Last week the Ninth Circuit, following a rehearing en banc, declined to exempt from antitrust scrutiny an agreement among grocers in Southern California that was designed to minimize the economic impact of a strike. In State of California v. Safeway, California sued a group of grocery stores for entering into a profit-pooling and market-allocation agreement as an economic weapon to advance the grocers' position in a dispute with their unionized employees.
While the U.S. Supreme Court has recognized an exemption from the antitrust laws for certain agreements among competitors relating to labor negotiations, the Ninth Circuit en banc panel was unwilling to apply that blanket exemption to the grocers' agreement. Yet although the agreement is subject to the antitrust laws, the panel declined to find antitrust liability on the record before it. According to Judge Gould writing for majority, the limited duration of the agreement and the presence of many other competitors in the market make the agreement inappropriate for per se or "quick look" treatment by the court. Instead, the district court must conduct a rule of reason analysis to determine whether the anticompetitive effects of the grocers' agreement outweigh its procompetitive effects.