THE WALL STREET JOURNAL: Justices Debates Price-Fixing Case: Posted Wed 11 January 2006

In the gasoline price-fixing case, the justices -- led by Chief Justice John Roberts -- seemed skeptical of arguments by a lawyer for 23,000 gasoline distributors that ChevronTexaco Corp. and Shell Oil Co. violated antitrust laws and fixed prices. Chief Justice Roberts described the gasoline-distributors' arguments as "a very artificial hook." Other justices, including David Souter and Stephen Breyer, wondered whether the arguments were weak because the price was set by the legitimately formed joint venture.

In 1998, when ChevronTexaco was still Texaco, the company joined with Shell to form Equilon Enterprises and Motiva Enterprises to handle refining and marketing of their gasoline. The two ventures charged the same wholesale price for Texaco and Shell gasoline, which were sold as separate products under the companies' brand names. In 1999, several gasoline distributors filed a class action in California, alleging that Texaco and Shell had used Equilon to fix gasoline prices in violation of antitrust provisions of the Sherman Act.

Justice Scalia said he didn't believe the Federal Trade Commission would have approved the joint ventures -- as it had done -- if the two oil companies had dominated the market.

The court's decision could resonate across the business world, affecting how future joint ventures and mergers are structured, not just with oil companies. The ruling also could be significant in signaling how the Roberts court will interpret antitrust laws. (Texaco v. Dagher, and Shell Oil v. Dagher.)

Story on same subject, also from The Wall Street Journal...

LAW BLOG ARCHIVE

January 10, 2006, 2:15 pm

The New Yorker's Jeffrey Toobin on Reporter Testimony

Posted by Peter Lattman

The New Yorker's Jeffrey Toobin has a story this week on the increased demands for reporter testimony from the courts, which has alarmed both media lawyers and journalist groups.

January 10, 2006, 12:17 pm

Over at One First Street, NE . . .

Posted by Peter Lattman

While Ted Kennedy tried to box Judge Alito into a corner on this Vanguard recusal issue this morning, there was real work getting done over at the U.S. Supreme Court in the case of Texaco v. Dagher, an antitrust case that has far-reaching consequences for joint ventures.

At issue in Texaco v. Dagher: Whether two 1998 joint ventures made between Texaco and Shell to refine and market gasoline violated antitrust law when the companies agreed to set the price at which the ventures would sell their product.

In a controversial 2003 decision, the U.S. Court of Appeals for the Ninth Circuit reinstated a lawsuit brought by Los Angeles gas station owners over the joint ventures. The plaintiffs argued that Texaco and Shell conspired to fix gas prices nationwide, driving up pricing and forcing independent gas station owners out of business.

Despite that the joint venture received regulatory approval from the Federal Trade Commission, the Ninth Circuit found it unlawful — a "per se" violation of the antitrust laws — for the companies to establish a single price for their respective gasoline brands. The alliance's creation, wrote judge Stephen Reinhardt, "ended competition between Shell and Texaco throughout the nation in the areas of downstream refining and marketing of gasoline." (Texaco sold its interest in the joint ventures as a condition of its 2001 merger with Chevron Corp.)

In their brief to the Supreme Court, the oil companies argued that because their joint venture was a "plausible integration of business activity," the joint venture should be analyzed under the so-called rule of reason, a lesser standard that would allow the joint venture to proceed.

Several business groups including the U.S. Chamber of Commerce, Verizon, and the American Petroleum Institute have submitted amicus briefs on behalf of the oil companies, arguing that the Ninth Circuit's decision would discourage business combinations. At the court's request, the Justice Department also weighed in with its own brief, siding with the defendants.

Steven Sunshine, head of Cadwalader Wickersham & Taft's antitrust practice (and not involved in the case), agrees: "Application of a per se rule to joint ventures would condemn all joint ventures."

Sunshine hopes that the Supreme Court will use this case, along with Illinois Tool Works v. Independent Ink and Volvo Trucks v. Reeder-Simco (two other antirust cases pending this term), to reverse circuit court decisions which ruled against antitrust defendants. "Conventional wisdom among the antitrust bar is that the court took these three cases to overturn the use of presumptions creating blanket liability," says Sunshine.

Arguing the case for the defendants, Craig Stewart, a partner in Jones Day's San Francisco office; going to bat for the plaintiffs, Daniel Shulman of Minneapolis's Gray Plant Mooty.
 

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