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THE NEW YORK TIMES: Supreme Court Clears Oil Companies

Published: February 28, 2006
Filed at 3:31 p.m. ET
WASHINGTON (AP) — The Supreme Court on Tuesday threw out a lawsuit that accused two oil companies of inflating gas prices by at least $1 billion.
Justices unanimously said gas distributors did not prove that Chevron Corp. and Shell Oil Co., a U.S. subsidiary of Royal Dutch Shell Plc, violated antitrust laws in the joint venture, which ended four years ago.
Justice Clarence Thomas, writing for the court, said the companies had a legal partnership. ''The pricing decisions of a legitimate joint venture do not fall within the narrow category of activity that is per se unlawful'' under federal law, Thomas said.
At the time of the deal in 1998, Texaco was independent from Chevron. The company joined with Shell to form enterprises to handle refining and marketing of their gasoline.
Gas distributors filed a class-action lawsuit in California, alleging that Texaco and Shell had used the partnership to fix gas prices in violation of antitrust provisions of the Sherman Act.
A ruling in favor of the gas distributors would have had broad implications for business mergers beyond the oil industry.
Representatives of Chevron and Shell lauded the decision.
''As the Supreme Court noted, the joint venture, which no longer exists, was extensively reviewed and approved by the federal government's antitrust enforcement agency, the Federal Trade Commission,'' Chevron spokesman Donald Campbell said. ''It was also reviewed by four state attorneys general, who similarly concluded that the venture was not anticompetitive.''
A lawyer representing the plaintiffs did not immediately return a call seeking comment.
The case was argued at the court last month, and justices signaled then that they were not concerned that the giant gas companies went too far. Chief Justice John Roberts said that joint ventures must price their products, and it shouldn't matter whether they are sold as a new brand or under the Shell and Texaco labels.
Gas price-fixing has been a sensitive subject over the past year for Americans who experienced surging prices that exceeded $3 a gallon in many parts of the country.
A trial court judge dismissed the lawsuit against the oil companies. But the San Francisco-based 9th Circuit U.S. Court of Appeals ruled there was evidence that the ventures had improperly restrained trade.
The high court erased that decision. Justice Samuel Alito did not participate in the case because he was not on the court when the appeal was argued.
The cases are Texaco v. Dagher, 04-805, and Shell Oil v. Dagher, 04-814.
Shares of Chevron fell 59 cents to $56.51 on the New York Stock Exchange, where those of Royal Dutch Shell declined by 50 cents to $60.41.
In the past year, Chevron has traded in a range of $49.50 to $65.98, and Royal Dutch Shell has traded between $57.79 and $68.45.
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