Opinion ID: 775962
Heading Depth: 3
Heading Rank: 2

Heading: Fungibility

Text: 45 The district court also asserted that even if the proposed market were oligopolistic, plaintiff still could not establish its susceptibility to the exercise of market power through tacit coordination. The `products' in her proposed market are, as discussed above, far from fungible. Todd, 126 F. Supp. 2d at 327. The district court apparently refers to its previous discussion of interchangeability, wherein it argued that the various types of jobs included in the MPT category are vastly different from one other. Id. at 325. 46 It is important to bear in mind the context in which the fungibility question arises. The inquiry is one part of the question of whether the market is susceptible to the exercise of market power though tacit coordination. Fungibility is relevant on this point because it is less realistic for a cartel to establish and police a price conspiracy where it is difficult to compare the products being sold. See Donald S. Clark, Price-Fixing Without Collusion: An Antitrust Analysis of Facilitating Practices After Ethyl Corp., 1983 Wis. L. Rev. 887, 896 (1983) (explaining how product heterogeneity makes it difficult for a cartel to achieve a consensus). In contrast, [f]ungible products facilitate coordination of pricing in a concentrated industry because it is easier to determine and monitor a consensus on some competitive variable. Brian R. Henry, Benchmarking and Antitrust, 62 Antitrust L.J. 483, 496 (1994). Therefore, fungibility plays a significant role in evaluating the anticompetitive potential of an information exchange. 47 The question in this case is whether jobs at the various oil and petrochemical companies were comparable, or fungible enough so that the defendants could have used the exchanged information as part of a tacit conspiracy to depress salaries. Compare Gypsum, 438 U.S. at 426 (gypsum board is fungible), Container Corp., 393 U.S. at 337 (corrugated containers are fungible), and Flav-O-Rich, Inc. v. N.C. Milk Comm'n, 593 F. Supp. 13, 15 (E.D.N.C. 1983) (milk is fungible), with Stephen Jay Photography, Ltd. v. Olan Mills, Inc., 713 F. Supp. 937, 944-45 (E.D. Va. 1989) (yearbook photographers competed primarily on basis of quality not price and thus the product was not fungible), and Rosefielde v. Falcon Jet Corp., 701 F. Supp. 1053, 1066 (D.N.J. 1988) (business jets are not fungible). 48 As an initial matter, the district court's discussion about the clear differences among the various types of MPT jobs is inapposite. Plaintiff alleges that the information exchanged by defendants related to specific job categories - not to MPT employment in general. Compl. ¶¶ 50-66. Therefore, the fact that a job as an attorney and one as a geologist are not comparable does not bear on the ability of defendants to coordinate salaries. Rather, the relevant question is whether jobs within each category are fungible enough across the oil and petrochemical industry to allow for such coordination. 49 One might argue that the jobs still are not fungible - even within each category of MPT employee. Varied jobs in a complex industry are far less fungible than, say, a product such as corrugated containers. Services generally tend not to be fungible or susceptible to standardization, see Clark, supra, at 938, and it is unlikely that these fourteen different companies would have positions with job descriptions that precisely match one another. Even this argument, however, is complicated by the specific facts of this case, coupled with the policy rationale behind the fungibility inquiry. 50 Plaintiff's complaint alleges in detail the sophisticated techniques defendants used to achieve a common denominator with respect to the compensation paid to their MPT employees. Compl. ¶ 50. Defendants developed the Job Match Survey because they realized it was not functionally efficient simply to know what each others' employees were being paid unless they were able to horizontally match the various job classifications. Id. The survey revolved around certain benchmark jobs provided by Chevron. The defendants would submit detailed information relating to the jobs most nearly comparable to the benchmark jobs so that they could be matched. A `match' is defined as a similar job in a similar organization whose combined reporting functions and scope adjustments are not more than two survey salary grades above or below the benchmarked job. Id. ¶ 51. Plaintiff alleges that, during the relevant time period, Exxon was able to match 70-80% of its jobs to the 155 Chevron benchmark positions. Id. ¶¶ 62-63. Furthermore, because not all jobs could be matched precisely, the defendants agreed upon certain offsets reflecting the specific differences between jobs as a percentage figure. Id. ¶ 53. For purposes of the survey, each grade level was assumed to have a salary difference of 14% at its midpoint. The offset factor assigned to each job was thus stated as a fraction of 14% - a positive fraction for jobs with greater responsibilities than the Chevron benchmark job and a negative fraction for jobs with lesser responsibilities. Id. ¶¶ 53-54. Defendants even devised a formula to enhance the comparability of non-cash benefits afforded to MPT employees in their Long Term Incentive Survey. Id. ¶ 83. 51 Plaintiff is thus on solid ground when she argues that defendants made their own employees' positions `fungible' for comparison purposes with those of their competitors. 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 are extremely telling. See VI Areeda, supra, ¶ 1435b, at 224 ([A]greed steps might be taken to reduce the product or transactional variety that impedes rivals' ability to match product variations, to compare transactions, or to detect `cheating' from parallel uniformity.).