1. Does this case mean that competitors may simply create a joint venture to avoid any liability for price-fixing?
2. Why did the retailers allege that forming this joint venture was anticompetitive behavior?

3. Is this decision consistent with protecting consumers from price-fixing?

Historically, Texaco and Shell Oil have competed with one another in the global markets as refiners of crude oil and suppliers of gasoline to retail service stations. In 1998, the two companies formed a joint venture, Equilon, to consolidate their operations in the western United States. Texaco and Shell agreed to share expenses and profits from the jointly controlled new entity. Although the Equilon entity engaged in the refinement of crude oil into gasoline, the actual end product was sold to retailers under the brand names of Texaco and Shell at a mutually agreed-upon price.

The retailers of Texaco and Shell products brought a class action lawsuit against Texaco and Shell, alleging that creating the joint venture was a per se violation of the Sherman Act because it ended any price competition between the two and amounted to a horizontal price-fixing scheme. 

The U.S. Supreme Court ruled in favor of Texaco and Shell, holding that the rule of reason standard should apply. The Court reasoned that per se liability applies only to agreements that are so plainly anti-competitive that no study of the industry is needed to establish their illegality. In this case, the market analysis was relevant. The Court held that the joint venture agreement was nothorizontal price-fixing because the challenged pricing policy was simply price-setting by a single entity, Equilon, and not a pricing agreement between competing entities with respect to their competing products.

Narrow Per Se Rules “[T]his Court has long recognized that Congress intended to outlaw only unreasonable restraints. Instead, this Court presumptively applies a rule of reason analysis, under which antitrust plaintiffs must demonstrate that a particular contract or combination is in fact unreasonable and anticompetitive before it will be found unlawful. Per se liability is reserved for only those agreements that are so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality. Accordingly, we have expressed reluctance to adopt per se rules where the economic impact of certain practices is not immediately obvious.”