Opinion ID: 755341
Heading Depth: 3
Heading Rank: 4

Heading: Losses at PSI Outlets

Text: 52 Another Rebel witness, Harry Holcombe, reviewed the income statements of ARCO's PSI stations and concluded that almost all the stations lost money during the alleged predatory period. Because ARCO sold PSI wholesale gas and PSI stations lost money, Holcombe stated that this demonstrated that ARCO was willing to lose money by pricing gas at its PSI outlets below the outlets' cost of obtaining the gas. 53 There are a number of reasons why this does not present a triable issue. First, the district court excluded Holcombe's testimony regarding economic measurements and concepts such as the measurement of below marginal or average variable cost selling, recoupment, and data supporting price discrimination. [ER p. 274] His testimony was restricted to general industry practices. Nevertheless, the district court in Rebel II chose to address his testimony so as to address the PSI method of determining cost. Rebel II, 957 F.Supp. at 1203 n. 20. 54 Second, PSI is a wholly-owned subsidiary of ARCO, and Holcombe stated that PSI had no independent existence. Under these circumstances, the price paid by PSI to ARCO is a transfer price, not a sale. Brown v. Hansen Publications, Inc., 556 F.2d 969, 971 (9th Cir.1977). If PSI and ARCO are a combined unit, the costs of ARCO and PSI together must be considered, not simply PSI's costs versus its sales. Vollrath, 9 F.3d at 1460-61 (if entities are considered a combined unit, then the appropriate consideration is the costs of the combined group to determine if the combined group sold below its costs); Caribe BMW, Inc. v. Bayerische Motoren Werke Aktiengesellschaft, 19 F.3d 745, 749 (1st Cir.1994) (100% ownership makes firm and subsidiary single person under Robinson-Patman Act). Finally, income statements such as those analyzed by Holcombe may show that PSI stations lost money, but such statements alone are not sufficient to show that below-cost sales were made. Janich Bros., Inc. v. American Distilling Co., 570 F.2d 848, 858 (9th Cir.1977) (as amended), cert. denied, 439 U.S. 829, 99 S.Ct. 103, 58 L.Ed.2d 122 (1978) (although conventional business records do provide information to use in calculating costs, the inclusion of other nonvariable costs in conventional records, such as depreciation, taxes, and licenses, means that a firm's marginal costs cannot be ascertained from conventional business records).