The Ninth Circuit Court of Appeals, in a divided en banc ruling, has determined that while an agreement between competitors to share revenues during a labor dispute is not immune from antitrust laws, the district court properly denied a challenge to an agreement between California supermarkets as a per se violation of the Sherman Act or on the basis of a “quick look” antitrust analysis; the Ninth Circuit found that a truncated or abbreviated review process is insufficient to determine whether this type of agreement has affected competition in the relevant market. California v. Safeway, Inc., No. 08-55671 (9th Cir., decided July 12, 2011) (en banc). Details about the court’s previous ruling that the agreement was anticompetitive appear in Issue 361 of this Update.

The court’s majority “expressed no opinion on the legality of the arrangement under the rule of reason” (the traditional test for violations of federal antitrust laws) because California, which brought the challenge, stipulated that it would forego a challenge to the revenue sharing agreement under the “traditional rule of reason, contending instead that the [agreement] is invalid per se or on a ‘quick look.’” According to the court, the “particular features and context” of this agreement “are more than mere idiosyncracies: they warrant further development of evidence and more rigorous review.”

Three dissenting judges, in an opinion authored by Chief Judge Alex Kozinski, characterized the majority’s opinion as advisory because it decided “an important legal question that will have absolutely no effect on anyone involved in this case.” They would have ruled that the agreement in this case was protected by a Sherman Act labor exemption. Three dissenting judges, in an opinion authored by Circuit Judge Stephen Reinhardt, would have found that the agreement inherently violated antitrust law.