Grocers Face Antitrust Suit in California
Albertsons, Ralphs and Vons must face an antitrust lawsuit over a pact the three competitors signed in 2003 to share profits if any one of the three were singled out by the United Food and Commercial Workers (UFCW) union for a strike in California, according to Bloomberg News.
The U.S. Ninth District’s Court of Appeals overturned arguments by the three chains that the agreement wasn’t anticompetitive because it ultimately reduced labor costs and therefore the prices paid by consumers. The state of California had countered that prices actually increased for consumers during the 141-day lockout/strike in 2003 and 2004.
The state argued a bigger issue was at stake than claims and counterclaims about the prices paid by consumers "The central issue here is whether a profit sharing agreement that would ordinarily violate the antitrust laws is excused from compliance under the nonstatutory labor exemption because it constitutes an economic weapon used by the employers in their efforts to prevail in a labor dispute."
Judge Stephen Reinhardt, writing for the majority, concluded, "It is a primary object of our nation’s laws to protect the rights and interests of working persons, and to enable them to obtain a fair and decent wage through collective action. Reducing workers’ wages and benefits is hardly an objective that would justify a violation of our antitrust laws."
Representatives of the parent companies for Albertsons (Supervalu), Ralphs (Kroger) and Vons (Safeway) did not offer any comment on the verdict.
Discussion Question: Do you think Albertsons, Ralphs and Vons engaged in anticompetitive behavior by agreeing to share profits if one of the chains was singled out for a strike? What will this ruling, if upheld, mean for future labor negotiations?
Anti-competitive behavior is frequently in the eyes of the beholder or judge. Unless Wal-Mart gets union-organized, this decision represents a significant blow to Ralph’s, Albertson’s and Von’s and gives the union lots of clout as they can strike one chain at a time, weakening it or possibly more.
In all fairness, it seems that if labor can organize and go on strike, why can’t supermarket chains organize to protect the interests of their investors? Are the wages of union labor any more important than the profits for investors?
If labor unions can use “economic weapons” then supermarket chains should be able to use similar weapons. The government should not be involved in this matter. It is a private matter that should be left up to labor and management to work out. I was outraged to read “It is a primary object of our nation’s laws to protect the rights and interests of working persons…” Really, the primary objective? Seems unfairly one-sided. Consumers are not hurt because they can simply shop other grocers not involved like Wal-Mart, etc., so I doubt prices increased.
The Ninth Circuit made it quite clear that such a profit sharing arrangement would be illegal if no labor action was threatened. There is no compelling legal reason why the threat of labor action should change this fact. Arguments about how the profit sharing might benefit the consumers, employers, or employees involved may be well-considered and compelling, but they do not change the fact that the agreement was anticompetitive and illegal.
I see no problem with the idea that laws exist to protect workers’ rights, or that society has a legitimate role in ensuring that workers, who are badly equipped to defend themselves as individuals or even as unions, cannot in fairness have a reasonable chance to bargain when there is collusion by an industry cartel.
The role of unions in ensuring wage negotiation is resented by some, for reasons I never understood. Collective bargaining is no more or less fair than corporate bargaining, and the laws protecting corporations are far more generous than the laws protecting workers. Lack of bargaining power is clearly one of the reasons we have had a steady decline in wages for almost forty years while corporate profits and corporate consolidation continued steadily.
Sure, unions are sometimes over aggressive and even downright irresponsible. So are corporations. That’s why we have laws and rules. The retailers in this case broke the rules.
This is how we learn what we can and cannot do, what is and is not acceptable. Someone pushes the boundaries, the court looked and decided it was unfair.
The only surprising thing is it only took 6 years to get a verdict.
The companies created a contingency plan for use in case of emergency. If retailers can work in concert during a blizzard, hurricane, flu epidemic, nuclear attack or any other natural or man-made crisis, why can’t they organize for self-protection in case one of them is singled out for action that would severely cripple one of them?
Should there be no way to protect your business if yours is the focus of obstreperous individuals intimidating your customers, defaming your company and preventing deliveries to your store all while leaving your competitors free to serve your fearful customers?
Mutual defense pacts against aggression have a long and honored history. They are not for sovereign states only. Unions engage in them all the time just by honoring each others’ picket lines.
The labor versus management pendulum is constantly swinging from one side to the other. Rarely do we see it settle in the middle, where both sides feel they are receiving their fair share of the profits. I believe the pendulum had swung too far in favor of labor for a long period from the late seventies to the early 00’s. Many good companies found themselves burdened by contract agreements that could no longer be supported in a more competitive environment. Rather than concede the facts, labor groups pushed the envelope and jobs were lost when companies were forced into bankruptcy.
At the time the corporations were allowed to make the pact regarding profits, I think it made sense. Now, we are facing a completely different economic environment and labor needs more protection. But along with this protection, labor carries the responsibility to act appropriately in an economy where overcapacity (or lack of demand) is the dominant factor. Both labor and management must understand that to get the business of the shoppers who are spending they must be better than their competitors. This means concessions by both sides.
Sooner or later, as the unions in California get stronger, Wal-Mart will eat their lunch, and the party is over for the workers, and the stores. Staying competitive is crucial for survival.
Just ask the UAW and others who no longer own the markets they are in. Common sense, and some profit sharing incentives for improved performance are the answer. The handwriting is on the wall. Work in harmony or jobs will be hanging in the balance.