small handful of firms in a more highly concentrated market may be less likely to require the kind of sophisticated data dissemination alleged in this case.” The 2nd Circuit disagreed that Todd failed to allege a market structure capable of being manipulated by collusive activity, or, in other words, that the jobs at the different companies were comparable or fungible enough so that the salary exchange could be used as part of a conspiracy to suppress salaries. “The jobs in question may not be inherently fungible, but since the purpose of the fungibility inquiry is to test whether defendants would be able to compare the positions for coordination purposes, the sophisticated techniques employed by defendants to account for the differences among jobs is extremely telling,” Judge Sotomayor said, noting that Todd was on “solid ground” in arguing that the exchange contributed to the fungibility of positions in the industry. Finally, in examining the nature of the information exchanged, Judge Sotomayor said that “applying the relevant criteria reveals anticompetitive potential in this case.” The judge said Todd had alleged that the information gathered was distributed to the companies several times a year — and that it was company-specific. “Courts prefer that information be aggregated in the form of industry averages, thus avoiding transactional specificity,” she said. And another important factor, she said, was whether the data is publicly available. “A final troubling aspect of the arrangement at issue is the fact that the defendants allegedly participated in frequent meetings to discuss the salary information, accompanied by assurances that the participants would primarily use the exchanged data in setting their MPT salaries,” Judge Sotomayor said. “In sum, the ‘nature of the information exchanged’ weighs against the motion to dismiss.” Second Circuit Chief Judge John M. Walker Jr. and Senior Judge James L. Oakes joined in the opinion. John F. Carney of Carney & McKay in Garden City, N.Y., was one of three lawyers from three different firms representing the plaintiffs. James C. Egan Jr. of Clifford, Chance, Rogers & Wells was one of the lawyers from several firms representing the defendants.

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