TROTT, Circuit Judge:
The district court granted Defendants’ motion to dismiss Plaintiffs’ antitrust claim founded on § 1 of the Sherman Act, holding that 1) Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826, 107 Cal.Rptr.2d 841, 24 P.3d 493 (2001), precludes the allegations made in the operative pleading; 2) Defendants’ exchange agreements can not be aggregated to establish market power and anti-competitive effect; and 3) even if the exchange agreements could be aggregated, the absence of a conspiracy to limit supply and raise prices eliminates a causal connection between the exchange agreements and anti-competitive effect. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse and remand.
I
BACKGROUND
Plaintiff-Appellant William O. Gilley filed this class-action lawsuit in 1998 on behalf of himself and other wholesale purchasers of CARB gasoline in the state of California. CARB gas is a cleaner-burning fuel, and since 1996 it is the only type of gas that can be sold in California. The complaint alleged that Defendants-Appel-lees, major oil producers, violated § 1 of the Sherman Act by entering into a conspiracy to limit the supply of CARB gasoline and to raise prices.
The allegations of the complaint were similar to those alleged in Aguilar, a class-action suit filed in California Superior Court in 1996. That suit was brought under the Cartwright Act, Cal. Bus. & PROF. Code § 16720 et seq., California’s equivalent to the Sherman Act. Aguilar, 107 Cal.Rptr.2d 841, 24 P.3d at 502. The plaintiff in Aguilar was a retail purchaser and consumer of gasoline and sought to represent a class of retail purchasers. The plaintiff in this action was a wholesale purchaser and retail dealer of gasoline and sought to represent a class of wholesale purchasers. Both plaintiffs were represented by the same attorneys, and both actions targeted the same defendants for essentially the same allegedly unlawful conduct. Because of the similarity in the cases, the district court hearing this case stayed the suit pending the outcome of Aguilar.
In Aguilar, the state superior court granted summary judgment to the defendants, concluding that there was insufficient evidence presented by the plaintiffs to allow a reasonable juror to find a conspiracy to limit supply and raise prices among the several gasoline companies. Id. at 503. The California Supreme Court affirmed. Id. at 521. As a result, Defendants in this case brought a motion for summary judgment arguing that Gilley’s claims were barred by collateral estoppel. In response, Gilley offered a proposed amended complaint, which the court found insufficient. The district court, however, granted Gilley leave to provide another [1007]*1007proposed amended complaint, which he did.
On May 6, 2002, the district court granted Defendants’ motion for summary judgment on that complaint, holding that Gilley was precluded by Aguilar from relitigating whether a conspiracy existed to limit supply and raise prices. However, the court granted Gilley further leave to amend the complaint to allege that “each of the bilateral agreements, entered into independently between various defendant gasoline companies, ha[s] anti-competitive effects and therefore violate[s] the Sherman Act.”
On May 24, 2002, Gilley filed the third post-Aguilar complaint, alleging that forty-four bilateral exchange agreements had the effect of unreasonably restraining trade in violation of § 1 of the Sherman Act and in violation of Cal. Bus. & Prof. Code § 17200. On March 27, 2003, the district court granted Defendants’ motion to dismiss that complaint with prejudice. With respect to the § 1 claim, the court explained that Gilley had not alleged any theory as to how any individual exchange agreement, which accounts for a small percentage of the relevant market, is able to inflate the price of CARB gasoline. The district court rejected Gilley’s argument that the court could consider the aggregate effects of the individual bilateral agreements to allege an anti-competitive effect — namely higher gas prices.
Gilley appealed to this Court, which reversed and remanded, holding that the district court erred in not giving Gilley an opportunity to correct the newly identified deficiencies. After the remand, the second amended complaint (“SAC”) was filed. Most of the allegations of anti-competitive conduct and effect are stated in the following terms:
[Defendant] entered into the following sales/ exchange agreements for delivery of CARB gas in [geographic market]: [list of exchange agreements.]
[Defendant’s] intent and purpose in entering into these sales/exchange agreements was to limit refining capacity for CARB gas and/or to keep CARB gas out of the spot market and away from unbranded marketers.
These agreements have had the effect of raising CARB gas prices in [geographic market] above competitive levels, without any countervailing procompetitive benefit.
The district court granted Defendants’ motion to dismiss the SAC, holding that Plaintiffs failed to allege that the exchange agreements, when considered individually, would be capable of producing significant anti-competitive effects. We now review the district court’s summary dismissal of the SAC.
II
DISCUSSION
A. Standard of Review
We review de novo a dismissal for failure to state a claim pursuant to Rule 12(b)(6). Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir.2005). All allegations of material fact are taken as true and construed in the light most favorable to the nonmov-ing party. Id.
B. Analysis
We address the following issues in this appeal: 1) the preclusive effect of the California Supreme Court’s decision in Aguilar; 2) the pleading standard for § 1 claims; 3) the sufficiency of Plaintiffs’ SAC; 4) Plaintiffs’ standing to add Tesoro as a Defendant in the SAC; and 5) the state law claim under Cal. Bus. & PROF. Code § 17200.
1. The Preclusive Effect of the California Supreme Court’s Aguilar Decision.
Gilley does not dispute that the decision in Aguilar has some preclusive effect in [1008]*1008the current lawsuit, but he contends that his current claim is not entirely extinguished by Aguilar. In contrast, Defendants argue that all of the allegations in the SAC are precluded by Aguilar. We conclude that Gilley has stated a claim that is not precluded by the California Supreme Court’s decision.
The critical determination in Aguilar was that the plaintiff failed to provide sufficient proof of a fact necessary for the claim she had pled, specifically that Defendants conspired and acted collectively through exchange agreements to fix prices and/or control supply. As the California Supreme Court explained: “Aguilar had to present evidence that tended to exclude the possibility that the petroleum companies acted independently rather than collu-sively. This she did not do.” Aguilar, 107 Cal.Rptr.2d 841, 24 P.3d at 518. In the order granting Defendants’ motion to dismiss, the district court in this case summarized its understanding of that finding: “With respect to exchange agreements specifically, the court found that the evidence showed independent action on the part of the petroleum companies rather than a collusive web of bilateral exchange agreements to control supply and prices.” The district court, applying the doctrine of issue preclusion (or collateral estoppel), accepted as an established fact the finding that the defendants did not collude to control supply and prices through the exchange agreements.
The California Supreme Court was clear in Aguilar, however, that the failure to prove that fact did not necessarily mean that plaintiff did not have a legally viable claim against Defendants:
In alleging facts for her Cartwright Act cause of action, Aguilar proceeded on a theory, which was legally sound, that the assertedly unlawful conspiracy consisted of an agreement among the petroleum companies as competitors to restrict the output of CARB gasoline and to raise its price, and was unlawful per se without regard to any of its effects.
In granting the petroleum companies summary judgment, the superior court did so on that theory. On appeal, Aguilar apparently attempted to introduce an alternative theory, which was also legally sound, that the assertedly unlawful conspiracy consisted of the various exchange agreements entered into by the various petroleum companies, and was unlawful because of its effects. The Court of Appeal rejected any such attempt as too late. To the extent that Aguilar makes the same attempt on review, we reject it for the same reason.
Id. at 521, n. 35 (citations omitted). Plaintiff was not allowed to proceed with the alternative theory based on the effects of the exchange agreements, without proof of collusion, because the theory had not been timely pleaded, not because it was held to be defective, either legally or factually.
The Aguilar decision does not preclude the latter theory in subsequent litigation. Issue preclusion is decided under the law of the state where judgment was entered. Ross v. Alaska, 189 F.3d 1107, 1110 (9th Cir.1999). Under California law, issue preclusion applies only if a number of conditions are satisfied. Calvert v. Huckins, 109 F.3d 636, 638 (9th Cir.1997). Among those conditions are “[the] issue must have been actually litigated in the former proceeding” and “the decision in the former proceeding must be final and on the merits.” Id.
Aguilar precludes a claim that depends upon proof of collusion by Defendants to use exchange agreements to control supply [1009]*1009and prices, notably in the form of a per se claim of a horizontal price-fixing conspiracy,1 but it does not preclude a claim that the bilateral exchange agreements have an anti-competitive effect on competition, despite the absence of collusion, under the rule of reason.2
The SAC may include allegations which are precluded by Aguilar, but not of all of what the SAC alleges is precluded. To the extent that the SAC alleges a claim that Defendants have entered into exchange agreements, without a conspiracy to control supply or to set prices, and that, those agreements aggregated together have an anti-competitive effect on. competition in the relevant market, it has stated a claim that is not precluded by Aguilar.
2. The Pleading Standard for § 1 Claims.
To successfully state a claim under § 1 of the Sherman Act, a plaintiff need only meet the notice pleading standard articulated in Fed.R.Civ.P. 8(a)(2). Bell Alt Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. at 1964, 167 L.Ed.2d 929 (2007). Rule 8(a)(2) requires ‘“a short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ ” Id. (quoting Fed.R.Civ.P. 8(a)(2)). “[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very remote and unlikely.’ ” Id. at 1965. Additionally, dismissals for failure to state a claim are disfavored in antitrust actions. Hosp. Bldg. Co. v. Trs. of Rex Hosp., 425 U.S. 738, 746, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976); Clayco Petroleum Corp. v. Occidental Petroleum Corp., 712 F.2d 404, 406 (9th Cir.1983).
3. The SAC is a Sufficient Pleading.
Section 1 of the Sherman Act prohibits “[ejvery 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. However, it has long been recognized that Congress did not intend to give literal meaning to those words, but instead only intended to make unlawful unreasonable restraints on trade. State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997). Therefore, “to establish a claim under § 1 of the Sherman Act, the plaintiff must show 1) that there was a contract, combination, or conspiracy; 2) that ... unreasonably restrained trade under either a per se rule of illegality or a rule of reason analysis; and 3) that the restraint affected interstate commerce.”3 Bhan, 929 F.2d at 1410.
[1010]*1010a. The First Element — Existence of an Agreement.
Under the first element of a § 1 claim, a plaintiff must plead the existence of a contract, combination, or conspiracy, meaning a defendant did not operate unilaterally, but instead, at least two entities acted in concert. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984). Defendants argue that the exchange agreements are not concerted action.
“Our antitrust law is clear that [a plaintiff] need not prove intent to control prices or destroy competition to demonstrate the element of an agreement ... among two or more entities.” Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1153-54 (9th Cir.2003) (internal quotation marks omitted) (noting that intent of the parties is to be evaluated under the second element of the § 1 analysis). The exchange agreements are “contracts.” As a result, each bilateral exchange agreement, even without intent to control prices, provides an agreement that meets the first element of a § 1 Sherman Act claim.
b. The Second Element — When Aggregated, the Exchange Agreements Unreasonably Restrain Trade.
Under the second element of a § 1 claim, a plaintiff must show the challenged agreement unreasonably restrains trade by establishing anti-competitive effects. Bhan, 929 F.2d at 1410. To make this showing under the rule of reason analysis, a plaintiff generally must establish market power. Adaptive Power Solutions, LLC v. Hughes Missile Sys. Co., 141 F.3d 947, 951 (9th Cir.1998). “Market power is the ability to raise prices above those that would be charged in a competitive market.” NCAA v. Bd. of Regents, 468 U.S. 85, 109 n. 38, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984).
Because each of the exchange agreements arguably affects only a small amount of CARB gas, Plaintiffs pleaded the cumulative effect of a single Defendant’s exchange agreements to show market power and anti-competitive effect.
Plaintiffs argue correctly that the district court erred in not allowing them to allege the cumulative effects of a single Defendant’s exchange agreements. They find support in Ninth Circuit and United States Supreme Court precedent, which has allowed the aggregation of multiple contracts when evaluating the legality of an individual contract. Twin City Sportservice, Inc. v. Charles O. Finley & Co., 676 F.2d 1291 (9th Cir.1982); Fortner Enters. v. United States Steel Corp., 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969); Standard Oil Co. of Cal. & Standard Stations, Inc., v. United States, 337 U.S. 293, 69 S.Ct. 1051, 93 L.Ed. 1371 (1949); cf. 2 AReeda & Hovenkamp ¶ 310cl, p. 201 (“An aggregation of claims may produce sufficient proof of violation or injury where violation requires that a certain legal threshold be met and no claim standing alone is sufficient to meet the threshold.”).
In Twin City, we were presented with the issue of “whether a district court, in assessing the antitrust liability of a defendant, may look to the overall effects of a defendant’s conduct in the relevant market, or is limited to looking at the market implications of the one contract between the antitrust plaintiff and defendant.” 676 F.2d at 1302. We allowed aggregation, reasoning that a defendant who restrains trade by an obvious pattern and practice of entering into individual contracts should not be allowed to do piecemeal what he would be prohibited from doing all at once. Id. We held that, “[cjreating such a distinction would require courts to enforce arguably innocuous single contracts that belong to a pattern of contractual relations that significantly restrain trade in a relevant market.” Id. at 1303.
[1011]*1011The district court and Defendants concede that aggregation of agreements is appropriate in some cases. Both, however, contend that aggregation should be allowed only in the context of “exclusive dealing” and “tying” cases because of the predictably anti-competitive effect of those practices — market foreclosure to competitors. The district court reasoned that only those types of contracts can be aggregated because they have “a clear purpose and an identifiable effect” and because “[determining the cumulative effect of such contracts can be done with relative ease.” We disagree, as no general rule requires that only the easiest cases may be aggregated. As noted by the California Supreme Court, plaintiffs have a viable legal theory. See Aguilar, 107 Cal.Rptr.2d 841, 24 P.3d at 521 n. 35 (noting an “alternative theory, which [is] also legally sound, that the as-sertedly unlawful conspiracy consisted of the various exchange agreements entered into by the various petroleum companies, and was unlawful because of its effects”) (citation omitted).
At the stage of a motion to dismiss for failure to state a claim, it is not our role to determine the soundness of Plaintiffs’ economic theory. Even if we, as a savvy court, view actual proof of the facts pleaded in the SAC as improbable and conclude that a recovery is remote and unlikely, the complaint should still proceed. Bell Atl. Corp., 127 S.Ct. at 1965. The analysis we would have to undertake to dismiss the complaint here is not appropriate at the Rule 12 stage.4
Defendants also argue that bilateral exchange agreements, in general, are an efficiency-enhancing distribution practice that promotes, not hinders, competition. The allegations contained in the SAC, however, are that these exchange agreements have anti-competitive effects.
That exchange agreements like “exclusive dealing” and “tying” arrangements, may be efficiency-enhancing and thus pro-competitive does not necessarily mean that the anti-competitive effects of those types of arrangements or agreements are always outweighed by procompetitive justifications. See Brown v. Hansen Publ’ns, Inc., 556 F.2d 969, 971 (9th Cir.1977) (noting that “exclusive dealing” contracts may be procompetitive); NCAA, 468 U.S. at 104 n. 26, 104 S.Ct. 2948 (noting that “tying” arrangements may be procompeti-tive).
This loggerhead is precisely what a rule of reason analysis would address. The formulation of the dispute at issue was long ago laid out. “The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.” Bd. of Trade of Chicago v. United States, 246 U.S. 231, 38 S.Ct. 242, 62 L.Ed. 683 (1918). This point of contention is yet another reason to allow the complaint to proceed.
Defendants offer a number of other arguments against aggregation. None of the arguments, however, can sidestep our precedent.
Defendants argue that Plaintiffs waived the aggregation argument by not challenging the district court’s Order Granting Leave to Amend in their first appeal to the Ninth Circuit. That order reads, “The court GRANTS leave to amend plaintiffs complaint only to the extent that it alleges that each of the bilateral agreements, entered into independently between various [1012]*1012defendant gasoline companies, have unreasonable anti-competitive effects and therefore violate the Sherman Act.” The purpose behind the district court’s decision to grant leave to amend was so Plaintiffs could plead a claim different than the per se violation pled in Aguilar. Plaintiffs complied by pleading a rule of reason claim based on the aggregate effects of the exchange agreements.
Defendants also argue also that Dickson v. Microsoft Corp., 309 F.3d 193 (4th Cir.2002), forecloses aggregation of the bilateral exchange agreements to establish a violation of § 1. In that case the plaintiff “alleged discrete conspiracies between Microsoft and two original equipment manufactures (OEMs): Dell and Compaq. Id. at 210.” The Fourth Circuit affirmed the district court’s determination “that it could not consider the cumulative harm of Microsoft’s agreements with all OEMs but instead was required to consider — individually — Microsoft’s agreements with Compaq and Dell” because the complaint “did not allege a conspiracy among Microsoft and all OEMs; it alleged discrete conspiracies between Microsoft and Compaq and Microsoft and Dell.” Id. (emphases added). In other words, because the plaintiff did not allege the cumulative effect of Microsoft’s agreements with “all OEMs” in the complaint, the Fourth Circuit declined considering their aggregate effects. Dickson is distinguishable from the present case, as the plaintiffs here do expressly allege that each Defendant’s agreements considered in the aggregate have anticompetitive effects.
Defendants also contend that aggregation would subject firms to unwarranted liability and great uncertainty regarding the validity of independent business dealings that do not carry inherent anticom-petitive potential. Section 1 liability, however, is directed not only at inherent anticompetitive conduct, but also at conduct that has anticompetitive effects. Khan, 522 U.S. at 10, 118 S.Ct. 275. Furthermore, aggregation of the agreements does not lessen a plaintiffs burden of demonstrating anticompetitive effects of a given agreement.
Because the district court’s application of the law was incorrect, and because we reject Defendants’ arguments against aggregation, we conclude that the district court erred in not allowing Plaintiffs to aggregate the agreements to demonstrate their anticompetitive effects.
c. The Allegations in the SAC Are Not Necessarily Premised on a Conspiracy to Limit Supply and Raise Prices.
The district court concluded that, even if aggregation were proper, the complaint alleges the existence of a network of exchange agreements that allow Defendants to limit supply and raise the price of CARB gas. The district court based that conclusion on language of the complaint stating that each Defendant obtained market power “through the use of [the Defendant’s] exchange agreements, coupled with its own refining capacity and that of its contracting partners.” However, that language says nothing more than the exchange agreements provide access to refining capacity of Defendant’s competitors through the exchange agreements themselves. Furthermore, that language, read in the light most favorable to Plaintiffs, Knievel, 393 F.3d at 1072, certainly does not plead a “network”, a “precise dance of give-and-take”, or any other nomenclature for the operation of a conspiracy to limit supply or raise prices.
The district court concluded also that “Plaintiffs cannot avoid the fact that their Sherman Act claim is, at its core, a conspiracy claim.” To come to that conclusion, the district court did not rely on the allegations made in the SAC. Instead, the [1013]*1013court, in effect, probed the soundness of Gilley’s economic theory, concluding that the alleged anticompetitive effects could not result without the intentional collusion precluded, as a factual allegation, by Aguilar. The district court illustrated its analysis with a hypothetical:
Defendant A enters into separate exchange agreements with B, C, D, E, and F. If B overproduces CARB gasoline at some point in time, A may be able to take the excess amount and adjust its production accordingly. However, in the absence of a conspiracy, C, D, E, and F may also produce excess CARB gasoline which cannot be absorbed by A because A has already taken the overproduction from B.
The district court may be correct in its understanding of how the economy or the oil business works, but that is a factual assessment, not left to the court, even a savvy judge, to decide on a Rule 12 motion. The hypothetical is not what has been pled in the SAC. The SAC alleges that anticom-petitive effects have resulted from the exchange agreement, even in the absence of collusion, and under Rule 12(b)(6), allegations of material fact are taken as true and construed in the light most favorable to the plaintiff. Knievel, 393 F.3d at 1072.
A review of the SAC shows that it alleged that the existence of the exchange agreements allows a given Defendant in a given geographic market control of enough refining capacity of CARB gas to keep CARB gas out of the spot market and away from unbranded marketers, with the overall effect of creating supracompetitive prices. Plaintiffs did not allege that Defendants entered into a conspiracy to limit supply or raise prices, and did not assert a conspiracy to enter into the exchange agreements. That the district court believes that the allegedly anticompetitive effects would not actually occur without a conspiracy does not justify dismissal of the SAC for failure to state a claim.
Furthermore, the absence of a conspiracy to limit supply and raise prices does not eliminate a causal connection between the exchange agreements and anticompetitive effect. As discussed above, Plaintiffs must first identify an agreement that unreasonably restrains trade. Here, the SAC properly identifies a number of agreements satisfying the contract, combination, or conspiracy requirement of § 1. Next, Plaintiffs must plead facts that if taken as true would allow Plaintiffs to recover for an antitrust injury. Here, Plaintiffs’ SAC, construed in the light most favorable to them, alleges that each Defendant’s control of its refining capacity, coupled with that of its contracting partners, establishes requisite market power in the relevant geographic market sufficient to establish anticompetitive effects.
We conclude that the SAC is a sufficient pleading to move beyond Rule 12(b)(6).
4. Plaintiffs Have Standing Against Tesoro.
Although a plaintiff must directly purchase from a defendant to have standing to recover damages, Ill. Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), an indirect purchaser may nevertheless have standing to seek injunctive relief. Lucas Auto. Eng’g, Inc. v. Bridgestone/Firestone, Inc., 140 F.3d 1228, 1235 (9th Cir.1998).
Taking Plaintiffs’ allegations as true, and construing them in the light most favorable to Plaintiffs, at least an indirect purchaser scenario exists in the SAC. In addition to Plaintiffs’ allegations that they are “direct purchaser[s] from [Djefen-dants,” the allegation that Tesoro acquired the Avon refinery from UDS, and that “Tesoro entered into the same sales and/or exchange agreements that UDS had for[1014]*1014merly entered into with other refiners ... in connection with the ownership and operation of the Avon refinery” provides sufficient pleading to conclude that Plaintiffs have standing to include Tesoro in the SAC.
5. We Remand the State Law Claim.
The district court dismissed Plaintiffs’ claim under Cal. Bus. & PROP. Code § 17200 as follows:
Plaintiffs’ state unfair competition claim rests on the same facts as their Sherman Act claim. Because the Sherman Act claim is being dismissed at an early stage of litigation, the Court finds that the factors underlying the assertion of supplemental jurisdiction ... weigh against retention of jurisdiction over the remaining state law claim.
Because we reverse the dismissal of the Sherman Act claims, we also reverse the district court’s dismissal of the state law claim.
Ill
CONCLUSION
We agree with the California Supreme Court that the Aguilar trial court only adjudicated a per se claim of horizontal price fixing. Therefore, Plaintiffs’ rule of reason claim alleging that the bilateral exchange agreements have anticompetitive effects is not precluded. In addition, Ninth Circuit and Supreme Court precedent allow for aggregation of the individual exchange agreements to demonstrate market power and anticompetitive effect in a given market. Though the district court may think the prospects of Gilley actually proving the allegations contained in the SAC to be highly improbable — and may be correct in that assessment — that is not a valid basis for Rule 12 dismissal.
REVERSED and REMANDED.