## Facts

- Texaco Inc. and Shell Oil Co., historical competitors, formed Equilon Enterprises LLC in 1998 to combine their refining and marketing operations in the western United States.
- The joint venture pooled assets, shared risks and profits, and refined and sold gasoline under both the Texaco and Shell brand names.
- Federal and state regulators approved the joint venture through consent decrees requiring certain divestments, but imposing no limits on the prices Equilon could charge.
- Equilon set a single, unified wholesale price for Texaco-branded and Shell-branded gasoline sold to Texaco and Shell service-station dealers.
- A certified class of approximately 23,000 dealers sued, alleging per se unlawful horizontal price fixing under § 1 of the Sherman Act based on the unified pricing.

## Issues

1. Whether it is per se illegal under § 1 of the Sherman Act for a lawful, economically integrated joint venture to set the prices at which it sells its products.
2. Whether the joint venture’s unified pricing should be condemned as per se horizontal price fixing between the venture’s owners.
3. Whether the unified pricing constitutes an unlawful “ancillary restraint” subject to separate condemnation.

## Decision

- The Supreme Court reversed the Ninth Circuit and reinstated summary judgment for Texaco and Shell.
- The Court held that a lawful, economically integrated joint venture’s setting of product prices is not per se illegal under Sherman Act § 1.
- The Court concluded that Equilon’s unified pricing was an internal pricing decision of the venture, not a “naked” agreement between independent competitors.
- The Court rejected use of the ancillary-restraints doctrine because the pricing challenged was central to the venture’s business, not a restriction on nonventure activity.
- Because plaintiffs pursued only a per se theory and did not proceed under a rule-of-reason theory, they failed to show a triable issue once per se treatment was foreclosed.

## Legal Principles

- Sherman Act § 1 prohibits only unreasonable restraints of trade; per se rules apply only to categories of restraints that are plainly anticompetitive.
- Per se condemnation of horizontal price fixing targets agreements among separate competitors; a legitimate, economically integrated joint venture may be treated as a single firm for its core operational decisions.
- A joint venture’s setting of the prices at which it sells its own products, when the venture is lawful and integrated, is not per se unlawful price fixing under § 1.
- The ancillary-restraints doctrine concerns restraints imposed by a legitimate venture on nonventure activities; it does not convert the venture’s central pricing decisions into per se unlawful conduct.
- When per se treatment is unavailable, a plaintiff must proceed under rule-of-reason analysis to prove unreasonableness and anticompetitive effect.

## Conclusion

The Court held that unified wholesale pricing by a lawful, economically integrated joint venture is not per se illegal under Sherman Act § 1, treating the venture’s pricing as internal conduct of a single enterprise rather than a naked price-fixing agreement between competitors.


Texaco Inc. v. Dagher, 547 U.S. 1 (2006)