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Bloomberg: Shell, Chevron Sued By Stations Alleging Price Fixing (Update1)

By Karen Gullo and Tina Seeley

Aug. 21 (Bloomberg) — Chevron Corp., the second-largest U.S. oil company, and Royal Dutch Shell Plc, Europe’s biggest oil company, were sued by California gas station dealers who allege a conspiracy to fix gas prices.

The complaint filed today in federal court in San Francisco accuses the companies and a unit of the Saudi Arabian Oil Co. of artificially inflating gas prices by as much as 60 percent and destroying documents showing evidence of price fixing. The lawsuit was filed by 20 dealers on behalf of 25,000 dealers nationwide operating Shell- or Texaco-branded stations that bought gas from Shell, Texaco or their units from 1998 to 2001.

The dealers contend in the complaint that Shell and Texaco Inc., now part of Chevron, and Saudi Refining Inc. formed two joint-venture companies, Motiva Enterprises LLC and Equilon Enterprises LLC, that marketed gas to stations and set their own prices for gas. In 1998, the companies used Motiva and Equilon to set the same price for Shell- and Texaco-branded gas, causing prices to rise, according to the complaint.

“Once the brands were priced identically, the price differential of the Texaco brand disappeared, rising to the level of the Shell brand, and the alliance sharply raised the price of both brands, even as crude oil prices were falling to historic lows,” the dealers said in the complaint.

The U.S. Supreme Court, ruling last year in a similar case against Shell and Chevron, said joint ventures have broad power to set prices without violating U.S. antitrust laws and unanimously threw out a suit alleging gas price fixing.

Court Vindication

“We have litigated these antitrust class-action issues in the past and the courts have vindicated the Equilon-Motiva structure and pricing,” Chevron said in a statement.

The Equilon and Motiva joint ventures were reviewed by the U.S. Federal Trade Commission and by several state attorneys general prior to their formation, Shell Oil spokeswoman Alison Chassin said in an e-mail.

“We regret that a small number of dealers have brought this lawsuit, but we are confident that the claims are unmerited,” Chassin said.

There was no answer at Aramco Services Co., a U.S. affiliate of Saudi Arabian Oil.

The Equilon and Motiva joint ventures, formed in 1998, continued to sell gas under both the Shell and Texaco names, although the two brands didn’t compete with each other. Federal antitrust enforcers cleared both transactions.

Antitrust Standard

Joe Alioto, an attorney for the dealers, said the claims in the new lawsuit meet the standard established by the U.S. Supreme Court in the prior case.

Future lawsuits against joint ventures must be judged under a “rule of reason” standard, an approach to antitrust law that involves detailed analysis of the economic effects of a challenged practice, the court ruled in February 2006.

Exxon Mobil Corp., based in Irving, Texas, is the world’s biggest oil company.

The case is Mike Madani v Shell Oil Co., U.S. District Court, Northern District of California (San Francisco).

To contact the reporters on this story: Karen Gullo in San Francisco at [email protected] ; Tina Seeley in Washington at [email protected] .

Last Updated: August 21, 2007 22:02 EDT

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