Joint Ventures in Peril?

Yesterday, the Supreme Court heard oral arguments in a case that could make it much less attractive for companies to work together as joint venture partners. The case--Texaco and Shell Oil v. Dagher--was brought by a group of service station owners against the two oil giants. The station owners argued that, by marketing identical petroleum products together as partners in a joint venture, the two companies essentially engaged in price fixing.

The trial judge ruled in favor of the oil companies on the grounds that this was not a case of two companies setting prices in unison, but rather, one independent company setting prices on its own. The company just happened to be owned jointly by two large companies that would otherwise be rivals. A majority of the appeals court subsequently overturned that ruling and agreed with the gas station owners that, in effect, the joint venture enabled the two giants to avoid competition. According to this report posted on the CNN/Money website at the start of the Supreme Court's current term, legal analysts believe that, if the justices agree with the appeals court, companies may abandon joint ventures altogether, a move that could precipitate a number of spinoffs and mergers. Wouldn't that be exciting!

To read the briefs and for more analysis, check out this page on SCOTUSBlog, a repository of blow-by-blow coverage of Supreme Court cases.

Mike Hofman was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City. @mikehofman