Grocers' Revenue-Sharing Deal Deserves More Than A Quick Look, Ninth Circuit Holds

A revenue-sharing agreement among grocery stores, designed to help the stores weather targeted strikes by employees during labor strife, is not shielded from antitrust scrutiny by virtue of the non-statutory labor exemption, but neither is it so obviously anticompetitive to merit condemnation under a "quick-look" analysis, an en banc panel of the U.S. Ninth Circuit Court recently held. California ex rel. Harris v. Safeway, Inc., No. 08-55671 (9th Cir. July 12, 2011).

The case stems from labor negotiations in 2003 involving three large supermarket chains in Southern California (Albertson's, Ralphs and Vons). These three supermarkets had collective bargaining agreements with a union that were set to expire, and formed a multi-employer bargaining unit to negotiate. A fourth chain, Food 4 Less, had a separate contract with the same union that was due to expire several months later, and also joined the employers' group. In anticipation of "whipsaw" tactics, by which a union exerts pressure on one employer in a multi-employer bargaining unit through selective strikes or picketing, Albertson's, Ralphs, Vons and Food 4 Less (hereafter "Defendants" or "Grocers") entered into a Mutual Strike Assistance Agreement ("MSAA"). The MSAA provided that, if one party to the agreement was struck by the union, the other Grocers (minus Food 4 Less) would lock out their employees within 48 hours. The MSAA also included a revenue-sharing provision, providing that in the event of a strike or lockout, any grocer that earned revenues above its historical share relative to the other chains during the strike period would pay 15 percent of those excess revenues to the other Grocers. The 15 percent figure was designed to estimate the grocers' incremental profit. Slip Op. at 9288. The MSAA dictated that the revenue-sharing period would end two weeks following the end of the strike or lockout. Negotiations broke down, and the unions began to strike. The union ultimately focused its picketing efforts on Albertson's and Vons only. During the strike, the state of California sued, alleging that the MSAA's revenue-sharing provision violated Section One of the Sherman Act. Both sides moved for summary judgment. California claimed the revenue-sharing provision was a per se violation of Section One. The Grocers claimed the MSAA was immune from antitrust scrutiny under the non-statutory labor exemption, which limits an antitrust court's authority to pass judgment on trade...