Pandora's Box?

Supreme Court will hear Shell-Texaco pricing case

Published in CSP Daily News

WASHINGTON -- The U.S. Supreme Court said it would decide the antitrust liability of a joint venture that sets the same selling price for different brand products in a case involving a gasoline price-fixing lawsuit against Shell Oil Co. and Texaco Inc., reported Reuters.

The justices agreed to hear appeals by the two oil companies of a U.S. appeals court ruling that the antitrust law's automatic prohibition against price fixing applied to the economic arrangements under their two joint ventures. They will hear arguments and then issue a ruling in the [image-nocss] case during the term that begins in October.

The appeals court reinstated a lawsuit brought by 23,000 gas station owners in the western United States who said the two companies conspired to fix prices for their gasoline brands through the two joint ventures set up in 1998.

The joint ventures took over the gasoline wholesaling and retaining operations of the two companies. Equilon Enterprises, operated in the U.S. West, while Motiva Enterprises, covered the eastern United States. Texaco left the joint venture when it merged with Chevron Corp. in 2001 to form ChevronTexaco Corp. (which recently reverted to the Chevron Corp. name)

A federal judge in Los Angeles dismissed the lawsuit, but the California-based appeals court ruled it could go forward. The appeals court said the companies could be held liable for price fixing under federal antitrust law because the joint ventures priced Texaco and Shell gasoline the same.

The companies have said the U.S. Federal Trade Commission approved the two joint ventures and that they cannot be held liable under the antitrust laws.

The U.S. Justice Department supported the oil companies and urged the Supreme Court to correct the appeals court's ruling. It said the appeals court made a serious mistake by ruling that an agreement between the owners of a lawful joint venture to price their products the same may be treated, just by itself, as a violation of the antitrust laws.

"There is no basis for serious suggestion in this case that the formation of Equilon was a mere sham designed to mask cartel conduct," Solicitor General Paul Clement of the Justice Department told the high court.

The Chamber of Commerce business group and the National Association of Manufactures also supported the appeal by the two oil companies. The Washington Legal Foundation, a conservative public interest legal group, warned that the appeals court ruling "would open a Pandora's box of antitrust liability for joint ventures."