State Justices Back Texaco, Getty Merger

In a split decision, the California Supreme Court ruled today that state law does not apply to the $10.1-billion merger with Getty Oil that made Texaco the state’s largest industrial corporation.

The decision was a defeat for state Atty. Gen. John Van de Kamp, who lost the case twice before in lower courts.

The suit was brought in 1984 when the merger plan was first announced. Meanwhile, the Federal Trade Commission approved the deal but imposed certain restrictions on Texaco’s use of Getty assets in California.

Among its stipulations were that Texaco offer access to Getty’s 632-mile pipeline in the San Joaquin Valley to independents that used it prior to 1983. Texaco was also required to supply crude oil for five years to independent refiners previously served by Getty.

Foes Sought Restrictions

In the California high court case, many opponents of the merger did not hope to completely undo the consolidation, approved by the FTC decision, so much as they hoped more stringent restrictions would be imposed on Texaco over longer time periods.

Van de Kamp’s suit said the merger threatens California consumers with unnecessarily high gasoline prices and endangers independent oil firms.

But in a 37-page opinion by Chief Justice Malcolm Lucas, four justices voted that the state’s Cartwright antitrust law was not intended to apply to mergers.

The majority opinion traced legislative history of antitrust law back to the federal Sherman Act of 1890 and the state’s Cartwright Act of 1907. The Legislature has amended the Cartwright Act 26 times but never enacted a merger provision, and the opinion argued the Legislature never intended the act to govern mergers.

Mergers Not Covered

The decision also rejected an argument that mergers are covered by the state Unfair Practices Act, which deals with unfair competition.

Three members of the court signed an 89-page minority opinion, written by Justice Stanley Mosk, twice as long as Chief Justice Lucas’ opinion.

Mosk concurred that the Unfair Practices Act does not apply but dissented from the majority’s interpretation of the Cartwright Act.

He maintained the Cartwright Act does apply to mergers. He said, “This conclusion is unavoidable if the statute is construed in accordance with the plain meaning of its express terms and with an eye on the object it seeks to achieve and evil it aims to prevent.”