Judge OKs Suit Over Grocer Pact
A federal judge ruled Wednesday that a controversial mutual-aid pact between the three grocery chains involved in Southern California’s bitter supermarket labor dispute could be challenged on federal antitrust grounds.
The decision was a partial victory for California Atty. Gen. Bill Lockyer, who filed the lawsuit alleging that the agreement -- in which the chains shared nearly $150 million to help one another weather the dispute -- violated U.S. antitrust laws.
The chains -- Safeway Inc., which owns Vons and Pavilions; Kroger Co., the parent of Ralphs; and Albertsons Inc. -- sought to have the suit thrown out, arguing that the pact was protected under labor laws.
But U.S. District Judge George H. King in Los Angeles wrote in his decision that the mutual-aid deal was “not protected from potential antitrust liability.”
King, however, didn’t decide whether the companies actually restrained competition or otherwise violated the antitrust laws. That’s still to be determined in his court. The chains also could appeal his initial ruling.
“We are confident we will prevail on the merits,” Lockyer said in a statement, adding that this was the first such ruling to hold that a “profit-sharing agreement like the grocers’ is not immune from antitrust laws.”
Brian Dowling, a spokesman for Pleasanton, Calif.-based Safeway, said that “we disagree with the ruling and we are determining what our next move will be.” Gary Rhodes, a spokesman for Kroger, said the Cincinnati-based chain couldn’t comment because it hadn’t yet seen the ruling. A representative for Albertsons, headquartered in Boise, Idaho, couldn’t be reached for comment.
The 4 1/2 -month strike and lockout pitted the chains against the United Food and Commercial Workers union. It affected 59,000 workers at 852 supermarkets in Southern and Central California and ended Feb. 29, 2004, when the workers ratified a new contract.
The mutual-aid pact, reached weeks before the dispute began, was designed to ensure that no chain could profit at the expense of another as they fought the union. It also was intended to counter any effort by the UFCW to break the companies’ unity.
The chains expected that the union would shift pickets to one or two of the chains in hopes that those stores would incur such losses that the companies would quickly reach a new contract.
The UFCW, in fact, did pull its pickets from Ralphs shortly after the dispute began and focused on Vons, Pavilions and Albertsons. That sent shoppers flooding back to Ralphs.
The chains initially refused to disclose the pact’s details and sought to have them sealed after Lockyer sued. But King unsealed the documents in February.
They showed that the companies used a formula based on their sales, before and during the dispute, and their regional market shares to figure out what Kroger should pay the others.
Kroger later revealed in securities filings that it paid a combined $148 million to Safeway and Albertsons, and Albertsons said it received $63 million of that. That would have left $85 million for Safeway.
Lockyer noted that $4 million of that money was paid for the two-week period after the dispute ended, and that another Kroger subsidiary, Food 4 Less, was part of the mutual-aid pact even though it wasn’t involved in the contract dispute. Both contributed to the antitrust violations, he alleged.
Despite the pact, the chains suffered massive financial damage. They estimated that their combined sales were slashed by $1.5 billion as shoppers hit other stores, and they reported combined net losses of several hundred million dollars because of the dispute.
