Grocers Must Face Antitrust Claim

grocery aisleGrocery store chains in southern California that agreed to share revenues during a labor dispute may be subject to antitrust violation claims, a federal appeals court ruled.  The Sherman Antitrust Act prohibits contracts or agreements used to restrain trade.

A splintered 11-judge panel of the 9th U.S. Circuit Court of Appeals held the supermarkets, including Safeway, Inc., Albertson’s and Ralphs, temporary use of revenue-sharing as an economic weapon during a labor dispute was not exempt from antitrust law.

But the panel moderated its decision by holding the agreement was not an automatic violation of the antitrust law.  Instead the court said the case must go back to the trial court to determine whether the deal had an anticompetitive effect.

 The dispute stems for 2003 negotiations over a labor contract with the United Food and Commercial Workers Union.  Before it expired the chain stores formed a multi-employer bargaining unit to negotiate the new deal.  They also entered into a Mutual Strike Assistance Agreement, to shield themselves from selective strikes and picketing.

The strike and employer lockout lasted more than four months with Ralphs paying $83.5 million to Vons, a Safeway subsidiary, and $62.5 million to Albertson’s as part of the revenue-sharing provision, the court stated.

While the strike was in progress, the state of California sued the grocers alleging the agreement was anticompetitive and restrained trade.  The grocers countered that they were immune from antitrust scrutiny under a labor exemption.  The trial court sided with the state saying grocers were subject to the antitrust protections, but rejected California’s claim that revenue sharing was an automatic violation.

The appeals court agreed and the case must go back to the trial court to resolve whether the grocers’ actions were improper.

Chief Judge Alex Kozinski and two other judges dissented saying the revenue-sharing deal should be exempt from antitrust complaint.

But Judge Stephen Reinhardt and two other judges partially dissented arguing the antitrust violation was clear and the supermarkets should have been found in violation of the law without sending the case back to the lower court.  The final tally would be 8-3 by the court that the revenue-sharing deal may be subjected to antitrust scrutiny.

 Case:  California v. Safeway, Inc.  No. 08-55671

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