Friday, January 17, 2014

Texaco Inc. v. Dagher case brief

Texaco Inc. v. Dagher case brief summary

FACTS
Texaco and Shell created a joint-venture, Equilon, in order to sell gasoline to service stations in the western states and sold the two brands of gasoline at the same prices.

HOLDING
The Court ruled that otherwise competitors pooling capital in a joint venture should be regarded as a single 
firm.

DISCUSSION
  • The Court cited to both Arizona v. Maricopa County Medical Soc. (1982) at 116 and to Broadcast Music in showing that joint ventures are excluded from the per se rule for horizontal price fixing agreements.
  • Declares the ancillary restraint doctrine inapplicable, because setting prices of the joint venture relates to the core activity of the business association.
Analysis
  • If this is a Broadcast Music decision, not a Copperweld decision, then there is no surprise that it ends once the per se rule is kicked out, but it’s not clear why it should it fall under Broadcast Music as opposed to Copperweld.
  • It is possible to affirm this decision as simply affirming NCAA, where the Court performs a 3 step analysis and decides there are sufficient plausible efficiency justifications to push it to the rule of reason.

Traditional Ancillary Restraint Test (from Addyston Pipe):
The traditional ancillary restrain test exempted a restraint from per se analysis and subjected it to the rule of reason, if it was:
    1. Ancillary to a main legitimate activity
    2. Necessary to achieve the legitimate purpose of the main activity
    3. No more restrictive than necessary to achieve that purpose
Dagher Ancillary Restraint Test:

The Dagher test seems to only require that the policy be ancillary to the main legitimate activity, without the narrow tailoring of the second two steps.

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