Price-Fixing at the Pump. Is the OPEC Oil Conspiracy beyond the Reach of the Sherman Act?

Article excerpt

I. INTRODUCTION

In both the U.S. Senate and the U.S. House of Representatives, resentment has been building (1) against the relentless increases in the price of oil (2) resulting from the cornering of the oil market by the Organization of Petroleum Exporting Countries ("OPEC"). (3) At the 106th Congress, Rep. Benjamin Gilman (R-N.Y.), chairman of the House International Relations Committee, introduced two bills targeting OPEC's pricing practices. (4) The first piece of legislation would have barred countries participating in the OPEC cartel from receiving U.S. economic or military aid. (5) Because few OPEC member states receive significant foreign aid from the United States, that legislation, if enacted, was expected to have little impact. (6) The bill would also have required the Administration to review its policies with respect to international financial institutions funded in part by the United States, such as the World Bank, to ensure that they do not indirectly support OPEC's price-fixing activities. (7)

More interestingly, the second bill introduced by Rep. Gilman would have allowed U.S. citizens to sue foreign energy cartels. (8) In the Senate, a number of proposals to facilitate lawsuits against OPEC were also floated. Sen. Mike DeWine (R-Ohio) introduced legislation that would allow the Department of Justice to sue foreign countries, such as OPEC members, for price-fixing activities. (9) Moreover, describing OPEC as "an old-fashioned conspiracy in restraint of trade," (10) two senior senators, Arlen Specter (R-Pa.) and Joe Biden (D-Del.), wrote a letter to President Clinton urging him to immediately institute legal action against OPEC. (11)

Sens. Specter and Biden suggested legal action on two fronts. First, the U.S. should file a lawsuit before the International Court of Justice at the Hague, on the grounds that conspiracies and cartels in restraint of trade are a violation of international law. (12) Second, the United States should pursue OPEC in federal court, on the grounds that OPEC's price-fixing behavior violates U.S. antitrust law. (13) Sens. Specter and Biden were quick to recognize that any lawsuit against OPEC, particularly if undertaken by private individuals, would face considerable roadblocks under current legal doctrines and well-established precedents. (14) Legal experts generally share this view and regard lawsuits against OPEC with some degree of skepticism. (15)

Sens. Specter and Biden also favored legislation that would remove legal obstacles and ease the deeply ingrained discomfort of U.S. courts confronting antitrust claims involving foreign sovereigns. (16) Even under current law, however, it is not perfectly clear that a U.S. court would necessarily reject an antitrust claim against OPEC, particularly if sponsored by the Justice Department. After all, it has been over twenty years since the last such lawsuit, filed on behalf of a trade association of transport workers, met a negative response in the Ninth Circuit. (17)

This article is intended as a roadmap for practitioners and policy analysts interested in the legal obstacles that prevent litigants from successfully pursuing antitrust claims against OPEC, effectively sanctioning the cartel's price-fixing activities. OPEC's antitrust conspiracies expressly violate the language of the Sherman Act (18) and related legislation. (19) However, under current legal precedents (20) and absent specific sponsorship by the Executive, an antitrust lawsuit against OPEC is unlikely to succeed. This article argues that although the judicial bias against such litigation is clear, there is no fundamental legal reason why it may not ultimately be successfully pursued. It has been the long-standing policy of the U.S. government, clearly articulated by the Clinton administration, not to implicate OPEC member states in antitrust litigation. (21) Should the Executive announce a contrary policy, however, the judicial bias against OPEC-related claims probably would change. …