Texaco Inc. v. Dagher
Texaco Inc. v. Dagher, 547 U.S. 1 (2006), was a decision by the Supreme Court of the United States involving the application of U.S. antitrust law to a joint venture between oil companies to market gasoline to gas stations. The Court ruled unanimously that the joint venture's unified price for the two companies' brands of gasoline was not a price-fixing scheme between competitors in violation of the Sherman Antitrust Act. The Court instead considered the joint venture a single entity that made pricing decisions, in which the oil companies participated as cooperative investors. Facts Texaco and Shell Oil, historically competitors in the national and international oil and gasoline markets, formed a joint venture in 1998 called "Equilon" to consolidate their operations in the western United States, which ended competition between the two companies in the domestic refining and marketing of gasoline. Under the joint venture agreement, Texaco and Shell agreed to pool their resources and share the risks of and profits from Equilon's activities. Equilon's board of directors would comprise representatives of Texaco and Shell Oil, and Equilon gasoline would be sold to gas stations under the original Texaco and Shell Oil brand names. The formation of Equilon was approved by consent decree, subject to certain divestments and other modifications, by the Federal Trade Commission, as well as by the state attorneys general of California, Hawaii, Oregon, and Washington. The consent decrees did not impose any restrictions on the prices Equilon charged. Judgment District Court proceedings After Equilon began to operate, a class of 23,000 Texaco and Shell gas station owners filed a class action lawsuit in the United States District Court for the Central District of California, alleging that, by unifying gasoline prices under the two brands, petitioners had violated the per se rule against price fixing that the Supreme Court had long recognized under § 1 of the Sherman Act. The District Court awarded summary judgment to Texaco and Shell Oil. It determined that the rule of reason governed the plaintiffs' claim, under which only "unreasonable restraints of trade" were prohibited by the Sherman Act. Because they had eschewed rule of reason analysis, the plaintiffs had failed to raise a triable issue of fact. Ninth Circuit decision The Ninth Circuit reversed, ruling that the per se rule against price fixing instead applied, which conclusively presumed that the arrangement was illegal. The Ninth Circuit reached that decision by applying the ancillary restraints doctrine, which provided an exception from the rule of reason whenever a restraint on trade was not ancillary to the main purpose of an agreement. The court did not believe the oil companies had explained why the unified pricing for their two brands of gasoline was necessary to further the legitimate goals of the joint venture, and so reversed summary judgment. Texaco and Shell both petitioned for certiorari to the Supreme Court, which consolidated the petitions and granted certiorari to determine the extent to which the per se rule against price fixing applies to joint ventures. Supreme