Attorney General Lockyer Files Lawsuit Alleging Grocers' Agreement Violates Antitrust Laws
Complaint Says Chains' Mutual Aid Deal Unlawfully Restrains Trade, Hurts Consumers
(LOS ANGELES) – Attorney General Bill Lockyer today filed a lawsuit that alleges a mutual aid agreement reached by grocery chains embroiled in a three-and-a-half-month-old labor strike violates antitrust law and harms consumers.
"This action is about protecting shoppers against unlawful, anti-competitive conduct that keeps prices artificially high," said Lockyer. "The grocers' agreement to share costs and revenue hurts consumers by discouraging competitive pricing. The antitrust law exists to prevent that, and I intend to enforce the law. My office has long been active in trying to alleviate the negative effects on consumers caused by the increased consolidation of the Southern California supermarket industry."
Lockyer's complaint asks the court to rule that the mutual aid agreement – entered by Albertsons, Ralphs (owned by Kroger), Food 4 Less (owned by Kroger) and Safeway (owner of Vons and Pavilions) – violates federal antitrust law, specifically the Sherman Act. Filed in federal court in Los Angeles, the complaint also asks the court to find that the agreement is not exempt from antitrust law under any immunity afforded conduct by management during labor disputes. Lockyer's action also seeks a preliminary injunction barring the defendants from implementing the pact, called the "Mutual Strike Assistance Agreement."
"The defendants' agreement is an unlawful combination and conspiracy in restraint of interstate trade," the complaint alleges.
Further, the complaint states, the pact falls outside the bounds of any existing immunity from antitrust enforcement provided both unions and management during labor disputes. In making that argument, the complaint focuses on two provisions of the agreement.
The first includes as a party to the agreement an operating subsidiary – Food 4 Less – that is not involved in the strike or the collective bargaining process. The second specifies that the revenue-sharing agreement remains in effect for at least two weeks after the strike ends.
The complaint alleges, "This unlawful combination and conspiracy is not exempt from the antitrust laws ... for the following reasons: (a) the agreement extends beyond the time of the labor dispute; and (b) it includes a supermarket which is not a party to the collective bargaining process, or a member of the multi-employer bargaining unit."
The grocers entered the mutual aid pact on August 5, 2003, more than two months before the strike began. The pact requires Ralphs, Albertsons, Safeway and Food 4 Less to share with each other revenue and costs disproportionately lost or gained as a result of the strike, the complaint states. The sharing mechanism, according to the complaint, is based on a margin established before the strike and lockout period.
The agreement's anti-competitive effects, the complaint alleges, include:
A disincentive to discount prices and increase market share.
Restraining trade and competition between stores involved in the strike and one that is not involved in the strike.
Depriving shoppers of the "benefit of full competition among and between defendants for the sale of food and non-food grocery items for a period beyond the end of the strike and lockout."
The extension of the agreement beyond the strike period, the complaint alleges, also will affect "a not insubstantial amount of commerce ... in the relevant geographic and product markets." Since the chains operate throughout Southern California and have millions of dollars in annual sales, according to the complaint, cost-sharing after the strike period would affect a significant amount of sales.
The strike has idled some 70,000 workers at more than 850 stores in Southern and Central California. It began last Oct. 11, when union workers at Safeway's Vons and Pavilions stores walked off the job after contract talks reached an impasse over health benefit and pension issues. Within hours, Albertsons and Ralphs locked out their union workers. The Safeway, Ralphs and Albertsons chains are bargaining jointly with the workers' representative, the United Food and Commercial Workers' Union (UFCW).
"This strike has inflicted severe financial harm on thousands of workers and their families," said Lockyer. "They deserve, at a minimum, compliance with the law by the grocers."