Grocery Profit-Sharing Arrangement During Labor Strike Ruled Anticompetitive

The Ninth Circuit Court of Appeals has determined that an agreement among grocery chains in Southern California to share profits during an anticipated labor strike was anticompetitive in violation of the Sherman Act and rejected defendants’ argument that the violation could be excused because the agreement was designed to be used as an economic weapon in a labor dispute. California v. Safeway, Inc., Nos. 08 55671, 08-55708 (9th Cir., decided August 17, 2010). According to the court, despite the limited duration of the agreement and the fact that the groceries involved constituted, at most, 70 percent of the market, the agreement was anticompetitive because it removed all incentive to compete by providing lower prices or better service to consumers.

The court disagreed that the defendants needed the pact to effectively bargain with striking employees. In this regard, the court stated, “Defendants claim no purpose for their agreement beyond strengthening their hands in a labor dispute, so as to allow them to reduce the economic impact of a strike, a lawful tool of collective bargaining, and ultimately to be able to limit the wages and benefits of their employees. They do not assert that they could not reach an agreement with the unions without violating the antitrust laws—in fact, the history of multiemployer collective bargaining is to the contrary.” A concurring and dissenting judge did not agree that the record was sufficient to conclude that the agreement violated the Sherman Act, saying it was not “intuitively obvious” that the agreement did so.