Tuesday, December 02, 2003

Antitrust News: California AG Moves in for the Kill

The first rule of California government—When businesses are down, make sure to kick them as hard as possible:
California's attorney general is investigating whether the nation's three largest grocery chains have broken antitrust laws by forming a financial pact.

Safeway Inc., Kroger Co. and Albertsons Inc. were issued subpoenas Monday by Attorney General Bill Lockyer's office, demanding they reveal details of a mutual-aid pact, which the companies reportedly made to share revenue so they could reduce losses in the event of a labor strike. Some 70,000 Southern California workers are in the eighth week of a strike and lockout.

Meanwhile, the grocers agreed to arbitrate a suit filed by a union seeking health-care benefits for striking members.
This takes antitrust to a new low. Now businesses can’t act in self-defense to stem potentially crippling financial losses. Lockyer, of course, wants to protect unions from any pressure to settle on terms favorable to grocers. This is particularly galling since labor unions enjoy a federal antitrust exemption, which gives them a substantial political advantage over employers in labor negotiations. On top of that, the grocery strike is not about wages or working conditions, but whether employers will continue picking up the entire tab for health benefits, something which bears no relation to employment in the first place. But once again, federal law practically obligates employers into providing health care to employees.

Lockyer’s actions show just how hollow antitrust is. The states objective of antitrust is to “protect consumers,” yet how does adding to the economic woes of grocers’ aid consumers? It doesn’t. Consumers have already suffered immense harm because of the grocery strike and the parallel public transit strike. If the unions break the grocers on health care, the result will be higher labor costs, which translates into higher prices, the traditional scourge of antitrust enforcers.

A final note: Kroger, one of the grocery companies targeted by Lockyer, is itself a plaintiff in the Andrx antitrust lawsuit, which I discuss in the post below. There, Kroger is using antitrust to try and force lower cost generic drugs onto the market. When you put this in context, you realize Kroger is forced into this position because of the government-union alliance's demand that the company finance employee healthcare without restrictions. This doesn't justify Kroger's suit against Andrx, but it does explain it.

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