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LOS ANGELES -- The ruling of Judge George H. King, U.S. District Court for the Central District of California here, that the state can go ahead with an antitrust lawsuit against grocers Albertsons; Kroger, owner of Ralphs; and Safeway, owner of Vons and Pavilions in relation to a revenue-sharing deal they struck before the five-month supermarket strike/lockout that ended in February 2004 could have a "chilling effect" on such pacts in the future, a labor expert cautioned.
Newport Beach, Calif. labor attorney Roger H. Schnapp told Progressive Grocer that, from the point of view of the three chains, the ruling was "disappointing, but a minor battle in the overall war." He added, however, that if the case is ultimately decided against the defendants, it could prevent "grocers and others" from making similar profit-sharing agreements, resulting in "the first step down a relatively bad path." A prudent attorney would advise a company to take "a wait-and-see attitude" in the face of the current legal uncertainty, noted Schnapp.
The agreement was formed to keep any one company from making money at another one's expense, and to fight anticipated United Food and Commercial Workers union efforts to divide and conquer the chains.
According to the terms of the pact, if any of the stores raised their market share above pre-strike levels, they had to share the resulting profits with the other pact participants, with payments based on a 15 percent profit margin. The profit-sharing provisions of the agreement continued until two weeks after the end of the labor dispute.
Earlier that same month, before the labor dispute concluded, California Attorney General Bill Lockyer filed a federal antitrust against the retailers, arguing that the pact was anticompetitive and rewarded those grocers that inflated consumer prices while narrowing consumer options. The supermarket companies tried to have the suit dismissed in a summary judgment motion, maintaining that similar agreements had been previously accepted by courts since there has always been a public interest in allowing collective bargaining to resolve issues between labor and management.
However, King's ruling noted, "Overall, the challenged revenue-sharing provision of the [grocers' pact] is not sufficiently connected to the subject matter of the collective bargaining process, or to matters required to be negotiated collectively."
"This ruling, the first if its kind in history, is a significant legal victory for consumers and law enforcement officials, not just in California but potentially across the country," said Lockyer in a statement. "The decision stands for the principle that businesses cannot violate the most basic tenet of antitrust law, conspiring to keep prices artificially high, and then escape accountability just because they broke the law during a labor strike."
The labor dispute affected about 70,000 unionized workers at 850 stores in the region.