January 11, 2006
Other Supreme Court News
Posted by Christine Hurt

While the Alito hearings are taking center stage, the Supreme Court is actually working.  Yesterday, the court heard oral argument in Texaco v. Daugher, an antitrust case in which gas distributors claim that two joint ventures between Shell and Texaco to sell gas downstream violated the Sherman Act.  From what we hear about the oral argument from friends who were there, the justice weren't buying it.  I'm sure my perception is colored by the fact that my husband represented Shell in cases brought by gas distributors and dealers/lessees, and sometimes dealt with the JVs in question.

Although the plaintiffs believe that these JVs gave Texaco and Shell the power to set above-market prices, the FTC approved the creation of these ventures.  Also, during this time large oil companies were merging without much fuss, such as the ExxonMobil merger and many smaller mergers.  In fact, the ventures came to an end when Texaco merged with Chevron and had to divest them.  I would posit that had Texaco and Shell wanted to merge in 1998, that they eventually would have been allowed to do so by the FTC with only some cosmetic divestitures.  (Shell would have had no interest in merging with Texaco.)  Therefore, if Shell and Texaco could have achieved the same result by merging legally, the theory that by creating a joint venture (approved by the FTC) that set a uniform price is illegal is somewhat strained.

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