The U.S. Court of Appeals for the Ninth Circuit has held that a profit-sharing agreement among the grocery store defendants in California v. Safeway, Ralph’s, Von’s, Albertson’s and Food4Less violated the Sherman Act, despite the supermarkets’ defense that the agreement was intended to respond to a labor dispute, not to eliminate competition.

The Court of Appeals reversed the district court ruling, and held that the State of California was entitled to summary judgment on its claim for a declaratory judgment against the defendants – the three largest supermarket chains in Southern California – for engaging in a violation of the Sherman Act.  The court held that the agreement, which was designed to split profits according to each stores’ historic shares of the market during a labor dispute, was inherently anticompetitive and was not excused by the non-statutory labor exemption.

According to the Court, the supermarkets collectively accounted for 55-64% of the Los Angeles-Long Beach metropolitan market, and 66-75% of the San Diego metropolitan market.  Defendants argued that the profit-sharing agreement was pro-competitive and did not violate the Sherman Act because it was intended to operate for a limited period, it did not include 100% of the market participants, and it allowed the grocery chains to aid competition in the labor market by lowering employee wages and benefits. 

The Court rejected each of these supposedly pro-competitive justifications, stating:

“We find it difficult to believe that any individual with a rudimentary knowledge of antitrust law would seriously contend that if the defendants agreed to share profits for a limited period for their mutual economic benefit, there would not be a violation of § 1 of the Sherman Act—at least in the absence of some extraordinary circumstance.”

The Court also noted that “driving down compensation to workers is not a benefit to consumers cognizable under our laws as a ‘pro-competitive’ benefit” and that the “primary objective of our nation’s laws [is] to protect the rights and interests of working persons.”

After determining that the agreement was “patently anticompetitive,” the Court then addressed defendants’ final claim that the agreement, even if anticompetitive, should be exempt from liability according to labor laws because it concerned the employers’ bargaining position in a labor dispute.

The Court rejected defendants’ final claim, holding that the non-statutory labor exemption did not apply because “profit sharing is not needed to make the collective bargaining process work” and thus “defendants’ profit sharing agreement lies completely outside the matters regulated by labor law.”

The European Commission has opened a probe to investigate whether marine-insurance agreements among ship owners in the International Group of P&I Clubs (“IG”) restrict competition by blocking rivals from the market. 

The IG is comprised of 13 worldwide “protection and indemnity” clubs of ship owners, which together provide insurance to approximately 93 percent of ocean ships.

The Commission is concerned that certain provisions in the IG’s marine-insurance agreements may restrict competition by blocking commercial insurers or other mutual P&I insurers from the relevant market by restricting access to ship owners.  The Commission stated that it “fears that the provisions at stake in the agreements … may harm ship owners and the insurers that are not members of the IG.”

The provisions at issue involve claim-sharing and joint-reinsurance agreements as well as rules which govern the contractual relationships between the clubs and their members. 

The probe follows the recent expiration of a 10-year antitrust exemption enjoyed by the P&I agreements under European Union regulations.  Although the EU in April again created certain antitrust exceptions for the insurance industry, the P&I agreements were not included among them because their market share rises far above the 20-25 percent maximum provided for by EU competition regulations.

In response to the investigation, the IG stated that “there have been no relevant or material changes to the arrangements or in the market for P&I cover” since regulators last reviewed the agreements in 1999. 

The Commission launched the investigation on its own initiative, even though there have been no complaints regarding these agreements.  There is currently no deadline for completing the investigation.