Shell Oil and Texaco, with the approval of the Federal Trade Commission, formed two separate joint ventures. One joint venture, Equilon Enterprises, combined Shell’s and Texaco’s downstream operations in the western United States. The other venture, formed by Texaco, Shell, and Saudi Refining, named Motiva Enterprises, combined the three companies’ downstream operations in the eastern United States. Under the joint venture agreements, Equilon and Motiva market Shell and Texaco gasoline under licensing agreements governing both the sale of the products and the use of the Shell and Texaco trademarks. 

The various agreements between the oil companies allowed Texaco and Shell to consolidate and unify the pricing of the Texaco and Shell gasoline brands within the Equilon and Motiva joint ventures. More than 23,000 Shell and Texaco service station owners brought suit, alleging that the arrangement constituted price fixing that was per se illegal under Section 1 of the Sherman Act. Is this pricing policy permissible? Explain.