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Supreme Court Preview: Antitrust Scrutiny of Joint Ventures

By Louis Fisher
March 04, 2006
One of the most significant business cases that the Supreme Court will hear this term is Texaco Inc. v. Dagher, which presents the question whether it can be concerted action which is per-se illegal under Section 1 of the Sherman Act for an economically-integrated joint venture to set the selling price of its own products. Section 1 of the Sherman Act provides in pertinent part that “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce... is declared to be illegal.” The Supreme Court, interpreting this language, has held that an agreement between competitors not to compete on price—that is, “price fixing”—violates Section 1 per se. But the Court has also held that “this is not a question simply of determining whether two or more potential competitors have literally ‘fixed’ a price.... When two partners set the price of their goods or services they are literally ‘price fixing,’ but they are not per se in violation of the Sherman Act.” Even more fundamentally, two nominally separate entities, such as a parent corporation and its wholly owned subsidiary, may in certain circumstances be viewed as acting unilaterally, rather than pursuant to a “contract,
combination... or conspiracy” subject to Section 1 scrutiny. In the Dagher case, the Supreme Court will address how these principles apply to the operations of an economicallyintegrated joint venture through which two erstwhile competitors have merged certain lines of business, but not their entire corporations....