Equilon on the Docket

Texaco-Shell case to be heard by Supreme Court

Published in CSP Daily News

WASHINGTON -- The Supreme Court convened for a new session Monday with a number of cases on its docket that could have a huge impact on the business world, said CNN/Money.

In one antitrust case that affects the petroleum industry, Texaco & Shell Oil v. Dagher, the Federal Trade Commission (FTC) and Department of Justice's antitrust division are asking the high court to overturn an appeals court ruling that said a Texaco-Shell joint venture was guilty of price fixing.

A federal district court in California originally threw [image-nocss] out the case against the oil companies, saying that the venture, Equilon, is one entity allowed to charge one price. But the ruling was overturned by the 9th Circuit Court of Appeals in San Francisco in June 2004.

Texaco and Shell appealed to the Supreme Court.

In essence, the high court must decide if a joint venture can set prices as one corporate entity or if the two companies, Texaco and Shell, which each market gasoline products through the joint venture, must offer their gas station owners different prices to create a more competitive market, said the report.

Jeffrey Lamken of law firm Baker Botts told CNN/Money that if the Supreme Court were to maintain the appellate court's ruling, it would change the fundamental nature of joint ventures. "These two companies have a joint venture for processing and distribution of refined petroleum and while they agreed not to compete with each other, they still compete with other companies," he said.

If the high court decides that even within a joint venture, two companies would have to set competing prices, the joint venture system would probably collapse, resulting in a rash of mergers and spinoffs, the report said.