Texaco Inc. v. Dagher and Shell Oil Co. v. Dagher (consolidated)
Dagher and about 23,000 other Texaco and Shell station owners sued Texaco, Shell Oil, and Saudi Refining Inc. (SRI), alleged that the companies were using two joint ventures to create a price fixing scheme that violated section 1 of the Sherman Antitrust Act. In 1998, SRI, Shell, and Texaco formed an alliance intended to enhance efficiency and reduce competition in their refining and marketing of gasoline. This agreement set up two joint ventures: “Equilon Enterprises,” which focused on Texaco and Shell operations in the Western United States, and “Motiva Enterprises,” which focused on Shell, SRI and Texaco operations in the eastern United States. Based on a large record of economic data, the companies estimated that the agreement would save nearly $800 million in annual costs. To further facilitate this alliance, Shell and Texaco signed non-competition agreements, which barred either company from competing with Equilon or Motiva.
The plaintiffs’ price fixing accusation rests on the per se or “quick look” theory of liability. The district court granted summary judgment in favor of SRI because the plaintiffs had never purchased gas from SRI or Motiva. The district court judge also granted summary judgment in favor of Shell and Texaco, finding that given the complexities involved in the creation of Motiva and Equilon, shown by the extensive record, no rational jury would find the ventures to be mere window dressing for a price fixing conspiracy, thereby negating the “quick look” rule of liability. The Ninth Circuit Court of Appeals affirmed the summary judgment in favor of SRI, but reversed the summary judgment in favor of Texaco and Shell, finding that price fixing carries inherent suspicions with it and the record contained enough evidence to support a per se theory of liability.
Question Presented:
Whether it is illegal per se under Section 1 of the Sherman Act for a lawful, economically integrated joint venture to set the prices at which the joint
venture sells its products?
