High Court Hears Fuel Pricing Case

The Supreme Court debated Tuesday whether two oil companies could be sued for setting up now-defunct joint ventures that allegedly inflated gasoline prices in the late 1990s.

The justices, led by Chief Justice John Roberts, seemed skeptical of arguments by a lawyer for 23,000 gasoline distributors that Texaco Inc., now part of Chevron Corp., and Shell Oil Co. violated antitrust laws and fixed prices.

Roberts described the gas distributors’ arguments as “a very artificial hook.” Other justices, including David Souter and Stephen Breyer, wondered whether arguments were weak because the price was set by the legitimately formed venture.

In 1998, before Texaco was purchased by San Ramon, Calif.-based Chevron, the company joined with Shell to form Equilon Enterprises and Motiva Enterprises to handle refining and marketing of their gasoline. Equilon focused on the West, while Motiva handled the East.

The two ventures charged the same wholesale price for Texaco and Shell gasoline, sold as separate products under the companies’ brand names. In 1999, several gas distributors filed a class-action lawsuit in California, alleging that Texaco and Shell had used Equilon to fix gas prices in violation of antitrust provisions of the Sherman Act.

If the joint ventures aren’t supposed to set the prices, who is, Roberts asked. He said the joint ventures must price their products, and it shouldn’t matter whether they were sold as a new brand or under the Shell and Texaco labels.

In court papers, the gas distributors said they paid $1 billion or more in excessive charges.

A trial court judge dismissed the lawsuit against the oil companies. But the U.S. 9th Circuit Court of Appeals ruled the case should go forward because there was evidence that the ventures had improperly restrained trade.

Also, the justices narrowed the scope of a federal antitrust law that restricts price discrimination by companies, throwing out a $4-million award against truck maker Volvo in a dispute with an Arkansas dealer.

Associated Press and Bloomberg News were used in compiling this report.