Supreme Court Rules for Joint Ventures

Justice Thomas asserts that the ChevronTexaco-Shell joint venture has the discretion to determine the prices of the products that it sells.
Stephen TaubMarch 1, 2006

There’s good news for rivals that want to team up in a joint venture. The Supreme Court unanimously rejected a lawsuit that claimed that a joint venture between Chevron and Shell Oil illegally inflated gasoline prices, according to USA Today.

“If it went the other way, it would have essentially put every joint venture at risk,” Steve Newborn, who worked on the formation of the Chevron joint venture, told the paper. “The Supreme Court, not surprisingly but thankfully, found that legal joint ventures are pro-competitive.”

The ruling stemmed from a lawsuit brought by 23,000 gas station owners in the western United States who said that the two energy giants conspired to fix prices for their gasoline brands through the joint ventures, according to Reuters.

Earlier, a trial court judge dismissed the lawsuit against the oil companies. However, a U.S. Appeals Court ruled that there was evidence that the ventures had improperly restrained trade, according to USA Today. The Supreme Court decision overturns the appeal, according to the report.

“The pricing decisions of a legitimate joint venture do not fall within the narrow category of activity that is per se unlawful,” Justice Clarence Thomas wrote for the court, reported the paper. Thomas also noted that a joint venture, like any other company, “must have the discretion to determine the prices of the products that it sells,” reported marketwatch.com.

If the lower court ruling was upheld, the validity of joint venture deal would have been questioned, sending “people scrambling to reconfigure their arrangements,” said William Baer, a former antitrust chief at the Federal Trade Commission who helped write the joint venture guidelines related to antitrust law, noted USA Today.

Baer, now an antitrust lawyer, told the paper that some of the conditions of a legitimate joint venture include a endeavor that results in creation of a product or service that might not otherwise have been created; or when the venture boosts output or efficiencies, which can save consumers money. In this case, ChevronTexaco teamed up with Shell to create businesses specializing in refining and marketing their gasoline.