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Illinois District Court Dismisses Antitrust Case Alleging Monopolization Of Transportation Services For Canadian Crude Oil In Chicago
01/31/2025
On January 13, 2025, the United States District Court for the Northern District of Illinois granted defendant’s motion to dismiss plaintiff’s claim that it monopolized the market for “Canadian crude oil transportation services in the Chicago area” in violation of Section 2 of the Sherman Act and similar Illinois statutes, which require harmonization with federal laws.
Plaintiffs’ complaint concerned access to pipelines that transport Canadian crude oil through the Chicago area to the refineries in the southern Midwest and the Gulf Coast. Defendant owns three pipelines that enter the Chicago area and three of the four pipelines that continue south. The fourth pipeline that exits south of Chicago is owned by a joint venture between two parties, one of which is defendant. The joint venture and its other owner were dropped after plaintiff amended its original complaint.
Plaintiff alleged defendant used its voting power on the joint venture’s board (two of the four seats) to veto a fully negotiated business arrangement with plaintiff. The proposed, unsigned agreement would have provided plaintiff with access to Canadian crude oil from the joint venture’s pipeline that it could then transport to refineries south of Chicago by barge on the United States’ navigable waterways.
The Court dismissed plaintiff’s claims because it failed to adequately allege defendant (i) had monopoly power in the alleged market and (ii) had “engaged in willful acquisition or maintenance of monopoly power” by refusing to work with plaintiff. Failing to meet the first requirement is itself sufficient for the Court to dismiss plaintiff’s Section 2 claims.
With respect to monopoly power, the Court determined plaintiff did not plausibly allege a relevant market. Plaintiff’s narrow definition of the geographic market failed to account for alternative transportation routes for crude oil that refineries could use, such as routes that circumvented the Chicago area. Similarly, confining the alleged product market to crude oil from Canada did not explain why refineries could not substitute crude oil from other sources, such as from within the United States. Without accounting for potential substitutes available to refineries, the Court could not reasonably infer defendant had monopoly power, an essential element to a monopolization claim. Although this was grounds enough to dismiss the case, to determine whether to do so with or without prejudice, the Court went on to assess the adequacy of the remaining elements of plaintiff’s antitrust claims.
Plaintiff’s allegation of willful acquisition of monopoly power by defendant was based on two theories: (i) an unlawful refusal to deal and (ii) a violation of the essential facilities doctrine. For the first, courts look to the existence of a “prior, voluntary, and profitable course of dealing” when determining whether a party’s refusal to deal is of the kind that violates the antitrust laws. Although plaintiff argued this was not a necessary factor, the Court concluded the lack of this showing put the “refusal to deal claim on the thinnest of ice.” The Court then determined plaintiff did not provide sufficient evidence to support other indicative factors, such as that the proposed facility would have been a profitable transaction for Defendant. Unable to find any factors in favor of plaintiff’s theory, the Court could not find defendant had illegally refused to deal.
After acknowledging that the validity of the essential facilities doctrine has been subject to question, the Court nonetheless reviewed the claim since the Supreme Court has not yet repudiated the doctrine. The Court found that plaintiff was the only one of defendant’s potential competitors that allegedly required access to the joint venture’s pipeline. As such, the essential facilities claim failed because “a facility does not become essential simply because access to it best suits the economic and business needs of a single rival.”
The Court dismissed with prejudice plaintiff’s federal antitrust claim based on an allegedly unlawful refusal to deal after it determined that no amendment could revive a claim where there was no prior course of dealing between plaintiff and defendant. The Court then dismissed plaintiff’s claim alleging a violation of the essential facilities doctrine without prejudice but warned plaintiff that the distance between its current complaint and a version that plausibly states an essential facilities claim is “not small.” The Court also noted that an amended complaint would have to include “substantially bolstered allegations about the contours of the market and [Defendant’s] place in it.” Based on the Court’s findings, plaintiff would likely need to expand their market definition in any future amended complaints for consideration of additional methods of delivering crude oil beyond pipeline-based transportation, as well as additional sources of crude oil beyond Canada.
