Tuesday, November 15, 2005

US to argue for legal collusion between oil companies before Supreme Court

In one antitrust case, Texaco and Shell Oil v. Dagher, the Federal Trade Commission and Department of Justice's antitrust division are asking the high court to overturn an appeals court ruling that said a Texaco-Shell joint venture was guilty of price fixing.

A federal district court in California originally threw out the case against the oil companies, saying that the venture, called Equilon, is one entity allowed to charge one price. But the ruling was overturned by the 9th Circuit Court of Appeals in San Francisco in June 2004. Texaco and Shell, two of the nation's biggest oil companies, appealed to the Supreme Court.

In essence, the high court must decide if a joint venture can set prices as one corporate entity or if the two companies, Texaco and Shell, which each market gasoline products through the joint venture, must offer their gas station owners different prices to create a more competitive market.

Jeffrey Lamken at the law firm Baker Botts said that if the Supreme Court were to maintain the appellate court's ruling, it would change the fundamental nature of joint ventures.

"These two companies have a joint venture for processing and distribution of refined petroleum and while they agreed not to compete with each other, they still compete with other companies," he said.

If the high court decides that even within a joint venture, two companies would have to set competing prices, the joint venture system would probably collapse, resulting in a rash of mergers and spin-offs.
Three [Cases] to watch before the Supreme Court

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