In re: Wholesale Grocery Products Antitrust Litigation, MDL No. 2090 (D. Minn.)

On July 16, 2012, U.S. District Judge Ann D. Montgomery, in Minneapolis, denied plaintiffs’ motion for class certification in an antitrust suit against Baker Botts client C&S Wholesale Grocers, Inc. and SuperValu Inc.

C&S and SuperValu are two of the largest grocery wholesalers in the United States. The plaintiffs -- retail grocers -- allege that C&S and SuperValu conspired by way of a 2003 Asset Exchange Agreement (the “AEA”) and ancillary non-competition covenants to allocate territories and customers. In the AEA, C&S acquired SuperValu’s New England wholesale grocery business and SuperValu acquired, from C&S, the former Midwest wholesale grocery business of Fleming, another major wholesaler that had gone bankrupt and which C&S had acquired in the bankruptcy proceeding. Plaintiffs claim they were charged supra-competitive prices for wholesale grocery products and services as a result of the alleged conspiracy.

Beginning in late 2008, several putative class action suits were filed by grocery retailers, alleging that the AEA was a “sham” transaction whose purpose and effect were to allocate territories and customers and enable C&S and SuperValu to charge supra-competitive prices. The cases were consolidated for pretrial proceedings in the District of Minnesota.

The key issue raised by plaintiffs’ motion for class certification was whether common evidence could be used to show that all members of the class suffered antitrust injury (“impact”). Relying on their economic expert, plaintiffs put forward two tests which purportedly could show that if SuperValu’s exit from New England and C&S’s non-entry into the Midwest resulted in supra-competitive prices, all class members in those regions would be impacted. Yet, neither plaintiffs nor their expert offered any evidence that any retailer had actually been charged supra-competitive prices. Instead, they argued that as a matter of economic theory increased market concentration leads to higher prices, and thus one may presume that all purchasers in the affected regions paid supra-competitive prices.

The defendants and their expert economist, Dr. John Johnson of Edgeworth Economics, demonstrated the invalidity of plaintiffs’ assumption of class-wide impact by presenting analyses of actual transaction prices and pricing negotiations between the defendants and retailers. Judge Montgomery found that none of plaintiffs’ proposed methods for establishing class-wide impact was capable of doing so. She determined that one of their proposed tests had “no evidentiary value” in establishing a prima facie case of injury for each member of the class, because it “merely assumes that prices will be raised after the AEA because competition is reduced.” She similarly rejected plaintiffs’ other proposed approach because it rested on the critical assumption, which defendants and their expert disproved, that prices behaved in a uniform manner after the AEA.

The judge agreed with defendants and Dr. Johnson that “[t]he facts and circumstances of this case -- with the potential for numerous factors affecting both the price each customer would receive in a competitive environment and the price each customer actually received -- require a more searching analysis than merely assuming prices would rise for every class member because competition was reduced overall.”

The judge’s decision is available here.