State Case Against Markets May Hinge on Food 4 Less
By DAVID GREENBERG and KATE BERRY
Staff Reporters
The antitrust suit filed by Atty. General Bill Lockyer against three major supermarket companies may hinge on one chain that wasn’t involved in the 4 1/2-month strike and lockout: Food 4 Less.
Workers at the discount food chain never went on strike or were locked out. The chain, which is owned by Kroger Co.’s Ralphs Grocery Co. unit, is covered by a separate collective bargaining agreement than Ralphs and the other chains that were affected, Safeway Inc.’s Vons and Pavilions stores and Albertsons Inc.
In fact, Food 4 Less reaped loads of extra business as shoppers avoided pickets set up at Vons, Pavilions and Albertsons.
Yet Food 4 Less was included in the secret profit-sharing agreement that was struck by the three chains in August. That means some of the profits it pulled in during the strike will be redistributed to the other chains, just as money earned at Ralphs after the union pulled its pickets on Oct. 31 will flow to its rivals.
Food 4 Less has 101 stores in Southern California, compared with more than 850 for Ralphs, Vons, Pavilions and Albertsons. Food 4 Less employees, who are also members of the United Food and Commercial Workers, are covered under an extension to a separate contract that expired at the end of February.
The inclusion of Food 4 Less may have helped the stores weather the business lost during the strike no one knows to what extent because the agreement is still secret but it won’t help in the chains’ legal proceedings.
“The fact that there was a store in the agreement that was not part of the bargaining group is one reason that this agreement falls outside the scope of any immunity that may have been constructed by the courts in these types of situations,” said Tom Dresslar, a spokesman for Lockyer.
Lockyer, a labor ally, claims that the agreement is illegal because it discourages competitive pricing. He filed the antitrust lawsuit in federal District Court in Los Angeles on Jan. 2, and he has vowed to press on, seeking nullification of the labor contract despite its ratification on Feb. 29 by 86 percent of the United Food and Commercial Workers.
As part of the contract, the UFCW agreed to withdraw 38 charges filed with the National Labor Relations Board linked to the mutual aid pact, said Anne Pomerantz, a supervisory attorney with the NLRB in Los Angeles.
Another 60 charges, filed by both sides, remain outstanding, she said.
Antitrust exemption
Last week, the three parent companies filed responses to the lawsuit, requesting that it be dismissed outright.
They maintain that they are exempt from antitrust laws based on broad rules that allow a host of actions “in the furtherance of or related to” the collective bargaining process.
In the 1970s, the airline industry used the same labor exemption to carve out agreements that allowed airlines to share revenue during various strikes.
The timing of the pact, which came several weeks before the strike, is another issue Lockyer plans to pursue in the antitrust lawsuit, as is the fact that the profit-sharing pact continued for at least two weeks after the dispute was settled.
“It really seems to be that the attorney general is splitting hairs on this,” said Mark Theodore, a partner in the L.A. office of Proskauer Rose LLP, which represents management in labor disputes. “There is a certain amount of transition that you have to get back to business as usual. There are a lot of administrative issues to implementing the contract.”
It is not uncommon for retail operations to extend the termination date of a revenue-sharing pact past the contract ratification because it takes time to restore normal business operations, several labor lawyers said.
Kroger, Albertsons and Safeway are all facing layoffs of a sizable portion of their replacement crew and the costs of luring back their permanent workforce. Some found other jobs.
Analysts estimate the total sales lost in the strike at $1.5 billion, not counting these extra costs. Additional details of the chains’ financial pain will be disclosed on March 9, when Albertsons and Kroger each file their earnings reports for the fourth quarter ended Jan. 31.
For its fourth quarter ended Jan. 3, Safeway estimated $167.5 million in pretax strike-related losses. After including tax benefits, the estimate shrunk to $103 million.
While the numbers will be significant, investors have already put the past behind them, judging by the recent rise of each company’s stock.
“We’re treating whatever losses the companies have as a one-time event,” said Nancy Aversa, an analyst at Cleveland-based Victory Capital Management. “We’re really more concerned with the core earnings of the companies.”
