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Gas LDC Must Answer Antitrust Suit by Marketer

Fortnightly Magazine - January 15 1997

By reversing a ruling by a federal district court judge, the United States Court of Appeals for the Ninth Circuit has effectively reinstated an antitrust suit by a natural gas marketer against Washington Natural Gas Co., a natural gas local distribution company (LDC), charging the LDC with "off-tariff" pricing and other practices designed to favor commodity sales over transport-only customers who buy their own gas directly, such as from marketers.

In reinstating the complaint, the appeals court denied any "state action immunity" against antitrust claims. As the court explained, the proper test of whether state action immunity applies is not whether regulators may have "displaced competition in a market with a regulatory structure," but rather, whether the adopted system of regulation permits the alleged conduct.

The appeals court ruled that the filed-rate doctrine (presuming that state-approved rates are reasonable) also would not bar the action, because the doctrine was meant to discourage antitrust suites by customers (em not competitors, such as marketers.

It added that a state statute appeared to support allegations by the gas marketer that "off-tariff pricing" was illegal under Washington law (em a fact that, if true, would override any state action immunity. Cost Mgmt. Servs., Inc. v. Washington Nat. Gas Co., 99 F.3d 937, Nov. 7, 1996 (9th Cir.).

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