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The Courthouse News Service reports that the profit-sharing agreement reached by Southern California’s major chains - Albertsons, Ralphs and Vons - in 2003, permitting them to share profits in the event that one of them was singled out for a strike by organized labor, was in fact a violation of federal antitrust laws.

The finding was reached by the Ninth Circuit Court of Appeals, which said that “profit pooling or profit sharing arrangements eliminate incentives to compete for customers along every dimension: there is little purpose in attempting to attract another firm's customers by lowering prices, improving quality or taking any other measure if the profits earned from those new customers would be placed in a common pool in which the other firm is a participant, and the proceeds distributed in the same way no matter which participant in the profit pool generated the underlying sales.”

The chains - which included Food 4 Less, which became part of the agreement later on - argued that reduced labor costs actually lowered consumer prices for everyone, and therefore was not anticompetitive. A lower court concurred with that assessment, but the appeals court disagreed.
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