Friday, January 13, 2006

Oral Arguments in Dagher case

On January 10, 2006, SCOTUS heard oral arguments in the much anticipated Texaco v Dagher and Shell Oil v Dagher cases.  Here's a link to some discussion and relevant case materials.   I have written a short review of the arguments for the ABA's Supreme Court Preview and will provide a link soon.  The case offers some important opportunities for the Court. 

The first is to extend the Copperweld rule that a wholly owned subsidiary and a parent are one entity for Section One purposes to the case of a joint venture.  The facts of Dagher involve the creation of a joint distribution and marketing venture by Shell Oil and Texaco.  The joint venture charged the same price for oil manufactured by Shell and that by Texaco.  Dagher, a station owner and named plaintiff in the class action, claimed that the single pricing by the joint venture constituted price fixing between Texaco and Shell Oil.  The oil companies argued that pricing was the unilateral choice of a single entity.   Although the oil companies cited Copperweld, I think it is unlikely that the court will extend the ruling to joint ventures.  The argument remains, as accepted by the Ninth Circuit, that the creation of the venture itself constituted the price fixing.

The Court will also have a chance to revisit the issue of quick look rule of reason and the broader question of characterization.  This tack could be an interesting aspect of the decision.   A few years in California Dental, the Court seemed to sound the death knell for the quick look approach.  But that case involved an FTC action, and the ruling may have rested on the agency's faulty assumptions and record about anti-competitive effects.   The Dagher case is a private antitrust action and may allow the Court to clarify the viability of the quick look approach in private actions.

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Shubha, thanks for reminding everyone of this important case. Let me add to your description that (i) Shell and Texaco *exited* the US market for gasoline refining and distribution, in other words, they did not compete with the joint venture; and (ii) that, consequently, the joint venture charged the same price for the oil that it, the venture, manufactured under the Shell and Texcao labels. The latter, I think, is critical. It is somewhat misleading to say that "[t]he joint venture charged the same price for oil manufactured by Shell and that by Texaco," because neither Shell nor Texaco were in the business of manufacturing oil in the US anymore. Your way of framing the issue led the majority down the path of finding liability. Dagher is not a case where Shell and Texaco agreed to charge the same price for *their* respective gas, but rather a case where two shareholders in a joint venture, Shell and Texaco, instructed the joint venture to charge a uniform price for *its* gas, sold under two different brands. The latter is not a Section 1 issue, because, strictly speaking, it is not an agreement between competitors; the former, in contrast, is arguably per se illegal.

Posted by: Hanno Kaiser | Jan 14, 2006 7:11:25 AM

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