U.S. Supreme Court Reviews Key Joint Venture Decision
WASHINGTON, D.C. (September 12, 2005) —McDermott Will & Emery filed an amicus brief on the merits on behalf of the U.S. Chamber of Commerce in an appeal before the U.S. Supreme Court in Dagher v. Saudi Refining. The Court granted certiorari to review Dagher in June, 2005 and will hear the case in early 2006. Dagher, a case arising from the Ninth Circuit, raises significant antitrust issues for the business community.
The amicus brief, prepared by members of the Firm’s Antitrust Practice Group, urged the Court to reverse the Ninth Circuit’s decision in Dagher. The amicus brief argued that the Ninth Circuit’s fundamentally flawed legal analysis would chill the formation and operation of legitimate joint ventures if permitted to stand. The consequences of such a chilling effect are significant, given the economic benefits offered by joint ventures, including innovation, investment and job creation, among others.
In Dagher, a divided Ninth Circuit panel held that a pricing decision made by a legitimate, integrated joint venture could be subject to per se condemnation under Section 1 of the Sherman Act as a "price fixing" scheme. In the case, Shell Oil Company and Texaco, Inc. formed a legitimate, integrated joint venture (Equilon) which combined Shell’s and Texaco’s refining and marketing operations and was approved by the antitrust authorities. Upon the formation of Equilon, Shell and Texaco exited the market. Among other things, after it was formed, Equilon was responsible for pricing the products it manufactured and owned—i.e., Shell and Texaco gasoline products. The Ninth Circuit viewed Equilon’s post-formation conduct as a price fixing conspiracy, even though prices were determined by Equilon alone.
Concluding that Section 1 of the Sherman Act applied, the Ninth Circuit found that Equilon’s conduct could be deemed facially anticompetitive and conclusively presumed to be illegal without further analysis. This represented a significant deviation from well-settled precedent which makes clear that antitrust challenges to legitimate joint ventures must consider the venture’s procompetitive benefits. If permitted to stand, Dagher would subject the ordinary business decisions of legitimate joint ventures, such as pricing, to per se illegality. The Ninth Circuit’s decision thus created significant uncertainty for joint ventures and companies considering joint ventures.
The Firm’s Antitrust Practice Group previously filed an amicus brief to the Supreme Court on behalf of the Chamber in January, 2005, urging the Court to grant cert in this case. Given the gravity of the Ninth Circuit’s decision, the Supreme Court’s decision to review Dagher represented a significant victory for the Chamber.
A McDermott Will & Emery team, led by Raymond A. Jacobsen, Jr. and including Joseph F. Winterscheid, M. Miller Baker, Andrea L. Hamilton and Joseph N. Eckhardt, prepared the amicus brief that urged the Court to reverse the Ninth Circuit decision.
