WASHINGTON, D.C. (February 1, 2005) — Members of McDermott Will & Emery's Antitrust Group prepared an amicus brief on behalf of the U.S. Chamber of Commerce and the National Association of Manufacturers in an appeal before the U.S. Supreme Court regarding Dagher v. Saudi Refining, a Ninth Circuit case which raises significant antitrust issues for joint ventures and companies considering joint ventures.
Texaco, Inc. and Shell Oil Company have appealed the Ninth Circuit's decision in Dagher to the Supreme Court, asking that the Court to review — and ultimately overturn — the case. 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 the antitrust laws as a "price fixing" scheme. In this case, Shell and Texaco 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, Equilon was responsible for the pricing decisions for the products it manufactured and owned — i.e., Shell and Texaco gasoline products. Contrary to the prevailing view that an antitrust challenge to a joint venture will involve consideration of the venture's procompetitive benefits, the Ninth Circuit found that Equilon's pricing of the its own products could a "price fixing" scheme — a per se violation of the antitrust laws. In other words, Equilon's pricing of its own products could be deemed facially anticompetitive and conclusively presumed to be illegal without considering the joint venture's procompetitive benefits.
The amicus brief supports the petitions for certiorari filed by Shell and Texaco, and argues that the Ninth Circuit's fundamentally flawed analysis will have a serious and resounding effect on the business community. More specifically, the amicus brief discusses the overall importance of joint ventures to the economy, and explains that businesses that form joint ventures do so with the understanding that, if challenged under the antitrust laws, their procompetitive benefits will be considered. By eliminating that understanding, the amicus brief argues that the Ninth Circuit's decision will undoubtedly chill the formation and operation of legitimate joint ventures and consequently limit the economic benefits that joint ventures offer — product innovation, investment, and job creation. Moreover, the decision exposes existing joint ventures to the possibility of extensive — and frivolous — litigation. The amicus brief urges the Supreme Court to review and overturn the case, and thus provide the business community with the clarity needed to ensure that joint ventures remain a viable economic form, and to ensure that existing joint ventures will not be subject to unwarranted per se condemnation.
A McDermott Will & Emery team, led by Ray Jacobsen, and including Miller Baker and Andrea Hamilton prepared the amicus brief in support of Shell's and Texaco's petitions to the U.S. Supreme Court.