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The Wall Street Journal: US Court Reinstates Shell, ChevronTexaco Price Fixing Suit



June 1, 2004 11:52 p.m.

Posted 2 June 04


SAN FRANCISCO (AP)--A federal appeals court on Tuesday reinstated a lawsuit accusing ChevronTexaco Corp. (CVX) and Shell Oil Co. of operating a price-fixing conspiracy.


The suit accuses the companies' joint ventures - Motiva Enterprises and Equilon Enterprises - as being part of a plan by the oil giants to inflate fuel prices beginning in 1998 and ending as early as 2001, when Texaco sold its stake to win approval of its purchase of Chevron.


Judge Stephen Reinhardt, while noting that Texaco and Shell charged the same for gasoline after the formation of the joint ventures, ruled that "the very purpose of the alliance was to eliminate competition in order to realize efficiency gains and gain market share."


Reinhardt, writing for a three-judge panel of the 9th U.S. Circuit Court of Appeals, said a jury must decide whether two competitors that agreed to charge the same for gasoline created the alliance "to restrict competition."


Between September 1998 and February 1999, when crude oil was at historic lows of $10 to $12 per barrel, Equilon increased the Shell and Texaco brands 40 cents per gallon in Los Angeles and 30 cents in Seattle and Portland, Ore., Reinhardt said.


U.S. District Judge George King dismissed the case in 2002, which was brought by 23,000 gasoline vendors. King ruled that a jury could not find that the companies "formed Equilon and Motiva merely to achieve an ulterior anticompetitive purpose or that the ventures are patently anticompetitive."


In a sharp dissent Tuesday, Judge Ferdinand Fernandez agreed.


A lawyer for the vendors, Daniel Shulman, said the companies fixed prices in violation of federal law. The distributors, he said, paid $1 billion or more in excessive charges, which they will seek to recoup.


While the distributors passed the alleged excess costs to consumers, antitrust law allows them to recover the illegal fees, Shulman said. If the vendors prevail, consumers are not eligible for refunds, said Joseph Alioto, another attorney for the vendors.



Jeff Moore, a spokesman for San Ramon, Calif.-based ChevronTexaco, said the oil company was confident the joint venture will be found not to have broken antitrust laws.


Cameron Smyth, a spokesman for Houston-based Shell, the U.S. branch of the Dutch/Shell Group, said the company was reviewing the decision and had no comment.


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