Grocers’ Mutual Aid Pact Detailed
Weeks before the first picket signs went up in Southern California’s bitter supermarket labor dispute, grocery chains were designing a mutual aid pact to ensure that no chain could profit at the expense of another as they battled the union, court documents unsealed Friday showed.
The long strike and lockout, which ended a year ago, pitted the United Food and Commercial Workers union against Safeway Inc., which owns Vons and Pavilions; Kroger Co., the parent of Ralphs; and Albertsons Inc.
During the dispute, the stores acknowledged that they had used the mutual aid agreement under which Kroger ultimately paid money to the other companies so all could weather a protracted work stoppage. But the chains had refused to divulge details about the agreement or why they crafted it.
The unsealed documents revealed that the stores used a complex formula based on their individual sales -- before and during the dispute -- and their regional market shares to figure out what Kroger should pay. The formula also contained a profit mechanism that California Atty. Gen. Bill Lockyer alleged in a federal antitrust lawsuit provided an incentive to keep the chains from cutting prices during the dispute.
The formula’s details “bring into sharp relief the anti-competitive nature” of the pact, Lockyer said in a statement Friday. “We will continue to aggressively prosecute our lawsuit.”
The unsealed documents provide a look at the stores’ maneuvering to outwit union strategists, with considerable success.
The stores signed the sales-sharing pact a month before the strike not only to make sure none of them prospered at the others’ expense, but also to counter any effort by the UFCW to break the stores’ unity.
The stores expected that the UFCW would shift its picketing to just one or two of the chains in the hope that those markets would incur such losses that they would abandon the others and quickly reach a new contract on their own.
The UFCW did exactly as the stores expected. Three weeks into the 4 1/2 -month dispute, the UFCW pulled its pickets from Ralphs to concentrate on Vons, Pavilions and Albertsons.
That sent shoppers flooding back to Ralphs and triggered the aid pact, which compelled Kroger to share sales with the others.
The mutual aid agreement raised eyebrows among some industry and labor experts, who questioned how three publicly held companies could share money yet provide no details. The stores have maintained that the agreement is legal.
Since then Kroger has revealed in Securities and Exchange Commission filings that the pact required it to pay a combined $148 million to Safeway and Albertsons; Albertsons said it received $63 million of that. Using simple arithmetic, Safeway’s share apparently was about $85 million.
That was minor compensation compared with the $1.5 billion in sales that the three companies estimate they lost as shoppers went to stores that weren’t involved in the labor dispute. Corporate profits were slashed by hundreds of millions of dollars.
The documents show that the pact between the stores “was a clear restraint of trade,” said Rick Icaza, president of UFCW Local 770 in Los Angeles, the largest of the union locals involved in the dispute. “Vons, for example, couldn’t care less whether they made a profit during the strike, because they knew they would be subsidized by Ralphs.”
Lockyer filed his suit against the grocers in January 2004, and the aid agreement was placed under seal at the stores’ request. Lockyer later sought to have the agreement unsealed, and was joined in the motion by the Los Angeles Times, which argued that there was a strong public interest in having access to the documents.
In legal papers, the supermarkets asserted that “consumers are concerned about having to cross a picket line to get their groceries, not with the intricacies” of the mutual aid pact.
The stores also contended that Lockyer wanted the agreement unsealed “not to enlighten the general public, but to obtain confidential strategic information that the unions can use” in future contract negotiations elsewhere.
But U.S. District Judge George King in Los Angeles disagreed and unsealed the agreement. Brian Dowling, a spokesman at Pleasanton, Calif.-based Safeway, declined to comment on the disclosure, but said “these are lawful agreements and common among multiple employers bargaining with unions.”
Cincinnati-based Kroger declined to comment. Albertsons, based in Boise, Idaho, didn’t return telephone calls seeking comment.
The dispute began when the UFCW struck Vons and Pavilions on Oct. 11, 2003. Ralphs and Albertsons promptly locked out their union workers. A total of 852 supermarkets were affected, with 59,000 employees idled. Millions of shoppers were inconvenienced during the holidays.
The dispute ended Feb. 29, 2004, when UFCW members ratified a new three-year contract.
Also included in the sales-sharing pact was Kroger’s Food 4 Less grocery chain, even though Food 4 Less had a separate contract with the UFCW and wasn’t involved in the dispute.
Lockyer contends the inclusion of Food 4 Less is one reason the pact violated antitrust laws. But the grocers, noting that Food 4 Less has more than 100 stores in Southern California, assert that Kroger still would have benefited disproportionately during the dispute if Food 4 Less had not been included.