OPINION OF THE COURT TEXACO INC. V. DAGHER 547 U. S. ____ (2006) SUPREME COURT OF THE UNITED STATES NOS. 04-805 AND 04-814 TEXACO INC., PETITIONER

															04–805 v. FOUAD N. DAGHER et al. SHELL OIL COMPANY, PETITIONER 04–814   v. FOUAD N. DAGHER et al. on writs of certiorari to the united states
court of appeals for the ninth circuit [February 28, 2006] Justice Thomas delivered
the opinion of the Court.

															   From 1998 until 2002, petitioners
Texaco Inc. and Shell Oil Co. collaborated in a joint venture,
Equilon Enterprises, to refine and sell gasoline in the western
United States under the original Texaco and Shell Oil brand names.
Respondents, a class of Texaco and Shell Oil service station
owners, allege that petitioners engaged in unlawful price fixing
when Equilon set a single price for both Texaco and Shell Oil brand
gasoline. We granted certiorari to determine whether it is per
se illegal under §1 of the Sherman Act, 15 U. S. C. §1,
for a lawful, economically integrated joint venture to set the
prices at which the joint venture sells its products. We conclude
that it is not, and accordingly we reverse the contrary judgment of
the Court of Appeals.

															I

															   Historically, Texaco and Shell
Oil have competed with one another in the national and
international oil and gasoline markets. Their business activities
include refining crude oil into gasoline, as well as marketing
gasoline to downstream purchasers, such as the service stations
represented in respondents’ class action.

															   In 1998, Texaco and Shell Oil
formed a joint venture, Equilon, to consolidate their operations in
the western United States, thereby ending competition between the
two companies in the domestic refining and marketing of gasoline.
Under the joint venture agreement, Texaco and Shell Oil agreed to
pool their resources and share the risks of and profits from
Equilon’s activities. Equilon’s board of directors would comprise
representatives of Texaco and Shell Oil, and Equilon gasoline would
be sold to downstream purchasers under the original Texaco and
Shell Oil brand names. The formation of Equilon was approved by
consent decree, subject to certain divestments and other
modifications, by the Federal Trade Commission, see In re
Shell Oil Co. , 125 F. T. C. 769 (1998), as well as
by the state attorneys general of California, Hawaii, Oregon, and
Washington. Notably, the decrees imposed no restrictions on the
pricing of Equilon gasoline.

															   After the joint venture began to operate,
respondents brought suit in district court, alleging that, by
unifying gasoline prices under the two brands, petitioners had
violated the per se rule against price fixing that this
Court has long recognized under §1 of the Sherman Act, ch. 647, 26
Stat. 209, as amended, 15 U. S. C. §1. See, e.g. , Catalano, Inc. v. Target Sales, Inc., 446 U. S. 643 , 647
(1980) (per curiam) . The District Court awarded summary
judgment to Texaco and Shell Oil. It determined that the rule of
reason, rather than a per se rule or the quick look
doctrine, governs respondents’ claim, and that, by eschewing rule
of reason analysis, respondents had failed to raise a triable issue
of fact. The Ninth Circuit reversed, characterizing petitioners’
position as a request for an “exception to the per se prohibition on price fixing,” and rejecting that request. Dagher v. Saudi Refining, Inc., 369 F. 3d
1108, 1116 (2004). We consolidated Texaco’s and Shell Oil’s
separate petitions and granted certiorari to determine the extent
to which the per se rule against price fixing applies to
an important and increasingly popular form of business
organization, the joint venture. 545 U. S. ___ (2005).

															II

															   Section 1 of the Sherman Act
prohibits “[e]very contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce among
the several States.” 15 U. S. C. §1. This Court has not taken
a literal approach to this language, however. See, e.g. , State Oil Co. v. Khan, 522 U. S. 3 , 10 (1997)
(“[T]his Court has long recognized that Congress intended to outlaw
only unreasonable restraints” (emphasis added)). Instead,
this Court presumptively applies rule of reason analysis, under
which antitrust plaintiffs must demonstrate that a particular
contract or combination is in fact unreasonable and anticompetitive
before it will be found unlawful. See, e.g. , id. ,
at 10–19 (concluding that vertical price-fixing arrangements are
subject to the rule of reason, not per se liability). Per se liability is reserved for only those agreements
that are “so plainly anticompetitive that no elaborate study of the
industry is needed to establish their illegality.” National
Soc. of Professional Engineers v. United States, 435 U. S. 679 ,
692 (1978). Accordingly, “we have expressed reluctance to adopt per se rules … ‘where the economic impact of certain
practices is not immediately obvious.’ ” State Oil , supra , at 10 (quoting FTC v. Indiana
Federation of Dentists, 476 U. S. 447 , 458–459
(1986)).

															   Price-fixing agreements between
two or more competitors, otherwise known as horizontal price-fixing
agreements, fall into the category of arrangements that are per
se unlawful. See, e.g. , Catalano, supra, at 647. These cases do not present such an
agreement, however, because Texaco and Shell Oil did not compete
with one another in the relevant market—namely, the sale of
gasoline to service stations in the western United States—but
instead participated in that market jointly through their
investments in Equilon.[ Footnote
1 ] In other words, the pricing policy challenged here amounts
to little more than price setting by a single entity—albeit within
the context of a joint venture—and not a pricing agreement between
competing entities with respect to their competing products.
Throughout Equilon’s existence, Texaco and Shell Oil shared in the
profits of Equilon’s activities in their role as investors, not
competitors. When “persons who would otherwise be competitors pool
their capital and share the risks of loss as well as the
opportunities for profit … such joint ventures [are] regarded as a
single firm competing with other sellers in the market.” Arizona v. Maricopa County Medical Soc. , 457 U. S. 332 , 356
(1982). As such, though Equilon’s pricing policy may be price
fixing in a literal sense, it is not price fixing in the antitrust
sense. See Broadcast Music, Inc. v. Columbia
Broadcasting System, Inc., 441 U. S. 1 , 9 (1979)
(“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”).

															   This conclusion is confirmed by respondents’
apparent concession that there would be no per se liability had Equilon simply chosen to sell its gasoline under a
single brand. See Tr. of Oral Arg. 34. We see no reason to treat
Equilon differently just because it chose to sell gasoline under
two distinct brands at a single price. As a single entity, a joint
venture, like any other firm, must have the discretion to determine
the prices of the products that it sells, including the discretion
to sell a product under two different brands at a single, unified
price. If Equilon’s price unification policy is anticompetitive,
then respondents should have challenged it pursuant to the rule of
reason.[ Footnote 2 ] But it
would be inconsistent with this Court’s antitrust precedents to
condemn the internal pricing decisions of a legitimate joint
venture as per se unlawful.[ Footnote 3 ]

															   The court below reached the opposite
conclusion by invoking the ancillary restraints doctrine. 369
F. 3d, at 1118–1124. That doctrine governs the validity of
restrictions imposed by a legitimate business collaboration, such
as a business association or joint venture, on nonventure
activities. See, e.g. , National Collegiate Athletic
Assn. v. Board of Regents of Univ. of Okla. , 468 U. S. 85 , 113–115
(1984); Citizen Publishing Co. v. United States , 394 U. S. 131 ,
135–136 (1969). Under the doctrine, courts must determine whether
the nonventure restriction is a naked restraint on trade, and thus
invalid, or one that is ancillary to the legitimate and competitive
purposes of the business association, and thus valid. We agree with
petitioners that the ancillary restraints doctrine has no
application here, where the business practice being challenged
involves the core activity of the joint venture itself—namely, the
pricing of the very goods produced and sold by Equilon. And even if
we were to invoke the doctrine in these cases, Equilon’s pricing
policy is clearly ancillary to the sale of its own products. Judge
Fernandez, dissenting from the ruling of the court below, put it
well:

															   “In this case, nothing more
radical is afoot than the fact that an entity, which now owns all
of the production, transportation, research, storage, sales and
distribution facilities for engaging in the gasoline business, also
prices its own products. It decided to price them the same, as any
other entity could. What could be more integral to the running of a
business than setting a price for its goods and services?” 369 F.
3d, at 1127.

															See also Broadcast Music, supra , at 23
(“Joint ventures and other cooperative arrangements are … not
usually unlawful, at least not as price-fixing schemes, where the
agreement on price is necessary to market the product at all”).

															*  *  *

															   Because the pricing decisions of
a legitimate joint venture do not fall within the narrow category
of activity that is per se unlawful under §1 of the
Sherman Act, respondents’ antitrust claim cannot prevail.
Accordingly, the judgment of the Court of Appeals is reversed.

															It is so ordered.

															   Justice Alito took no part in the
consideration or decision of these cases. Footnote 1 We presume for purposes of these cases that
Equilon is a lawful joint venture. Its formation has been approved
by federal and state regulators, and there is no contention here
that it is a sham. As the court below noted: “There is a voluminous
record documenting the economic justifications for creating the
joint ventures. [T]he defendants concluded that numerous synergies
and cost efficiencies would result” by creating Equilon as well as
a parallel venture, Motiva Enterprises, in the eastern United
States, and “that nationwide there would be up to $800 million in
cost savings annually.” 369 F. 3d 1108, 1111 (CA9 2004). Had
respondents challenged Equilon itself, they would have been
required to show that its creation was anticompetitive under the
rule of reason. See Copperweld Corp. v. Independence
Tube Corp., 467
U. S. 752 , 768 (1984). Footnote 2 Respondents have not put forth a rule of
reason claim. 369 F. 3d, at 1113. Accordingly, we need not address
petitioners’ alternative argument that §1 of the Sherman Act is
inapplicable to joint ventures. Footnote 3 Respondents alternatively contend that
petitioners should be held liable under the quick look doctrine. To
be sure, we have applied the quick look doctrine to business
activities that are so plainly anticompetitive that courts need
undertake only a cursory examination before imposing antitrust
liability. See California Dental Assn. v. FTC, 526 U. S. 756 ,
770 (1999). But for the same reasons that per se liability
is unwarranted here, we conclude that petitioners cannot be held
liable under the quick look doctrine.

Summary: In Texaco Inc. v. Dagher (2006), the Supreme Court ruled that it is not per se illegal under Section 1 of the Sherman Act for a lawful, economically integrated joint venture to set the prices at which it sells its products. The case involved a joint venture between Texaco and Shell Oil, called Equilon, which sold gasoline under both the Texaco and Shell brand names. The Court found that Equilon's pricing decisions were ancillary to the sale of its own products and did not constitute unlawful price fixing. The Court also noted that the formation of Equilon was approved by federal and state regulators and that there were economic justifications for the joint venture.