Appeals court issues mixed ruling on grocers’ strike pact

A federal appeals court ruled that Southern California’s leading supermarket chains weren’t entitled under antitrust law to enter into a revenue-sharing pact during the 2003-04 labor strike but said it had too little information to conclude that the retailers should be punished for it.

A federal appeals court ruled that Southern California’s leading supermarket chains weren’t entitled under antitrust law to enter into a revenue-sharing pact during the 2003-04 labor strike but said it had too little information to conclude that the retailers should be punished for it.

On Tuesday, the U.S. 9th Circuit Court of Appeals in San Francisco stopped short of definitively saying that Safeway Inc.’s Vons, SuperValu Inc.’s Albertsons and Kroger Co.’s Ralphs violated antitrust law when they agreed to pool revenues during the 141-day strike and worker lockout to protect each other if any of the three had stores that were singled out by picketers.

The court, in declining to take a firm stance on whether the pact was lawful, said, “We express no opinion on the legality of the arrangement.” The court also left unclear what consequences the grocers could face if they reached a similar agreement during any future labor struggles.

The decision was a setback for California, which sued the three grocers in 2004, alleging that the mutual strike assistance pact violated federal antitrust laws and led to higher prices for consumers.

Deputy Atty. Gen. Jonathan Eisenberg said the state hadn’t yet decided whether to file an appeal.

The ruling comes at a key time as Vons, Albertsons and Ralphs are once again locked in tense contract negotiations with the United Food and Commercial Workers. The labor contract for 62,000 supermarket checkers, baggers, meat cutters and other unionized employees expired in March, and members of the region’s seven locals have authorized a strike. Negotiations, which have dragged on for months, are being supervised by a federal mediator.

Union officials expressed disappointment over what they said was a lack of clear and timely guidance from the court about what tactics retailers may or may not use in the event of another strike or lockout.

But the ruling was something of a victory for the retailers. “The court is saying this agreement can’t be illegal unless there is proof of harm to consumers. There was no such proof,” said Daymond Rice, a Safeway spokesman.

Such an agreement “is not exempt” from antitrust scrutiny under the Sherman Antitrust Act and that more than a quick look “is required to ascertain its impact on competition,” according the 74-page ruling.

The mutual-aid pact, reached weeks before the dispute began in 2003, was designed to ensure that no chain could profit at the expense of another during the strike and counter any effort by the United Food and Commercial Workers to break the companies’ unity.

Such pacts have been used for decades by grocers to spread the risk and prevent stores from closing during labor disputes, said Burt P. Flickinger III, managing director of Strategic Resource Group in New York.

“If stores end up closing, it’s bad for the company, bad for the customers, bad for the workers and bad for everyone but the non-unionized companies paying grocery workers essentially minimum wage,” Flickinger said.

Either the state or the grocers may appeal the 9th Circuit’s en banc ruling to the U.S. Supreme Court. But given the lack of strong punitive language, Flickinger said, “in practice, I don’t see much changing in what the companies do.”

Mike Shimpock, a spokesman for United Food and Commercial Workers Local 770, said that the ruling “overturned the markets’ contention that they were above the law, but unfortunately makes it difficult to hold them accountable in a timely manner.”

p.j.huffstutter@latimes.com

carol.williams@latimes.com