Texaco v. Dagher: Opportunities Missed and Neglected

DOI10.1177/0003603X0705200308
Date01 September 2007
AuthorDaniel R. Shulman
Published date01 September 2007
Subject MatterA Continuing Symposium on Antitrust and the Roberts Court
THE
ANTITRUST
BULLETIN:
Vol.
52, Nos. 3&4/Fall-Winter 2007 :531
Lxaco
v. Dagher:
Opportunities missed
and neglected
BY
DANIEL
R.
SHULMAN*
I.
INTRODUCTION
The
Supreme
Court
said
in
Dagher'
that
it is
not
per se
unlawful
price-fixing in violation of section 1 of
the
Sherman
Acf
for a fully-
integrated
joint
venture
to set
the
prices at
which
it sells its
own
prod-
ucts.
Now
who
could
argue
with
that? As
one
of the
lawyers
for the
losing
side in
the
Dagher
case, the plaintiffs-respondents, I tell profes-
sional
colleagues,
seriously,
that
there
was
more
to
the
case
than
appears
from
the
Court's
opinion,
and,
jocularly,
that,
contrary
to
what
might
appear
from
the
opinion,
the
respondents
did
in fact file a
brief
in
the
Supreme
Court.
The
purpose
of
this
article is
not
to
attack
the
Supreme
Court's
decision,
but
instead
to
point
out
the
numerous
substantial
issues
that
*
Principal,
Gray, Plant, Mooty,
Mooty
&Bennett,
Minneapolis
and
counsel of record for the respondents in the
Dag!ler
case.
AUTHOR'S NOTE: Iiuould like to thank Sandi L. Deboom for assistance in the
preparation
of this
article.
Texaco Inc. v. Dagher, 126S. Ct. 1276 (2006).
15 us.c. §1 (2007).
'D
:?OO/I'II
Federal
Legol
Publication»,
[lie.
532 :
THE
ANTITRUST
BULLETIN:
Vol. 52, Nos. 3 & 4/Fall-Winter 2007
the case presented,
which
the
Court
failed to consider in its decision.
As
an
advocate
and
believer in the rightness of my clients' position,
of course
disappointed
by the result in
Dagher.
As a long-time, full-
time practitioner of
antitrust
law, I
was
even
more
disappointed
by
the failure of the
Court
to
address
the
many
serious issues
the
case
raised,
consideration
and
resolution of
which
could
have
provided
illumination
and
guidance
for
courts
and
practitioners
of
antitrust
law. In the history of
antitrust
law,
Dagher
will be only afootnote; it
could
have
been
achapter.
This article will briefly review the Supreme Court's decision (which,
given its brevity, can only be so reviewed), it will
summarize
the
fac-
tual
record actually before the
Court,
and
it will discuss
the
major
legal
issues
the
Court
chose
not
to
address.
These
include
(1)
the
reach of the
Coppenoeld
doctrine; (2)
standards
to be
applied
in
evalu-
ating
the
conduct
of
joint
ventures;
(3)
the
scope
of the
ancillary
restraints doctrine; (4)
proper
application of the perse
and
quick look
approaches in analyzing allegedly anticompetitive conduct; (5) alleged
efficiencies as a justification for otherwise anticompetitive mergers;
(6)
summary
judgment in antitrust cases (yes, again);
and
(7)
due
regard
for
antitrust
precedent.
The article concludes
with
a few observations on
what
the
Dagher
decision says
about
the current
Supreme
Court's
approach to antitrust.
II.
THE
DAGHER
OPINION
Dagher
was
a case in which a
number
of Shell
and
Texaco gasoline
dealers
sued
Shell
and
Texaco for price-fixing in violation of section 1
of
the
Sherman
Act.' Shell
and
Texaco
had
combined
their
United
States refining
and
marketing
operations in the United States
into
two
joint
ventures.'
Eight
months
after forming
the
ventures, Shell
and
Texaco
caused
the
ventures
to
charge
the
same
dealer
tankwagon
Joint
Appendix
at 1,
Dagher,
5~7
US.
_(No. 04-805) [hereinafter JA];
Appellants' Excerpts of Record, Transcript of 1 Record at 2, Dagher v.
Saudi
Ref., lnc., 369 F.3d 1108 (9th Cir. 2004) (No. 02-5(509) (filed Dec. 13, 2002)
[hereinafter Transcript of _ Record].
JA, supra note 3, at 73,
'll'll
6, 7.
TEXACO
V.
DACHER
533
prices for
the
Shell
and
Texaco
brands
of gasoline,
which
to
that
point
had
been
separately
and
differently
priced.'
The
plaintiff
dealers
chal-
lenged
this practice as a
violation
of section 1
under
either
the
perse
rule
or
the
quick
look
rule
of
reason.
The
plaintiffs
specifically
declined
to
proceed
under
the
full
rule
of reason."
After
losing
in
the
district
court
on
summary
judgment,'
the
plaintiffs
prevailed,
in a
2-1
decision, in
the
Ninth
Circuit,"
and
the
Supreme
Court
granted
certio-
rari
and
reversed."
A. The lower court decisions
The
district
court
originally
denied
a
defense
motion
to
dismiss,
ruling
that
"price
fixing
can
still be illegal per se
even
if it
accompa-
nies
an
efficient,
integrated
joint
venture.
If
the
joint
venture
could
function
perfectly
well
without
price
fixing,
then
the
price
fixing
amounts
to
no
more
than
an
extraneous,
anticompetitive
restraint
that
does
not
merit
rule
of
reason
analysis.'?"
After
discovery,
how-
ever,
the
district
court
granted
summary
judgment,
finding
that
fix-
ing
the
same
prices for
the
Shell
and
Texaco
brands
did
not
violate
section
1.
Reversing
the
district
court,
the
Ninth
Circuit
held
that
"whether
the
per se
rule
applies
to a
legitimate
joint
venture's
allegedly
anti-
competitive
conduct
depends
first
and
foremost
on
a
determination
of
whether
the specific
restraint
is sufficiently
important
to
attaining
the
lawful
objectives of
the
joint
venture
that
the anticompetitive effects
should
be
disregarded.""
The
proper
inquiry
is
whether
the
pricing
Brief for Respondents at 1,
Dagher,
126 S. Ct. 1276 (No. 04-805).
Id. at 3.
Oagher v. Saudi Ref., Inc., 2002
u.s.
Dist. LEXIS 27935
(CD.
Cal.
2002),
reo'd,
369 F.3d 1108 (9th Cir. 2004), reo'd sub nom. Texaco Inc. v. Dagher,
126 S. Ct. 1276 (2006).
Dagher
v. Saudi Ref.,369 F.3d 1108.
Dagher,
126 S. Ct. 1276.
'"
Transcript of 1 Record, supra note 3, at 14-15.
Dagher,
369 F.3d at 1121.

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