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Monday, January 09, 2006

Trustbusting in the Modern Era: Not?

One lasting legacy of the original Progressives, and of Teddy Roosevelt in particular, is the Sherman Anti-Trust Act, which is still used to keep companies from conspiring to artificially raise prices about market level. Although many neoconservatives pretend that government regulation of business is anticapitalist, the Sherman Act shows how good laws can protect true capitalism by leaving the "invisible hand" free to move.

Normally, the Act is used against two or more companies that conspire to fix prices. Tomorrow, the Supreme Court will hear a case involving Shell, Texaco, and Saudi Refining Inc., on whether the Act also can be used against a single legal entity (a joint venture) that was used by its members to fix prices, especially when the joint venture was initially created for a lawful purpose. It's like asking whether the Mafia itself is a bad organization or if only its members are, or whether the Mafia is a bad organization now if it originally was created to raise money for an orphanage.

Sound like a stupid "angels on the head of a pin" question? It is -- and it's not. It's in cases like this that the Supreme Court either protects American values like free markets and "Main Street" rather than "Wall Street" economics, or empowers crony capitalism and the consolidation of wealth in ever-fewer hands. Do consumers win, or do Texaco, Shell, and Saudi Refining Inc.?

Five people make that decision, case-by-case. Any questions about why the Alito nomination is important, or why abortion isn't the only issue at stake?

Here's a summary from the nice folks at the Willamette University College of Law in Salem, OR:

Texaco Inc. v. Daugher and Shell Oil Co. v. Daugher (consolidated)
Argued: 01/10/06
Nos. 04-805; 04-814
Court below: 369 F.3d 1108; unavailable

SHERMAN ACT (Whether It Is A Violation Of The Sherman Act When The Two
Parties To A Joint Venture Set A Price For Gasoline Which Is Followed By The Joint Venture And Both Parent Companies)

The issue is whether it is in violation of the Sherman Act when the twoparties to a joint venture set a price for gasoline, which is followed bythe joint venture and both parent companies.

Daugher filed a suit against Texaco, Shell Oil (petitioners), and Saudi Refining Inc. (SRI) on the grounds that the companies were using two joint ventures to create a price fixing scheme in violation of the Sherman Antitrust Act, 15 USSC Sec. 1 (Act.) The United States District Court for the Central District of California granted summary judgment in favor of the petitioners and SRI, finding that the joint venture was not created in order to cover up a price fixing conspiracy. The United States Court of Appeals for the Ninth Circuit (Ninth Circuit) affirmed the summary judgment in favor of SRI. However, the Ninth Circuit reversed the summary judgment in favor of Petitioners, finding that there was enough evidence for a reasonable juror to believe that the petitioners may have violated the Act. On appeal to the United States Supreme Court, the petitioners will argue that the Act does not apply to a single firm when the two companies legitimately formed a valid joint venture. Petitioners will
argue further that even if the Sherman Act is applicable, the price setting should not be per se illegal because the per se rule is an exception to the reasonable person standard and should be used only if the evidence shows the companies are plainly anticompetitive. [Summarized by
Meghan Erickson]

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