MUTUAL-AID STRIKE AGREEMENT INCLUDED FOOD 4 LESS

Elliot Zwiebach

LOS ANGELES -- The mutual-aid agreement among the chains involved in the 2003-2004 strike-lockout in Southern California allowed Albertsons, Kroger and Safeway to share revenues from Kroger's Food 4 Less division, according to documents unsealed in U.S. District Court here.

That revelation incensed union officials because Food 4 Less operates under a separate labor agreement. The officials said if they had known of Food 4 Less' inclusion in the pact, they might have employed a different strategy in the dispute.

The documents said the three companies agreed to retain an independent accounting firm to determine how much revenue should be shared among them during the 141-day labor dispute by using weekly results submitted by each chain to calculate the amount of sales lost or gained. One of those documents was a previously confidential "mutual strike assistance agreement" -- signed in August 2003, two months prior to the expiration of the chains' contracts with seven Southern California locals of the United Food and Commercial Workers union -- that was unsealed by the court on a motion by California Attorney General Bill Lockyer as he pursues a lawsuit against the three companies, alleging anti-competitive activity.

A hearing to rule on a request by the chains to dismiss the lawsuit is scheduled for March 10. A spokesman for Lockyer told SN the appeals process on that ruling and others that could follow means it could be months before a trial actually starts.

The protracted labor dispute, which ended last March, began Oct. 11, 2003, when UFCW workers struck Safeway's Vons and Pavilions stores, and were subsequently locked out of Albertsons and Ralphs stores. Pickets were pulled from Ralphs stores less than three weeks later, a move that triggered the agreement to take effect.

According to the unsealed agreement, its existence was supposed to "remain confidential at all times and under no circumstances to be disclosed to the union."

Union officials contacted by SN last week described the agreement as illegal and were particularly angered by the inclusion of Food 4 Less.

Greg Conger, president of UFCW Local 324, Buena Park, Calif., said the inclusion of Food 4 Less "is absolutely criminal because Food 4 Less had nothing to do with these negotiations. The employers may as well have included Disneyland in the agreement."

According to Conger, the agreement indicates the chains are guilty of price fixing and other violations of the Sherman Antitrust Act, "and it clearly put their stockholders, consumers and our members at an extreme disadvantage [during the negotiations]."

Conger said the attorney general's lawsuit could lead to an order for the employers to negotiate a new contract, an order for back pay to members who were illegally locked out, or imposition of a special employer contribution to the union's trust fund.

Rick Icaza, president of Local 770 here, said the UFCW felt it was entitled to see the agreement during the negotiations, "though it's now apparent why they wanted to hide it from us. If we had known Food 4 Less was part of their strategy, we may not have pulled the [picket] lines from Ralphs, or we may have included Food 4 Less in the picketing."

Brian Dowling, a Safeway spokesman, told SN the agreements are "lawful and common when a multi-employer unit is negotiating with the union." Spokesmen for Albertsons and Kroger declined comment last week.

However, when Lockyer filed suit against the three chains in January 2004, he said the argument that such agreements were exempt from antitrust law does not apply, in part because Food 4 Less was a party to the agreement.

According to the unsealed document, the purpose of the agreement was "to deter the unions from bringing economic pressure to bear on one employer with the intent of forcing such employer to exert pressure on multi-employer negotiations to persuade the other employers to settle on unfavorable terms."

In the agreement, Albertsons and Safeway said they would provide "limited mutual assistance" to Food 4 Less in Southern California "in the event one or more of the UFCW locals conducts a strike against Food 4 Less or in the event Food 4 Less engages in a defensive lockout of its employees."

In response to interrogatories by Lockyer's office last June, attorneys for Vons and Albertsons said Food 4 Less was included in the revenue-sharing plan "[because] otherwise, Ralphs would wind up in a better financial position than Albertsons and Vons because consumers would increase their shopping at Food 4 Less during a strike or lockout."

According to the unsealed document, the certified public accountant hired by the chains -- separate from the accountants they hired as individual companies -- was to utilize sales data from the eight full weeks prior to the strike-lockout to calculate each employer's percentage share of combined average weekly food sales in Southern California. During the strike-lockout, each company was to submit weekly sales reports to the CPA, who would calculate the dollar amount of increase or decrease from the pre-strike base and the total dollar change in average weekly sales to determine a sales-sharing amount.

The CPA would then compute the presumed redistribution of lost sales by multiplying the total average weekly sales-sharing amount by 15% and then multiplying the result by the number of weeks in the strike-lockout period. "The employer(s) due reimbursement under this section is/are the one(s) whose total average weekly sales lost during the strike-lockout period exceeds the redistributed amount," the agreement said.

Lockyer said inclusion of a 15% profit margin in the formula provided a disincentive for Ralphs to price products competitively during the labor dispute. "We believe the specifics of the profit-sharing formula bring into sharp relief the agreement's anti-competitive nature and the antitrust violations [because] it provided a disincentive to keep prices low and an incentive to keep them high. That's not the way our economic system is supposed to work."

Using the formula spelled out in the agreement, the unsealed documents said Kroger ultimately had to pay out approximately $147 million to Albertsons and Safeway -- $142.5 million for revenues during the strike-lockout and an additional $4.2 million for revenues from the two-week period after the dispute ended, before shopping patterns returned to a more normalized pattern.

Of the total, approximately $63 million went to Albertsons and approximately $84 million went to Safeway.

The accountant was instructed to maintain all reports in confidence and to return all copies of reports to the respective employers after all cost-sharing payments had been made.