Friday, March 3, 2006
On Feb 28, the Supreme Court ruled in favor of Texaco and Shell Oil in Texaco v. Dagher. Argued in early January, the Dagher case involved a challenge to the pricing practices of Equilon, a joint venture of Texaco and Shell Oil for the production and distribution of oil in the Western US. The district court ruled in favor of Texaco and Shell Oil, concluding that the pricing practices resulted from the unilateral decision of Equilon rather than the collusive efforts of Texaco and Shell Oil. The Ninth Circuit reversed, holding that Equilon's pricing was collusive under the ancillary effects doctrine. The Supreme Court, in an 8-0 opinion downloadable below, reversed the Ninth Circuit, following the reasoning of the district court. While not expressly creating an exemption for joint ventures from Section One claims (as Texaco and Shell Oil had urged), the Court concluded that when competitors pool resources and risk by creating a joint venture in a market where they no longer operate, pricing decisions are unilateral and not collusive.