Texaco, Inc. v. Dagher, 547 U.S. 1 (2006)
Primary Holding
A lawful, economically integrated joint venture is not per se illegal under §1 of the Sherman Act for setting the prices at which the joint venture sells its products.
In the case of Texaco, Inc. v. Dagher, Texaco and Shell Oil teamed up to create a joint venture called Equilon to refine and sell gasoline in the western U.S. Some gas station owners claimed this was unfair price fixing because Equilon set the same price for both brands. The Supreme Court ruled that this type of collaboration is not automatically illegal, which means companies can work together in certain ways without breaking the law. For consumers, this decision means that joint ventures can help companies operate more efficiently, potentially leading to better products and services. This case is relevant if you notice that two competing brands are working together and wonder if that might affect prices or competition in the market.
AI-generated plain-language summary to help you understand this case
In Texaco, Inc. v. Dagher, the underlying dispute arose from a joint venture formed in 1998 between Texaco Inc. and Shell Oil Company, known as Equilon Enterprises. This venture was established to refine and sell gasoline in the western United States under both Texaco and Shell Oil brand names. Respondents, a class of service station owners operating under these brands, alleged that the joint venture engaged in unlawful price fixing by setting a single price for gasoline sold under both brands. They argued that this practice violated the per se rule against price fixing as outlined in §1 of the Sherman Act. The procedural history of the case began when the respondents filed a lawsuit in district court, claiming that the unified pricing strategy constituted illegal price fixing. The District Court ruled in favor of Texaco and Shell Oil, granting them summary judgment and determining that the rule of reason, rather than a per se rule, should govern the case. The Ninth Circuit Court of Appeals subsequently reversed this decision, asserting that the petitioners were seeking an exception to the per se prohibition on price fixing. This led to the consolidation of separate petitions from Texaco and Shell Oil, prompting the Supreme Court to grant certiorari to address the application of the per se rule in the context of joint ventures. The relevant background context includes the competitive landscape of the oil and gasoline market, where Texaco and Shell Oil had historically been rivals. The formation of Equilon was approved by the Federal Trade Commission and various state attorneys general, with no restrictions placed on pricing. This joint venture aimed to consolidate operations and eliminate competition between the two companies in the domestic refining and marketing of gasoline, raising questions about the legality of their pricing strategies under antitrust laws.
Whether it is per se illegal under §1 of the Sherman Act for a lawful, economically integrated joint venture to set the prices at which the joint venture sells its products.
The judgment of the Court of Appeals is reversed.
- Court
- Supreme Court
- Decision Date
- January 10, 2006
- Jurisdiction
- federal
- Case Type
- landmark
- Damages Awarded
- N/A
- Data Quality
- high
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Consumer LostVertical price restraints, such as resale price maintenance agreements between manufacturers and distributors, are not per se illegal under §1 of the Sherman Act, but should be evaluated under the rule of reason to determine their competitive effects.
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