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Chevron, Shell to Face Antitrust Trial

A federal appeals court reverses the dismissal of a lawsuit brought by L.A.-area gas station owners over the firms' joint ventures.

June 02, 2004|Lisa Girion | Times Staff Writer

A federal appellate court, pointing to a pact between Shell Oil Co. and Texaco Inc. to sell gasoline at the same price, ruled Tuesday that the companies must face trial for alleged antitrust violations.

The U.S. 9th Circuit Court of Appeals, sitting in Pasadena, reversed an earlier decision by U.S. District Judge George H. King dismissing a lawsuit brought by the operators of 39 Los Angeles-area gas stations.

The operators claim Shell and Texaco, through joint ventures formed in 1998, conspired to fix gasoline prices nationwide. That drove up prices at the pump and forced many independent dealers out of business, they said.

The appellate court said evidence showed that the companies believed they would save as much as $800 million a year through the alliance, which gave them a 15% share of national gasoline sales and more than 25% on the West Coast. The companies created a joint venture for the Western United States called Equilon Enterprises and another for the Eastern portion called Motiva Enterprises that controlled 12 refineries and 22,000 service stations.

"The creation of the alliance ended competition between Shell and Texaco throughout the nation in the areas of downstream refining and marketing of gasoline," Judge Stephen Reinhardt wrote in the court's majority opinion.

Around the time the companies struck the deal, " 'a decision was made that the Shell and Texaco brands would have the same price in the same market areas,' " Reinhardt wrote, quoting from testimony in the case.

When the price of oil dropped by about $2 per 42-gallon barrel in early 1999, Equilon raised its gas prices by 40 cents a gallon in Los Angeles and 30 cents a gallon in Seattle and Portland, the court said.

Texaco sold its interest in the joint ventures as a condition of its 2001 merger with Chevron Corp.

ChevronTexaco Corp. spokesman Jeff Moore said the company was confident that the case would show that the joint ventures, which received regulatory approval, "never violated any antitrust laws."

A Shell representative said the company could not comment until its lawyers had reviewed the opinion.

Joseph M. Alioto, a San Francisco lawyer representing the dealers, said the alliance showed disregard for antitrust laws.

"When I saw what was going on, I thought it was unlawful on its face -- a complete fraud," he said. "The joint venture was a coverup for a price-fixing conspiracy."

If the companies were charging 10 cents a gallon more than a competitive market would have allowed, each dealer could be due $120,000 a year in damages, Alioto said.

The dealers hope to have the suit expanded to a class action on behalf of 23,000 to 27,000 independent gas station operators across the country.

Former Los Feliz Shell station operator Kevork Sislian said that he was shocked when the judge dismissed the suit and that he was eager to go to trial.

"Let the jury decide who is right and who is wrong," he said. "It's very clear.... They were overcharging us, and we were overcharging the consumers. We didn't have a choice."

After the suit was filed, Sislian said Shell took away his lease, forcing him to close the station he ran for almost a decade.

"They've treated us like dirt," he said.

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