SoCal Supermarket Antitrust Case to Go Forward
By George Anderson
California Attorney General Bill Lockyer is confident he can prove that Albertsons, Kroger and Safeway violated antitrust laws when the three signed a revenue-sharing agreement in anticipation of a United Food and Commercial Workers Union (UFCW) strike in Southern California in 2003. With yesterday’s ruling by a federal judge, Mr. Lockyer and his office will get the opportunity to make their case.
In a 30-page decision, U.S. District Court Judge George H. King concluded that the deal at least opened questions as to whether it had an anti-competitive effect. Judge King wrote that the agreement between the chains did not “follow naturally from the collective bargaining process.”
Tom Dresslar, a spokesperson for the California Attorney General’s office, said the case has implications for employers across the nation. “The message employers should be getting is that they are playing with fire if they try to implement these types of agreements,” he said.
A piece in the San Diego Union-Tribune offers a counterpoint to Mr. Lockyer’s position noting, “car manufacturers and airlines involved in multi-company negotiations with labor unions have signed similar revenue-sharing pacts in the past.”
Moderator’s Comment: What is riding on the outcome of this case? Do you believe the revenue sharing agreement signed by Albertsons, Kroger and Safeway
resulted in the chains being less aggressive competitively with one another, hurting consumers in the process?
California’s Attorney General is not seeking damages in this case. –
George Anderson – Moderator
Albertsons, Kroger and Safeway being less aggressive competitively with one another? How could they get any less? Seriously, if workers from the three chains can join, pay dues, and received strike pay from the same union, then why can’t the grocers themselves create their own alliance to fight back? Doesn’t the UFCW have their own form of revenue sharing when they receive dues from workers at the various chains? Then use those funds to organize labor disobedience? The government has no business sticking their nose into private business matters and should walk away from this issue. I’m no fan of any of these three companies, but if we allow workers to unionize, then we should allow employers the same right – allow them to pay into a fund to help them through labor disputes the same way we allow workers to pay dues to a union.
These 3 retail food industry players in SoCal have helped to improve the position of the newcomer to this area. The Bentonville based Wal-Mart has overcome the local voting issues to be allowed to sell their grocery wares in that market. Now, by competing in the same market, they are indeed a threat to the tried and true players. By creating a revenue sharing model, these 3 companies have taken on tactics used by other industries… tactics they believe are necessary for survival. By reaching an agreement with the union, they were able to begin building back their business and hopefully stay open for some time longer. If the legal system in SoCal wishes to put all of those union workers out of business, then by all means approach this as an anti-trust issue. When the retailers have to turn their attention and profits towards the legal system, then the very consumers the state is attempting to protect will be out of jobs as the competition takes over the market. The local consumers know they have a choice. I crossed the picket lines a couple of times during Christmas of ’03 only because of convenience. I mostly traded elsewhere.
As to the Wal-Mart entry, their prices are much lower in the first place and the labor is non-union. The 3 retailers that have banded together will not hurt the consumers. Even with higher gasoline prices, the consumers will decide if the pricing is too high and will drive to the lowest prices. If the retailers raise their prices unreasonably, it will only be at the expense of their existence. I believe the open market should and will declare the victor, not the court system. Let them compete!
It might have if it weren’t for the fact that consumers found their way to any number of other operators ranging from Stater Bros. to Trader Joe’s and even upscale operators like Bristol Farms. As long as there is real choice in a market, I’m not sure you can make a case that the consumer was hurt — and in the case of Safeway et. al., I don’t think that reduced labor costs alone are going to make them significantly more competitive. I was just in a Ralphs a month ago and the cashier told me that none of the store’s employees shop the store themselves, preferring to take their business anywhere else (oddly even to non-union stores) rather than support their employer. If that is the fruit of collusion, independents all over America should pray their chain competition is talking to each other.
The outspoken cashier who commented on the shopping habits of fellow employees shopping “anywhere but here” will surely get the chance when the Wal-Mart Juggernaut rolls through California. The cashier will get lower prices and, oh bye the way, since your current employer can’t make it, you’ll get the chance to work for Wal-Mart too. And one last thing, you probably won’t have the opportunity to shop somewhere else because there won’t be many options left.
Let’s see, would you now call the courts 4th party involvement? Considering the union as the third party?
What’s really happened here reminds me of a line from a country music song –
“Nobody wins, slamming doors. We’ve both lost this fight before, And I won’t play this game no more, ‘Cause nobody wins.”
Neither the courts, the parties, the union, or the consumer has won here. The question is, will they have learned and not play the game the next time? Doubtful.
Part of what any retailer has to ‘sell’ is their employees/associates. And, as Ryan mentions, which is likely widespread, if they can’t make the sale to their own employees, they likely are the losers in the end.
What is true is that others with better models and less antagonistic relations with their employees are the likely winners. Stater Bros., Trader Joe’s, Costco and the like are proving that. It’s a much better model and makes great sense. Costco posted this week 7 percent same store sales increases. Same store sales is the real measure of how well you are doing. I think any retailer in the market would be very pleased with 7 percent.
Hopefully, this mess will go away. I’m sure Arnold doesn’t want California to get notoriety with this anti-business lawsuit. He needs to straighten out the Attorney General. The legal costs involved will only be passed on in higher prices and lower wages. This won’t benefit the stockholders either. So what’s the point of this witch hunt? Wal-Mart is probably having a good laugh over this, since they are non-union. Maybe the Attorney General can expect to get a nice donation from Wal-Mart when he comes up for re-election.