Lead Opinion
Opinion by Judge GOULD; Concurrence by Judge FISHER; Partial Dissent by Chief Judge KOZINSKI; Partial Concurrence and Partial Dissent by Judge REINHARDT.
OPINION
We must decide whether an agreement among competitors to share revenues during the term of a labor dispute is exempt from the antitrust laws under the non-statutory labor exemption, and if not, whether the agreement should be condemned as a per se violation of the antitrust laws or on a truncated “quick look,” or whether more detailed scrutiny is required. We conclude that the agreement is not immune from the antitrust laws, but that summary condemnation, whether as a per se violation or on a “quick look,” is improper. We affirm the district court.
I. Factual and Procedural History
In the fall of 2003, the collective-bargaining agreement between several local chapters of the United Food and Commer
Albertson’s, Ralphs, Vons, and Food 4 Less (“Defendants” or “grocers”) entered into a Mutual Strike Assistance Agreement
Pertinent to the antitrust claims that we assess, the MSAA also included a revenue-sharing provision (“RSP”), providing that in the event of a strike/lockout, any grocer that earned revenues above its historical share relative to the other chains during the strike period would pay 15% of those excess revenues as reimbursement to the other grocers to restore their pre-strike shares.
On October 11, 2003, after union contract negotiations broke down, the unions began a strike against Vons stores in the region. Albertson’s and Ralphs locked out their union employees the next day pursuant to the terms of the MSAA. The unions at first picketed Albertson’s, Ralphs, and Vons stores, but soon elected to pull their pickets from Ralphs stores and focus their picketing efforts on Albertson’s and Vons only. About four-and-a-half months after the strike began, at the end of February 2004, the grocers and the unions reached an agreement and the strike/lockout ended. In accord with the revenue-sharing provision of the MSAA, Ralphs paid about $83.5 million to Vons, and it paid about $62.5 million to Albertson’s.
While preserving their right to appeal the district court’s rulings, the parties stipulated to the entry of final judgment for the grocers after California agreed not to pursue the theory that the RSP violated § 1 of the Sherman Act under a full rule of reason analysis, and the grocers agreed not to pursue the various affirmative defenses they had pleaded, with the exception of the non-statutory labor exemption. The district court entered judgment in accordance with the parties’ stipulations.
California timely appealed the final judgment, arguing that the RSP should be condemned as a per se violation or on a “quick look,” and the grocers timely cross-appealed, arguing that the non-statutory labor exemption should apply. We issued an opinion affirming in part, reversing in part, and remanding. California ex rel. Brown v. Safeway, Inc.,
II. Jurisdiction and Standard of Review
We have jurisdiction under 28 U.S.C. § 1291. We review de novo a district court’s denial of summary judgment on the basis of the non-statutory labor exemption. Clarett v. Nat’l Football League, 369 F.Sd 124, 130 (2d Cir.2004). The selection of the proper mode of antitrust analysis is a question of law, which we review de novo. United States v. Brown,
III. Non-Statütory Labor Exemption
On cross-appeal, the grocers contend that the district court erred in holding that the RSP is not immune from the Sherman Act under the non-statutory labor exemption, and they urge that summary judgment should have been entered in their favor on the basis of the exemption.
A. Background
Courts have recognized both “statutory” and “non-statutory” labor exemptions to the antitrust laws. Phoenix Elec. Co. v. Nat’l Electric Contractors Ass’n,
The non-statutory labor exemption, invoked by the grocers as a defense in this case, has been inferred from federal labor statutes. These “set forth a national labor policy favoring free and private collective bargaining,” “require good-faith bargaining over wages, hours, and working conditions,” and “delegate related rulemaking and interpretive authority to the National Labor Relations Board.” Brown v. Pro Football, Inc.,
“The Supreme Court has never delineated the precise boundaries of the [non-statutory labor] exemption, and what guidance it has given as to its application has come mostly in cases in which agreements between an employer and a labor union were alleged to have injured or eliminated a competitor in the employer’s business or product market.” Clarett,
In United Mine Workers of America v. Pennington, the Supreme Court similarly declined to apply the exemption to insulate a wage agreement between a union of mine workers and large coal companies.
The exemption was applied in a fractured decision in Local Union No. 189, Amalgamated Meat Cutters & Butcher Workmen of North America v. Jewel Tea Co.,
The Court declined to apply the non-statutory exemption to a labor-employer agreement in Connell Construction Co.,
Most recently, in Brown v. Pro Football, Inc., the Supreme Court for the first time extended the non-statutory labor exemption to an agreement that was solely among employers.
Brown involved an agreement among National Football League teams to restrain the salaries of certain classes of players. Brown,
The Court began by examining the “history and logic” of the exemption, observing that it “interprets the labor statutes in accordance with” the intent of Congress to prevent “judicial use of antitrust law to resolve labor disputes” and limits antitrust courts’ authority to determine what qualifies as a reasonable practice in industrial conflict. Id. at 236-37,
The Court then identified the question presented as one of scope: whether the exemption applies to an agreement among several employers bargaining together to implement after impasse the terms of their last best good-faith wage offer. Id. at 238,
The Court addressed and rejected several proposed limitations or boundaries to the exemption that were suggested by the parties and amici. Id. at 243-50,
The Court described its decision to apply the exemption to the football teams’ conduct in this way:
That conduct took place during and immediately after a collective-bargaining negotiation. It grew out of, and was directly related to, the lawful operation of the bargaining process. It involved a matter that the parties were required to negotiate collectively. And it concerned only the parties to the collective-bargaining relationship.
Id. at 250,
B. Positions of the Parties
The grocers contend that Brown immunizes employer agreements related in time and circumstance to the collective-bargaining process, and that the economic weapons parties use to advance their positions in a labor dispute — like an agreement to share revenue to weaken the effects of a whipsaw strike — are “as much a part of the collective bargaining process as are negotiations over terms.” The grocers stress that labor policy approves the use of economic weapons, and that economic weapons are “part and parcel” of the collective-bargaining process that should be exercised free from governmental regulation. NLRB v. Ins. Agents’ Int’l Union,
By contrast, California urges a narrower reading of Brown, one that would permit an exemption for agreements among employers only where “needed to make the
C. Exemption Inapplicable
We reject the grocers’ broad reading of the exemption and hold that, under the totality of circumstances here, and in light of the history and logic of the exemption as well as the Supreme Court’s guidance in Brown, application of the exemption to shield the RSP from antitrust scrutiny is not warranted.
The Court in Brown stated, as a premise of its reasoning, that the practice under examination — the unilateral imposition of terms by employers after impasse — was “unobjectionable as a matter of labor law and policy” and that it was regulated “directly, and considerably,” by labor laws. Brown,
Addressing the practice of revenue sharing in the context of multi-employer bargaining, we conclude that the salient con
Although it is not an easy question, in our view the grocers cannot succeed in exempting their agreement merely by asserting its value to them and purpose as an economic weapon in the labor dispute over core bargaining subjects. If this were so, a group of employers could claim that fixing prices made them stronger and was useful as an economic weapon in a strike. Quite obviously, that could not be sufficient to gain exemption. It would be like saying “anything goes in a strike context,” and we cannot read Brown so broadly. The RSP was designed to strengthen the grocers’ position in negotiations with the union, but that fact alone does not entitle the agreement to antitrust immunity. Employers might undertake any number of activities to strengthen their bargaining posture and force unions to accept their terms, but the law does not necessarily exempt all such activities.
Our decision not to expand the law of non-statutory labor exemption to shield the grocers from antitrust liability in these circumstances does not place them in an untenable position or “introduce instability and uncertainty into the collective-bargaining process.” Brown,
Further, the RSP concerned the “business” or “product” market, rather than the labor market. “The case for the applicability of the non-statutory exemption is strongest where the alleged restraint operates primarily in the labor market and has only tangential effects on the business market.” Am. Steel Erectors, Inc. v. Local Union No. 7, Int’l Ass’n of Bridge, Structural, Ornamental & Reinforcing Iron Workers,
Finally, the inclusion of a non-member of the collective-bargaining unit, Food 4 Less, in the agreement to share revenue during the terms of the strike counsels against application of the exemption. The fact that the unilateral post-impasse imposition of terms in Brown “concerned only the parties to the collective-bargaining relationship” appears to have been a significant factor supporting the application of the exemption in that case. Brown,
The restraint here differs from that in Brown along virtually every dimension that the Court there found significant in addressing the applicability of the exemption: The revenue-sharing provision has not been approved or regulated by labor law, it was not directly related to the collective-bargaining process, it did not concern a matter that the parties were required to negotiate collectively, and it involved a party that was not a member of the collective-bargaining relationship. The RSP is sufficiently “distant ... in circumstances from the collective-bargaining process that a rule permitting antitrust intervention would not significantly interfere with that process.” Brown,
We proceed to consider the merits of California’s claim under the Sherman Act.
IV. Antitrust Liability
A. Methods of Antitrust Analysis
Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States.” 15 U.S.C. § 1. “Congress designed the Sherman Act as a consumer welfare prescription.” Reiter v. Sonotone Corp.,
The Supreme Court, has repeatedly recognized that by the language
“Some types of restraints, however, have such predictable and pernicious anticompetitive effect, and such limited potential for procompetitive benefit, that they are deemed unlawful per se.” State Oil,
(quoting N. Pac. Ry. Co. v. United States,
“[T]here is generally no categorical line to be drawn between restraints that give rise to an intuitively obvious inference of anticompetitive effect and those that call for more detailed treatment.” Id. at 780-81,
B. Per Se Treatment
California characterizes the RSP as (1) a profit-pooling agreement and (2) a market-allocation agreement, and urges that prior judicial experience with these categories of restraints requires per se condemnation of the RSP. We disagree. Given its distinguishing attributes, the RSP cannot be placed in either category of per se illegal restraints.
1. Profit-Pooling
California first argues that the RSP is “nearly identical” to the profit-pooling arrangement invalidated in Citizen Publishing Co. v. United States,
Contrary to California’s assertions, the RSP differs from the profit-pooling arrangement condemned in Citizen Publishing in significant ways, precluding per se treatment of the RSP. First, the agreement among the grocers stated that sharing of revenues would occur during the period of the labor dispute and for two weeks thereafter. The RSP, by its design, was of both limited and unknown duration. The revenue sharing would terminate two weeks after the resolution of any labor dispute, and this “triggering” event for the expiration of the agreement could occur at any time. While the agreement in Citizen Publishing was scheduled to last for fifty years and could be terminated only by mutual consent of the parties, id. at 133,
This temporary and short-term feature of the RSP distinguishes the grocers’ agreement from the profit-pooling condemned in Citizen Publishing in a way that is relevant to the key question of whether the RSP is a per se unreasonable restraint on trade, with a “predictable and pernicious anticompetitive effect.” State Oil,
Because the RSP was an agreement among some, but not all, of the competitors in the relevant market, and because by its terms the RSP had a limited and indefinite duration, it evades any “easy label” of “profit-pooling” and cannot sensibly be grouped together with or analogized to the very different arrangement condemned in Citizen Publishing,
2. Market Allocation
We also reject California’s attempt to characterize the RSP as a market-allocation agreement. California correctly notes that market-allocation agreements among competitors at the same market level are per se antitrust violations. See United States v. Brovm,
C. “Quick Look”
We next address whether summary condemnation of the RSP on a truncated rule of reason or “quick look” is or is not correct. We conclude that a “quick look” conclusion of antitrust illegality is here inappropriate. This is so for many of the same reasons that per se treatment is not correct. The unique features of the arrangement among the grocers — its limited duration and the existence of other significant external competitors in the market — and the uncertain effect these features had on the grocers’ competitive behavior and incentives during the revenue-sharing period render any anticompetitive effects of the RSP not obvious.
To reach a confident conclusion on the anticompetitive effects of the RSP, further development of the record is required. One might want to permit expert testimony and examine facts about the degree to which the challenged revenue-sharing agreement may have suppressed incentives of the grocers to discount and otherwise compete for customers. One might want to have an understanding of the market impact of other competitors, not in the defendant group, whose pricing and terms of sale would have to be taken into account in a competitive market. It might be helpful to have an understanding whether other competitors were waiting in the wings to exploit any anticompetitive market by their entry, whether these potential new competitors were overseas, or in other regions of the United States, or were skilled in the developing concept of internet marketing of groceries or other novel techniques that might impose mar
The features of the RSP described in connection with the per se mode of analysis not only separate it from traditional per se illegal categories of restraints and prevent characterization as a “naked” restraint on price or output, but they also raise sufficient doubt about the anticompetitive nature of the agreement such that detailed scrutiny is required to understand its effects. Because “empirical analysis is required to determine [the] challenged restraint’s net competitive effect, neither a per se nor a quick-look approach is appropriate because those methods of analysis are reserved for practices that facially appear to be ones that would always or almost always tend to restrict competition and decrease output.” Salvino, Inc.,
To use the “quick look” approach, we must first determine whether “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.” Cal. Dental Ass’n,
“Where, as here, the circumstances of the restriction are somewhat complex, assumption alone will not do.” Id. at 775 n. 12,
Can it be successfully argued, to the contrary, that because the RSP reduces the monetary risks of lost sales to participating grocers during a whipsaw strike, it is irretrievably anti-competitive in effect? We conclude that such an argument fails. If a competitor finds itself the target of a strike, which would cause it to lose sales to other competitors, then revenue sharing provides some cushion from the damaging monetary impact of the strike. But it is by no means “obvious” that the grocers that entered into the RSP would be motivated to reduce their competition on price.
In light of the novel circumstances and uncertain economic effects of the RSP, we conclude that the district court correctly determined that it should follow the presumptive rule of reason. See Cal. Dental Ass’n,
V. Conclusion
We hold that the agreement between the grocers to share revenues for the duration of the strike period is not exempt from scrutiny under the Sherman Act, and that more than a “quick look” is required to ascertain its impact on competition in the Southern California grocery market. Given the limited judicial experience with revenue sharing for several months pending a labor dispute, we cannot say that the restraint’s anticompetitive effects are “obvious” under a per se or quick-look approach. Although we conclude that summary condemnation is improper, we express no opinion on the legality of the arrangement under the rule of reason.
AFFIRMED.
Notes
. Food 4 Less is an unincorporated operating division of Ralphs; it is a fictitious name under which Ralphs does business in Southern California.
. There were in fact two agreements with identical terms, one pertaining to UFCW Local No. 770 and the other to UFCW Locals No. 135, 324, 1036, 1167, 1428, and 1442. We will refer to them as one agreement for simplicity.
. To implement this arrangement, the grocers agreed to submit their weekly sales data for an eight-week period before the strike and for the strike period to a certified public accountant. The CPA would use the data to determine the grocers’ historical percentage shares of the market (relative to one another) prior to the strike, and to calculate the aggregate increase or decrease in each grocer’s average weekly sales during the strike. The CPA would then multiply the total amount of disparity for each grocer by 15% and those grocers earning revenues above their historical share would pay that amount in compensation to the lower performing grocer to return all grocers to their relative pre-strike positions. Food 4 Less and Ralphs were treated as one unit for purposes of this calculation.
.The parties refer to this as the “two-week tail.”
. California sought a permanent injunction and attorneys’ fees.
. The grocers rely on a decision from the Denver region of the NLRB, suggesting that a similar revenue sharing provision was a permissible practice, see Supp. Excerpts of Record (Vol.3) 429-32, and on two courts of appeals decisions, Air Line Pilots Ass’n International v. Civil Aeronautics Board,
. The grocers argue that the distinction between agreements affecting business or product markets and those affecting labor markets is no longer relevant to the non-statutory labor exemption analysis following Brown. The Court did not expressly address the significance of the distinction in deciding Brown. The D.C. Circuit below had held that the exemption waives antitrust liability for restraints on competition that "operate primarily in a labor market characterized by colleclive bargaining,” but the Supreme Court chose to interpret the exemption more narrowly. Brown,
. We are reluctant to expand the non-statutory exemption beyond the scope of Brown without further guidance from the Supreme Court. See Brown,
. Chief Judge Kozinski's partial dissent contends that, in light of the stipulations of the parties, our ruling on the non-statutoiy labor exemption is “very likely” an advisory opinion and beyond the scope of our jurisdiction. That position does not present a correct view of our Article III jurisdiction, and would seem to foreclose ruling on many issues squarely presented. The issue of whether the RSP is exempt from antitrust scrutiny — which was expressly ruled on by the district court and preserved for appeal by the parties — is a threshold question that logically precedes our examination of the antitrust issues. If in addressing the exemption we determined that the RSP should be insulated from antitrust review, there would be no need to consider whether the RSP could be condemned with a per se rule or under "quick look” analysis. We properly may determine whether the antitrust regime applies at all before we rule on the merits of the antitrust claim.
. As we have previously explained, "[t]he rule of reason weighs legitimate justifications for a restraint against any anticompetitive effects. We review all the facts, including the precise harms alleged to the competitive markets, and the legitimate justifications provided for the challenged practice, and we determine whether the anticompetitive aspects of the challenged practice outweigh its procompetitive effects.” Paladin Assocs., Inc. v. Mont. Power Co.,
. Practices that have been held per se illegal include geographic division of markets and horizontal price fixing. See Major League Baseball Props., Inc. v. Salvino, Inc.,
.While labor disputes are capable of dragging on for months or years, it does not appear that anyone realistically expected the RSP to continue for anywhere near the extended period of time at issue in Citizen Publishing.
. The Supreme Court has recognized that "[t]he retail food industry is very competitive and repetitive patronage is highly important.” NLRB v. Brown,
. An agreement of limited and/or indefinite duration could have obvious anticompetitive
. California offers a series of cases in addition to Citizen Publishing in an effort to demonstrate that profit-pooling arrangements have long been condemned as per se illegal. See, e.g., United States v. Paramount Pictures, Inc.,
. Also, if experts gave conflicting views on these subjects, and they were material to resolution, then the decision of the trier of fact might control the outcome.
. The grocers argue that the RSP has pro-competitive benefits in the form of lower prices for consumers as a result of the grocers' ability to negotiate a more favorable contract on labor costs. Because California has not met its burden to show that the RSP is obviously anticompetitive, we need not address the grocers’ procompetitive justifications.
. The ultimate competitive question may not be determined in this case because the State of California, to gain a fined judgment that could be appealed at this time, has stipulated to foregoing its challenge to the RSP under the traditional rule of reason, contending instead that the RSP is invalid per se or on a "quick look.”
Dissenting Opinion
concurring:
I join Parts I-IV.A and V of the majority opinion, and concur in the outcome of Parts IV.B-C. I have strong doubts that the grocers’ profit sharing agreement left them with an undiminished incentive to compete. Judge Reinhardt’s dissent raises serious economic concerns about the effects of even a limited profit sharing agreement that the majority has not entirely refuted. Nonetheless, I am not confident that under the novel circumstances here an “enquiry meet for the case” can be something less than the presumptive standard — the rule of reason. Cal. Dental Ass’n v. FTC,
Dissenting Opinion
dissenting in part.
By going out of its way to rule on the non-statutory labor exemption, the majority decides an important legal question that will have absolutely no effect on anyone involved in this case. We hold that there’s no categorical antitrust violation under the quick look doctrine; nor can such a violation be established on remand, because California stipulated to dismissal if it didn’t prevail under quick look. Since no antitrust violation can ever be established in this case, we have no occasion to decide whether any exemption from antitrust liability would apply. The majority’s groundbreaking ruling on the labor exemption is thus very likely an advisory opinion and beyond the scope of our Article III jurisdiction. See Thomas v. Anchorage Equal Rights Comm’n,
Worse, I seriously doubt the majority decides the labor exemption issue correctly because it fails to grapple with the complex dynamics of this case. Had it done so, it would have realized that each and every factor the Supreme Court found relevant in Brown v. Pro Football, Inc.,
First, the RSP was inextricably intertwined with the collective bargaining process. See Brown,
the union strikes against one member of a multiemployer bargaining unit, but allows the other employers to continue operating in order to maximize the competitive pressure brought to bear upon the struck member ...; the idea is thereby to force each employer individually to capitulate through a series of such strikes, thus defeating their attempt to stand together.
Int’l Bhd. of Boilermakers v. NLRB,
The grocers here were legitimately concerned that the union would selectively strike and picket only one chain, diverting their customers to the others. The unions would thereby upset the prevailing competitive balance, crippling the target and ruining any chance of bargaining as a group. The grocers sought to blunt the disproportionate losses borne by the targeted chain by redistributing some of the windfall profits reaped by the others as a result of the union’s tactics. The agreement was limited to the duration of the strike plus two weeks and became operative only if, and only to the extent, the union succeeded in redirecting consumers from the targeted store to other stores in the bargaining group. The RSP was thus narrowly tailored to counter the union’s divide-and-conquer strategy. Its effect, moreover, was entirely pro-competitive: It helped keep all competitors in the market rather than letting one be wiped out by the strike.
As it turns out, the grocers were right to be concerned. Less than a week after
The second Brown factor- — -that the practice is “unobjectionable as a matter of labor law and policy” — also points in favor of exemption. Broum,
On the handful of occasions that courts have evaluated the legitimacy of revenue-sharing provisions, they have been upheld. In Kennedy v. Long Island R.R.,
The D.C. Circuit reached a similar conclusion in Air Line Pilots Ass’n Int’l v. Civil Aeronautics Bd.,
Courts have also approved other strategies that redistribute the financial pain wrought by a strike. When unions engage in selective striking, for example, striking employees are often paid benefits to compensate for lost wages. See Kennedy,
When unions pay benefits to striking workers, their collusive actions are protected by statute. See HA. Artists & Assocs., Inc. v. Actors’ Equity Ass’n,
My colleagues reach the wrong conclusion because they misread Brown. The majority looks for some affirmative approval in labor law for the RSP, maj. op. at 1129, but that is far more than Brown calls for. Brown requires only that the conduct be “unobjectionable as a matter of labor law and policy.”
The third Brown factor similarly favors exemption because the RSP concerned only parties with a direct stake in the outcome of the collective bargaining agreement. See Brown,
The fourth factor — whether the conduct involved subject matter that the parties were required to negotiate collectively— simply doesn’t apply to this case. See Brown,
Fifth, and finally, the conduct indisputably “took place during and immediately after a collective-bargaining negotiation.” Brown,
A fair reading of the RSP can leave no doubt that all the relevant Brown factors weigh heavily in favor of exempting the RSP from antitrust review. We are not dealing with employers who were using a labor dispute as a pretext to engage in price-fixing; it’s perfectly clear that the employers were responding to union tactics in the course of a strike, and only to the degree the tactics were effectively deployed by the union. The majority’s contrary dicta have no basis in the record, common sense or precedent.
Worst of all, we may never be able to correct this error. Strikes are costly en
Concurrence Opinion
dissenting in part and concurring in part,
Our antitrust law reflects Congress’s judgment that, with rare and specific exceptions, free competition for customers among firms protects and benefits the public by increasing efficiency and output, lowering prices, and improving the quality of the products and services available.
In this case, the four largest supermarket chains in Southern California, controlling 60-70% of the market, entered into a profit sharing agreement according to a predetermined formula for the indeterminate period of an anticipated labor dispute and for a short period afterwards. The supermarkets contend that it is lawful for them to do so because, although profit sharing agreements are by their nature anticompetitive and thus constitute a restraint of trade, their particular profit sharing agreement differs in two respects from profit sharing agreements that have been held to violate the antitrust laws: first, the agreement was to last for only the limited duration of the strike, however long that might be; and, second, the four supermarkets control only a substantial majority but not 100% of the market.
The majority agrees with the supermarkets that these two factors make their profit sharing agreement sufficiently different from those in all the previously decided cases that, in order to determine whether their agreement has an anticompetitive effect, it is necessary to apply not just the fact-sensitive intermediate test
The profit sharing agreement’s indeterminate duration and less-than-total domination of the market are immaterial to an analysis of an agreement that inherently violates the antitrust laws. The correct method of analysis of a profit sharing agreement is either the simple per se rule or another intermediate standard such as quick look, by which we examine the anti-competitive effects of an agreement according to its particular circumstances, details, and logic, in light of the generally applicable antitrust law, fundamental principles of economics, and clear experience of the market. See Cal. Dental Ass’n v. FTC,
I.
Section 1 of the Sherman Act bans agreements or combinations that act as unreasonable restraints on interstate commerce. See State Oil Co. v. Khan,
It is evident from a rudimentary knowledge of economics, as well as from a reading of the case law, that neither the agreement’s limited duration nor its failure to include the fragmented group of other firms operating in the market could do more than reduce the ordinary anticompetitive effects of such agreements. Certainly these factors would not eliminate such effects. An analysis of the details, logic, and circumstances of the particular profit sharing agreement, including its relationship to the anticipated strike, confirms that conclusion. The agreement’s effect is necessarily anticompetitive and, like any other profit sharing agreement of limited duration among firms that control well over a majority, but less than 100% of the market, the anticompetitive effects might be reduced to some extent but they certainly would not be eliminated.
A.
The “presumptive or default,” Maj. Op. at 1133, method of analysis for determin
Rule of reason review is data-intensive and, consequently, expensive for litigants; also, it consumes large amounts of court time and other resources. See Arizona v. Maricopa Cnty. Med. Soc’y,
In contrast, an arrangement violates section 1 under a quick look approach when “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.” Cal. Dental Ass’n v. FTC,
Although the parties briefed the case on the traditional view that the two summary forms of review are separate and unrelated, and the questions they posed are here discussed separately to some extent, the lawfulness of the agreement is best analyzed in light of the Supreme Court’s recent explanation that “our categories of analysis of anticompetitive effect are less fixed than terms like ‘per se,’ ‘quick look,’ and ‘rule of reason’ tend to make them appear.” Id. at 779,
B.
I first discuss the applicability of strict per se analysis. “The rationale of the rule of per se illegality depends on the premise[ ] that ... judicial experience with a particular class of restraints shows that virtually all restraints in that class operate so as to reduce output or increase price.” XI Areeda & Hovenkamp ¶ 1911a, at 295. Accordingly, application of the per se rule is limited to restraints of a type that courts’ “considerable experience” has revealed to have “manifestly anti-competitive effects,” and no “redeeming virtue,” such that judges can “predict with confidence that it would be invalidated in all or almost all instances under the rule of reason.” Leegin,
1.
California contends that defendants’ profit sharing agreement is essentially identical to those profit pooling and sharing schemes that the Supreme Court has found to be per se violations of section 1. See Citizen Publ’g Co. v. United States,
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, or if transfer payments are made between firms to achieve the same effect. See N. Sec. Co.,
Defendants contend that there are three ways in which their scheme differs from the profit pooling or sharing that was held unlawful in prior cases. The first of these contentions is meritless. Defendants argue that, unlike the agreements in prior cases, which provided that the parties would share all profits, their agreement provides that any party that experiences an increase in relative market share would share with the others only 15% of its increase in relative revenue, and that the sums to be redistributed are less than all of the profits earned on those increased
Defendants’ other two contentions, however, raise sufficient question as to whether their profit sharing scheme should be invalidated under a strict per se approach or whether additional analysis of the agreement and its likely effects would be beneficial, and whether the court should proceed to a quick look approach or, more accurately, to a mixture or combination of the two approaches.
First, while profit sharing agreements in previous cases were to last for decades or permanently, defendants’ scheme is scheduled to last only for the period of the labor dispute, plus two additional weeks. See Citizen Publ’g,
Second, unlike firms in most of the prior profit sharing cases, which were the only firms of their kind operating in the relevant market, defendants were not the only
2.
California next contends that the profit sharing agreement was a market allocation agreement that allocated the Southern California grocery market according to defendants’ historic shares of that market. Market allocation agreements are “classic per se antitrust violation[s].” See United States v. Brown,
In contrast to the agreements at issue in the market allocation cases, however, defendants’ agreement is not alleged to have decreased the number of supermarkets available to customers. Rather, California alleged that the agreement simply reduced the competition for customers among the defendant businesses. Thus, it does not allege a market allocation claim appropriate for either strict per se analysis or a mixed or blended approach, and we need proceed no further with that question. In view of the above, I would decline to hold that California prevails on a strict per se theory.
C.
Turning from a strict per se to a quick look, or rather, in this case, to a combined or mixed approach, fair analysis requires careful inquiry. An agreement violates section 1 of the Sherman Act under a quick look analysis when “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.” Cal. Dental Ass’n,
Taking into account the Supreme Court’s recent explanation that the “cate
Significantly, a “confident conclusion” does not always prove ultimately correct. See supra note 3. Rather, it represents a tool of judicial economy designed to save the litigants and the courts a considerable investment of time and money, which in the balance is to the benefit of all. That occasionally we might be wrong is a price that it is long established that society is willing to pay. In fact, some of the conclusions of which our leading economic experts have been confident have turned out to be incorrect. For example, Alan Greenspan, appointed and then reappointed Chairman of the Federal Reserve for five terms by four different Presidents, recently admitted to a significant flaw in the ideology that caused him to support and implement policies of financial deregulation: “We made a mistake in presuming that the self-interest of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders.” See Paul M. Barrett, While Regulators Slept, N.Y. Times, Aug. 6, 2009, at BR 10. And Judge Richard Posner, a highly respected jurist and a leading economics expert, has recently expressed his admiration for Keynesian economics, reversing a lifetime of reliance on the Chicago School’s approach. See John Cassidy, Letter from Chicago, The New Yorker, Jan. 11, 2010, at 28. Thus, a “confident conclusion” for purposes of quick look and other limited approaches means, at most, a reasonably confident conclusion a court may reach that, on some occasions, may prove to be incorrect. Equally incorrect, however, may be a conclusion reached by a body of economics experts after years of study or even a verdict reached by a jury following a full-scale trial with the most careful and thorough development of a full evidentiary record with the aid of the most experienced antitrust lawyers and expert witnesses.
Here, I am confident in my conclusion that defendants’ profit sharing agreement creates a “great likelihood of anti-competitive effects,” and that such effects are not outweighed or neutralized by any plausible procompetitive benefits. I am confident that neither the duration of the agreement nor the fact that defendants have less than a 100% share of the market significantly affects the anticompetitive “principal tendency” of the profit sharing agreement. In reaching this conclusion, I have considered whether, because the objective of the agreement was to affect the outcome of a labor dispute and to bring about a reduction in labor costs, my conclusion should be altered. My answer is a definite and unqualified “No.” Finally, although the parties introduced some evidence to support
1.
a.
Defendants entered into an agreement under which they shared profits with one another according to their historic shares of the market. As discussed above, the only factors distinguishing defendants’ arrangement from a profit sharing agreement that would have constituted a per se violation of section 1 of the Sherman Act are (1) the presence in Southern California of a fragmented cluster of smaller markets with a residual minority of the market share, and (2) the indefinite, if limited, term of the agreement. Absent those features, defendants’ scheme would simply constitute a profit pooling or sharing arrangement akin to the ones held violative of section 1 in earlier cases, and there would be no question that the agreement creates a “great likelihood of anticompetitive effects.” This is apparent from the fact that when firms sharing profits are the only firms in a market, each' will receive the same portion of the total profits whether it cuts prices, invests in improving its products or services, or does nothing to win customers from the other firms; the result of this lack of competitive pressure is the high likelihood that prices rise towards monopoly levels or fail to fall with the same effect. It is for these reasons that the Supreme Court has said that “[p]ooling of profits pursuant to an inflexible ratio” is a “§ 1 violation!]” that is “plain beyond peradventure.” Citizen Publ’g,
The well-recognized effects of profit sharing set forth above help to guide the discussion in the case before us: that discussion starts from the premise that the sharing of profits among competitors ordi
In an ordinary period in which no profit sharing arrangement is in effect, defendants compete with one another, and with a smaller set of other unrelated grocers, for customers and sales. The fruits of successful competition might accrue both in the present, as a supermarket makes sales in the current period, and in the future, as customers won or retained through such competition return to the store to make more purchases. Defendants contend that a profit sharing agreement of limited duration, restricted to the dominant market participants, does nothing to alter the ordinary incentive structure, and that the competitive pressure while such a profit sharing agreement is in effect is no less than the competitive pressure that would occur in the absence of such an agreement. Having reviewed their contentions and analyzed all the plausible effects of the agreement, I disagree. I am confident in the conclusion that defendants’ profit sharing arrangement removes, or at the least significantly reduces, a key source of competitive pressure — competition among defendants for sales to be made during the agreement period — without there being any countervailing pressure sufficient to neutralize or overcome the overwhelming likelihood of anticompetitive effects. Although it is plausible that the two differences on which defendants rely will serve to reduce the competitive pressures to a lesser extent than would a long-term agreement among competitors who control 100% of the market, it is evident that the lessening of the reduction in competitive pressure will be one of degree only, and that there is no likelihood whatsoever that the anticompetitive effects of a profit sharing agreement will be eliminated.
As already stated, when an arrangement redistributes all profits on current sales among a group of competitors according to a predetermined ratio, as defendants’ arrangement does, there is little reason for the individual firms within the group to compete with one another for those sales. Thus, the analysis begins with the determination that there is a high likelihood that defendants’ agreement has a substantial negative effect on their incentive to compete with one another for customers in order to make sales during the period in which the agreement is in effect. Defendants nonetheless contend that there is an incentive to compete with one another for customers during the profit sharing period, pointing to the indefinite duration of the agreement and to the possibility that customers who are won or retained through competition during that period will remain as customers after the agreement ends. Additionally, they contend that the other firms in the market will exert competitive pressure on them sufficient to make up for any loss of competitive pressure among themselves. These contentions must be examined for their validity during the period of limited duration in general, and then in light of whether the particular circumstance of the agreement — an impending labor strike— alters that general analysis.
First, for a profit sharing agreement of limited but indefinite duration, the incentive to compete for sales and profits that would occur at some future time would necessarily be less than the ordinary incentive to compete by seeking to attract customers who will patronize the stores
With defendants exerting reduced competitive pressure on one another during the profit sharing period, competition from firms not included in the profit sharing agreement would have to result in an extraordinary amount of increased competitive pressure to make up for the loss of the paramount pressure that defendants ordinarily exert on each other. This too is highly unlikely.
This brings us to defendants’ contention that the threat of a strike, or a strike itself, constitutes such a circumstance. First, then, we must consider whether the profit sharing agreement loses its anticompetitive effects when it becomes operative during the course of a strike or labor dispute. There should be little difficulty in answering that question: the fact that defendants’ agreement provides for profits to be shared only during a labor dispute and a brief ensuing period does not alter its inherently anticompetitive nature. Even during a strike period, a profit sharing agreement generates a “great likelihood of anticompetitive effects.” For a vendor, the principal features of an employee strike are diminished consumer demand, as some customers choose not to cross the picket lines; a reduced workforce, because some workers at least are on strike; and a more urgent financial condition, as fixed costs remain at nonstrike levels, and revenues go down. While diminished demand, a reduced workforce, and a more urgent financial condition might affect defendants’ competitive behavior during the strike, these potential effects would occur independent of the existence of a profit sharing agreement. None of these effects changes the basic impact of the agreement: defendants had little incentive to compete with one another while it was in effect because any profits earned on sales to another defendant’s former customers would simply be redistributed back to the other defendants.
The profit sharing agreement itself would have an additional effect; it would cause defendants to compete even less during the strike period than they would were there no profit sharing agreement in effect at that time. Whatever the baseline circumstance as to competition in any given period, including a strike period, the existence of the profit sharing agreement results in a greater likelihood of reduced competition than there would otherwise be. That is the simple lesson that is apparent from a rudimentary knowledge of econom
For the reasons explained above, I conclude that a “great likelihood of anticompetitive effects can easily be ascertained” by examining the agreement in light of prior eases, in light of its circumstances and details, as well as in light of logic and rudimentary principles of economics. Here, those anticompetitive effects are not only substantial, but they result from an agreement that removes fundamental incentives to engage in competition for an indefinite period. In short, neither the fact that there are a number of smaller companies in the market, the fact that the agreement is of an indefinite though limited duration, nor the fact that the agreement takes effect during a strike, warrants a departure from the well-established rule that profit sharing agreements are anti-competitive and violate section 1 of the Sherman Act.
b.
Defendants’ fallback position is that the state lacks empirical evidence to demonstrate that the effects of the agreement were anticompetitive in practice. However, neither per se nor quick look review ordinarily requires empirical evidence of anticompetitive effects, nor is it required for the combined or mixed per se/quick look approach that should be applied here. As Professors Areeda and Hovenkamp explain, “[t]he main difference between ... the ‘quick look’ approach and the rule of reason is that under the former the plaintiffs case does not ordinarily include proof of [market] power or anticompetitive effects.” XI Areeda & Hovenkamp ¶ 1914d(l), at 355; see also Cal. Dental Ass’n,
This is a case in which reliable proof of anticompetitive effects or their absence through empirical evidence might be diffi
This is, more important, a case in which the anticompetitive nature of the restraint is obvious. As discussed above, by the terms of the agreement any defendant that earns profits above its historic market share is required to give those additional profits to the other defendants. Because a defendant may not retain any profits that it made from competing with the other defendants and receives a proportionate share of whatever profits those other defendants make from competing with it, the profit sharing agreement plainly reduces the competitive pressure among defendants for sales whenever it is in effect, during the strike or otherwise. To justify their conduct, defendants rely not on the neutral or positive effect on competition arising out of their agreement, but on other sources of competitive pressure — increased competition from other vendors and competition with one another for post-strike business. As explained above, it is wholly implausible that those factors would be sufficient to overcome the reduction in competitive pressure that necessarily results from the profit sharing agreement. Defendants’ agreement plainly removes a significant source of competitive pressure without giving rise to any comparable counter-source to replace it.
Although California was not required to adduce empirical evidence of anticompetitive effects, given the nature of the restraint at issue in the case, the empirical evidence before us supports its contentions or is, at the least, of no substantial consequence. Defendants acknowledge diminished competitive behavior, such as discounting and advertising, during the period in which the profit sharing agreement was in effect. This, in all likelihood, resulted in at least some increase in, or some failure to reduce, the prices charged to the consumers. See Declaration of Thomas R. McCarthy, Backup to ex. 7A; Declaration of Steven Lawler at ¶ 8; Declaration of Carla Simpson ¶¶ 6-7; Declaration of Charles Ackerman ¶¶ 15-19. Defendants explain this change in behavior by attributing it to the lack of personnel created by the strike, rather than to the profit sharing agreement. However, their expert, who relied on this explanation, performed no regression or other statistical analyses, which are typical means of determining the effects of multiple variables, such as the labor dispute and the profit sharing agreement, on a single dependent variable, such as competitive behavior by defendants. See, e.g., Hemmings v. Tidyman’s Inc., 285 F.Sd 1174, 1183-84 & n. 9 (9th Cir.2002). Instead, he simply looked at limited data from Albert-sons and declared that Albertsons “did a lot of discounting during the strike” and that it increased its use of certain discounting methods. See Declaration of Thomas R. McCarthy ¶¶ 51-53. Because his analysis lacks a discussion of how much discounting Albertsons would have done absent the profit sharing agreement, it is beside the point. California’s expert, who did perform regressions, asserted in his deposition that those regressions revealed that competition between defendants during the strike was harmed by the profit sharing agreement. He further noted that Vons raised its prices despite suffering a dramatic drop in demand for its products, exactly the opposite of the lower prices that are expected when demand drops in a competitive marketplace.
2.
Where, as here, a “great likelihood of anticompetitive effects can easily be ascertained,” the burden of proof is shifted to the defendant to “to show empirical evidence of procompetitive effects.” Cal. Dental Ass’n,
At this point comes defendants’ actual and least justifiable contention. The supermarkets assert that conduct that serves to reduce the cost of labor serves a pro-competitive purpose, such as may excuse otherwise anticompetitive behavior. They contend that the procompetitive benefit of their agreement is that it increased their chances of winning the labor dispute and reducing the wages and benefits they would be required to pay to their employees, which in turn would increase their ability to lower prices and compete more effectively with other companies. See Declaration of Thomas R. McCarthy ¶ 10. Defendants’ proffered justification for their profit sharing arrangement is, in essence, a countervailing power defense that the restraint of trade is necessary in order to give them sufficient bargaining power to counteract the market power exercised by their striking workers and thereby to allow them to purchase their workers’ labor at a lower price.
As California points out, however, the chain of contingencies linking defendants’ exercise of bargaining power to reduced prices for consumer purchases renders any such procompetitive benefits of their profit sharing agreement purely speculative. Rule of reason examination of defendants’ countervailing power defense is accordingly unnecessary. “Suffice it to say that the theoretical literature suggests that countervailing cartels seldom improve the welfare of consumers.” XII Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application, ¶ 2015b at 158 (2d ed.2000).
The Supreme Court has made clear, however, that because antitrust law operates to correct all distortions of competition, it condemns market actors who distort competition, whether on the buyer side or seller side. See Weyerhaeuser Co. v. Ross-Simmons Hardwood,
In any event, defendants’ argument is wholly unpersuasive in light of our nation’s labor laws and policies. It is a primary objective of these laws to protect the rights and interests of working persons, and to enable them to obtain a fair and decent wage through collective action.
It is little wonder that the majority expressly declines to address the “grocers[’J argu[ment] that the RSP has procompetitive benefits in the form of lower prices for consumers as a result of the grocers’ ability to negotiate a more favorable contract on labor costs.” Maj. Op. at 1138 n. 17. Were defendants’ proffered justification accepted as a ground for requiring full-blown rule of reason inquiry, colluding firms could evade quick look condemnation, without in any way increasing real efficiency or reducing costs to the consumer. Firms like the supermarkets that participate in markets for both buying (labor) and selling (groceries), and engage in a restraint of trade that has distorting effects in both, cannot avoid quick look review of anticompetitive conduct simply by positing that they could conceivably pass on to consumers in the selling market any private gains such firms may achieve by restraining competition in the buying market. Allowing them to do so would lead to the absurd result that conduct which restrains more competition, in the sense that it distorts competition in both the buying and selling markets, would be subject to less demanding scrutiny than would be a comparable restraint that distorted just one market.
3.
Defendants have .put forward no plausible procompetitive effects to overcome or neutralize the great likelihood of anticompetitive effects that would result from the implementation of their profit sharing agreement. That likelihood is evident from a plain reading of the agreement’s terms, an examination of the ample case law regarding profit sharing agreements, a rudimentary knowledge of economics, and an analysis of the “circumstances, details, and logic” of the agreement. In the absence of a procompetitive justification that outweighs the likelihood of substantial anticompetitive effects, I conclude with confidence and even with certainty that the profit sharing agreement violates § 1 of the Sherman Act. I also conclude with the same measure of confidence and certainty that denying California the injunction to which it is entitled, simply because the parties did not engage in an extremely costly, burdensome, and utterly unnecessary battle of economic experts under rule of reason review, is contrary to the fundamental policies underlying our antitrust law, and encourages future antitrust violations by these defendants and others who may seek to suppress the rights of their employees.
Accordingly, I dissent in part.
. See Apex Hosiery Co. v. Leader,
. Defendants also contend that their profit sharing agreement is exempt from the antitrust laws because they employ it as a bargaining tactic in an anticipated labor dispute. The majority concludes that the profit sharing agreement does not qualify for the nonstatutory labor exemption and I agree. See Maj. Op. at 1124-32.
. Inherent in the summary nature of quick look and per se analysis is the possibility that a restraint that would survive a full rule of reason analysis in a particular case will nonetheless be invalidated: "For the sake of business certainty and litigation efficiency, we have tolerated the invalidation of some agreements that a fullblown inquiry might have proved to be reasonable.” Maricopa Cnty. Med.,
. I note that the district court should not have accorded the expert's statement any weight given its explicitly speculative nature. "An expert's opinions that are without factual basis and are based on speculation or conjecture” are inadmissible at trial and are "inappropriate material for consideration on a motion for summary judgment.” Major League Baseball,
. This effect has been well understood for many years, and was ably explained well over a hundred years ago by the Kentucky Court of Appeal, then the highest court in that state, in the following discussion of a profit sharing arrangement between two steamboat companies:
There was a strong stimulation to increase the net profits by means other than that of popular favor springing out of efficient steamboat facilities and close attention to the business of shipping for reasonable charges and courteous attention to passengers at reasonable fare____ It is the competition, or fear of competition, that makes these carriers efficient, attentive, polite, and reasonable in charges. Remove competition, or the fear of it, and they become extortionate, inattentive, impolite, and negligent. ... It is said that neither was bound to charge the same as the other. That is true; but either could extort with impunity, and the other would be an equal recipient of the fruit of the extortion.... It is true that their contract did not, in so many words, bind them to any given charges; but it made it to the interest of each, not only to charge, but to encourage and sustain the other in charges that would amount to confiscation. ... This combination was more than that of a combination not to take freight or passengers at less than certain prices. In such case, the combiners have to furnish adequate means of transportation, and efficient and polite officers, and confine themselves as nearly as possible to the sum agreed upon, in order to secure the trade, or a reasonable portion of it; but here, by reason of the agreement,.... [inefficient means of transportation [and] unskilled or inattentive officials [] are no drawback to either boat. Its share of the profits come[s] notwithstanding.
Anderson v. Jett,
. IIA Areeda & Hovenkamp ¶ 391b(l) at 323 ("[W]hether a price-fixing conspiracy among sellers involves everyone or only a dominant group, this business practice leads to overcharges that constitute antitrust injury. The same can be said for business practices that are economically equivalent — for example, agreements on market division, product quality, credit terms, and the like.”).
. No precise standard exists for determining when a firm or a group of firms controls enough of a market that its actions might cause anticompetitive effects. However, the uncontested facts about defendants’ share of the market and the fragmented nature of the rest of the market together appear to be sufficient to establish the monopoly power over the market required for a violation of section 2 of the Sherman Act, a higher standard than is required to find that a firm or firms had sufficient power in the market that their actions could violate section 1. See Am. Tobacco Co. v. United States,
. Another consideration is that many alleged competitors’ product offerings differ substantially from those of defendants, including box stores selling goods in bulk, such as Costco; retailers selling a limited selection of products and brands, such as Trader Joe’s; and stores specializing in organic foods, such as Whole Foods. These markets are by their nature incapable of competing for much of the business of traditional supermarkets such as those operated by defendants. Notwithstanding these obvious facts, Costco, Trader Joe’s, and Whole Foods were each alleged by defendants to have placed competitive pressure on them during the labor dispute.
. Interestingly, economic theory suggests an even stronger negative effect on competition: it would appear to predict that, at least in the short run, in a market in which large, dominant firms have an agreement limiting competition amongst themselves, such an agreement will tend to increase the prices charged by those large firms, and that smaller firms, rather than increasing whatever economic pressure they ordinarily exert on those larger firms by charging the lower prices that would obtain under competitive conditions in order to attract the larger firms’ customers, but will instead charge higher prices close to those being charged by the larger firms. See Herbert Hovenkamp, Federal Antitrust Policy § 4.1b (1994). Firms that pool profits are acting as a kind of cartel, and cartels that do not contain all the firms in the market are still able to raise prices above the prices that would be observed in a competitive marketplace, especially in a short term situation like that present here, in which the fixed costs of starting a supermarket (leases, employment and product purchasing contracts, signage, etc.) make it unlikely that new firms would enter the market to take advantage of the prices that are artificially high due to the cartel’s collusive behavior. See Dennis W. Carlton & Jeffrey M. Perloff, Modem Industri
. A more urgent financial condition would appear, if anything, to make it less likely that defendants would commit resources to competing with each other for customers from whom they would receive profits, if at all, only at some future date. To any extent that lower demand, lower supply, or strike-caused financial woes would prompt a defendant to try to win customers from vendors external to the agreement, the profit sharing agreement would, as in a nonstrike period, reduce its incentive for doing so: while the defendant would pay the entire cost (in advertising, improved quality, or discounting) of luring such customers, it would retain only a fraction of the benefit generated equal to its prestrike share of the market, and a substantial number of the new customers might well, for reasons discussed earlier, be lost by the time the labor dispute and profit sharing ended.
. The obviously anticompetitive nature of defendants’ profit sharing agreement in a traditional market setting distinguishes it from the restraint in California Dental Association. Here, there is a long history of adjudging profit sharing agreements to be anticompetitive and of demonstrating the validity of that conclusion. The unique limits on price and quality advertising by dentists that were at issue in California Dental Association might have been thought by some to reduce incentives to compete over price or quality, because without such advertising it would be difficult for a dentist to inform potential customers about his advantages over his competitors and, thus, lowering his prices or expending resources to improve his quality might simply have reduced his profits from existing customers. However, the Court reasoned that the nature of the market for "professional services” such as dental care was unique and that the circumstances made it difficult to compare services across providers and to verify price and service information, meaning that price and quality advertising might have been misleading, and misleading advertising itself poses dangers to competition. See Cal. Dental Ass’n,
. Defendants’ evidence purporting to show that employees charged with pricing during the dispute did not know about the profit sharing agreement and took no action because of it, which was relied upon by the district court, also fails to provide support for their contentions. Their evidence on this point is both skeletal and somewhat dubious. Defendants do not come close to demonstrating that all employees with power over pricing were ignorant of the agreement or took no action because of it. See, e.g., Declaration of Bryan Davis ¶ 3 (Albertsons employee describing himself as responsible only for the prices in a discreet category of groceries); Declaration of Carla Simpson ¶ 2 (Safeway employee describing herself as having responsibility only for implementing pricing established by another department). Moreover, early in the strike the Los Angeles Times published a front-page article revealing that the chains had agreed to share the financial burden of the strike. See Nancy Cleeland & Melinda Fulmer, In Tactical Move, Union Pulls Pickets From Ralphs, L.A. Times, Nov. 1, 2003, at Al. More important, it would defeat entirely the efficiency goals underlying the existence of per se, quick look, and “meet for the case” analysis if defendants could preclude a summary finding, and proceed to full rule of reason analysis, simply by asserting that the employees in charge of pricing did not know about the profit sharing. Such assertions are easy to make, while proving or disproving who knew what, and whether the knowledge of a particular individual had any effect on whether the company acted in a competitive manner, would require exactly the sort of onerous and costly production of evidence that summary review is meant to avoid. In any case, as noted above, the quick look inquiry is a probabilistic one: in order to place the burden on defendants to demonstrate that the agreement had a procompeti
. “One of the important social advantages of competition mandated by the antitrust laws is that it rewards the most efficient producer and thus ensures the optimum use of our economic resources. This result, as Congress [has] recognized, is not achieved by creating a situation in which manufacturers compete on the basis of who pays the lowest wages.” United Mine Workers of Am. v. Pennington,