Argument of Speaker
Mr. Speaker: Justice Thomas has the opinion in 04-805, Texaco versus Dagher, and No. 04-814, Shell Oil versus Dagher.
Argument of Justice Thomas
Mr. Thomas: These cases come to us on writs of certiorari to the United States Court of Appeals for the 9th Circuit.
Petitioners Texaco and Shell Oil collaborated in a joint venture called Equilon Enterprises, Inc. to refine and sell gasoline to the western United States and to do so under the original Texaco and Shell Oil brand names.
Respondents, a class of Texaco and Shell Oil service-station owners, alleged that petitioners engaged in unlawful price-fixing when Equilon set a single price for both Texaco and Shell Oil-brand gasoline.
The Court of Appeals held that this pricing practice was per se illegal under Section 1 of the Sherman Act.
In an opinion filed with the Clerk today, we reverse the judgment of the Court of Appeals.
It is not per se illegal under Section 1 of the Sherman Act for a lawful, economically integrated joint venture to set the prices at which it sells its products.
Under our precedents, per se liability is reserved for those agreements that are so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality.
Price-fixing agreements between two or more competitors, known as horizontal price-fixing agreements, fall into the category of arrangements that are per se unlawful.
We are not presented with such an agreement here, however, because Texaco and Shell Oil did not compete with one another in the relevant market.
Instead, they participated in that market jointly through their investment in Equilon.
Throughout Equilon’s existence, Texaco and Shell Oil shared in the profits of Equilon’s activities in their role as investors, not competitors.
The Court of Appeals erred when it imposed per se liability by invoking the ancillary restraints doctrine.
That doctrine governs the validity of restrictions imposed by illegitimate joint venture or non-venture activities.
Here, by contrast, the challenged business practice involves the core activity of the joint venture itself; that is, the pricing of the goods produced and sold by Equilon.
The decision of the Court is unanimous.
Justice Alito took no part in the consideration or decision of these cases.
