Ninth Circuit Defines Limits of Labor Law Antitrust Exemption -- State of California v. Safeway, Inc.

Unions exist for the purpose of aggregating individual employees into a united front in order to bargain collectively for higher wages.  This is a classic price-fixing agreement which would generally be illegal under the Sherman Act.  Indeed, the only reason collective bargaining can exist is because unions were (for the most part) explicitly exempted from the anti-trust rules during the New Deal.

Congress has never enacted such an explicit statutory antitrust exemption for employers.  Nevertheless, the Supreme Court has found that such a parallel exemption is implicit in the collective bargaining regime established by the National Labor Relations Act.  In State of California v.  Safeway, Inc., however, the Ninth Circuit has now clarified that this implicit employer exemption has a fairly limited scope.  

The case arose out of the bitter 2003-2004 Southern California grocery workers strike against Safeway, Albertson's, and Ralph's/Kroger.  In order to prevent the UFCW from employing a "divide and conquer" bargaining strategy, the employers not only agreed to bargain as a group, but also to "share profits" during the strike.  The Ninth Circuit held, however, that such a "profit sharing" arrangement stretched the NLRA's antitrust exemption too far. 

In reaching this result, the Court held that the implied anti-trust exemption for employers only extends to agreements "needed to make the collective-bargaining process work."  Thus, agreements among employers that directly pertain to the "bargaining process," such as coordinating their bargaining positions and implementing these offers in the event of impasse, are immunized from anti-trust scrutiny.  But agreements to split profits, allocate market shares, or engage in other conduct that is not directly related to bargaining itself will fall outside the exemption. 


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