GROCERY MERGERS BOXING IN CONSUMERS ANTITRUST LAWSUIT AIMS TO PROTECT COMPETITION AMONG SUPERMARKETS.

Byline: Bill Lockyer 

OVER the past 20 years, consumer choice has been disappearing from the supermarket industry landscape. Competition has declined in a seemingly endless stream of mergers and acquisitions.

Safeway merged with Vons. American Stores, which owned Alpha Beta, bought Lucky and then sold Alpha Beta. Ralphs acquired Alpha Beta. Fred Meyer bought Ralphs and combined Ralphs with Hughes. Albertsons bought Lucky from American Stores. The list goes on.

No area has been more greatly affected by the march toward mono-shopping than Southern California. The variety that used to enliven boulevards from Encinitas to East Los Angeles is fast becoming a page in history books. Now, three supermarket chains control most of the business.

The Attorney General's Office has been greatly concerned about, and working to alleviate, the potential harmful effects of decreased competition in this industry for more than 15 years. Throughout the wave of mergers and acquisitions, this office diligently endeavored to protect the market and consumers. For example, in most cases we secured a requirement that the purchasing grocery chain sell stores to another company.

While large supermarkets may offer consumers convenience, the mushrooming consolidation in this industry also carries the risk of substantial harm. In 2000, the president of the Western Growers Association testified before Congress that grocery giants wielded their market power to depress prices for farmers - and failed to pass the savings on to shoppers. In the Alpha Beta-Lucky case, we provided evidence that showed the merger would cost California consumers $400 million annually.

The antitrust lawsuit filed by my office against grocery chains involved in the lengthy Southern California strike-lockout should be viewed in this historical context. The federal court complaint - which challenges a revenue-sharing agreement entered by Ralphs, Safeway, Albertsons and Food 4 Less - is consistent with our long-standing interest and activity in this arena.

Our lawsuit is based on a venerable antitrust tenet - when competitors enter the type of agreements that invariably reduce competition, such agreements are per-se violations of the law.

The reason is simple. By eliminating incentives to compete, these arrangements keep prices artificially high. The grocers' agreement falls squarely into this category.

Competitors normally have an incentive to keep their prices down to attract and keep customers. The high degree of concentration in the Southern California market lessens that incentive. The supermarket chains' agreement reduces it further. The resulting harm to consumers is not mere theory. We received reports the stores increased their prices during the strike.

The courts have granted a limited antitrust enforcement immunity to certain conduct by employers during labor strikes that otherwise would violate the law. The agreement challenged by my office does not qualify for any court-constructed immunity that applies to labor relations.

For example, the grocers went outside the legitimate labor dispute context by including in the agreement an employer who is not a party to the dispute (Food 4 Less) and by extending the agreement for at least two weeks beyond the strike period.

This case presents substantial, serious issues. The courts need to resolve these issues to clarify the law and guide future conduct. For that reason, my office will pursue this case, despite the strike's end.

It's true I personally supported and walked the picket line with the grocery workers who fought to protect their families and their health care coverage. The contributions of workers to our society and economy should be honored, not forgotten, in a corporate race to the bottom. I believe all businesses, including supermarkets, should support efforts to ensure adequate health care coverage for workers and families throughout our state.

The bottom line, however, is our system entrusts the attorney general with enforcing antitrust statutes. These laws safeguard the heart of our free market economy. During my tenure, my office has scrutinized potentially anti-competitive activities across a broad spectrum of industries to protect consumers at the gas pump, the pharmacy, the light switch and the supermarket. I will continue to enforce these laws. It's my duty, and the people of California deserve nothing less.