A federal appeals court ruled Tuesday, August 17, that a profit-sharing arrangement that California grocery stores joined in when unions struck in 2003 over health care costs violated federal antitrust law.
The 9th U.S. Circuit Court of Appeals’ ruling in State of California v. Safeway Inc. resulted from a lawsuit that California filed against several of the state’s largest grocery store chains. Employer groups, labor unions and attorneys general from several states filed amicus briefs in the closely watched case.
The grocers had formed a multiemployer bargaining unit to negotiate an expiring labor contract that sought to reduce health care coverage expenses, court records show. They also responded to the strikes by agreeing to share profits from sales among themselves.
California sued, alleging the stores’ profit-sharing agreement violated the Sherman Act, which bans certain agreements that restrain interstate commerce, court records show.
The stores argued that their agreement should be excused from complying with antitrust law because it aimed to help them achieve lower labor costs and was therefore “pro-competitive” and outweighed any anti-competitive effects, court records state.
But the appeals court disagreed and held Tuesday that the arrangement violates the Sherman Act. The appeals court remanded the case to a trial court for further proceedings.