When faced with a strike by their unionized employees in 2003, four supermarket chains in Southern California entered into a Mutual Strike Assistance Agreement. The chains agreed that they would lock out all union employees in the event of a strike against one of them, and that they would redistribute and share profits during the course of the strike.
While the lock-out agreement is a traditional tactic in labor disputes, the profit-sharing agreement drew the attention of the State of California, which sued the supermarkets alleging an unlawful agreement in restraint of trade, in violation of Section 1 of the Sherman Act. In California v. Safeway, Inc., the Ninth Circuit Court of Appeals last week held that the agreement was unlawful, and directed that summary judgment be entered in favor of the state.
The supermarkets argued that the profit-sharing arrangement was justified because it was designed to end once the labor dispute was resolved, and did not decrease the number of competitors in the market. Further, they argued, it served the pro-competitive purpose of resisting an increase in labor costs by allowing the supermarkets to fend off union demands. Finally, they contended that the agreement was subject to an exemption from the antitrust laws for the purpose of engaging in labor negotiations.
The Ninth Circuit rejected all of those arguments, holding "to exempt defendants' anticompetitive agreement from the antitrust laws simply because it was entered into in order to help employers prevail in a labor dispute would be contrary to the fundamental priciples of both labor and antitrust law, as well as the actions of both Congress and the courts in their efforts to reconcile those two important bodies of national law."
