Tumultuous combinations

by Henry Farrell on May 27, 2005

“Nathan Newman”:http://www.nathannewman.org/laborblog/archive/002986.shtml writes about union-busting cartels.

bq. For folks who remember the southern California grocery chain strike last year, a key to the grocers breaking the strike was a revenue sharing deal between the big chains– thereby preventing the unions from easily reaching settlement with any of the firms individually.

The L.A. Times “story”:http://www.latimes.com/business/la-fi-supers26may26,0,6124770.story?coll=la-home-business that he links to has more.

bq. The chains initially refused to disclose the pact’s details and sought to have them sealed after Lockyer sued. But King unsealed the documents in February. They showed that the companies used a formula based on their sales, before and during the dispute, and their regional market shares to figure out what Kroger should pay the others. Kroger later revealed in securities filings that it paid a combined $148 million to Safeway and Albertsons, and Albertsons said it received $63 million of that. That would have left $85 million for Safeway.

Those who have read Adam Smith will remember “his observations”:http://geolib.com/smith.adam/won1-08.html on the tendency of business owners to gang up together against workers.

bq. We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy, till the moment of execution, and when the workmen yield, as they sometimes do, without resistance, though severely felt by them, they are never heard of by other people.

(Funnily enough, Smith’s self-appointed intellectual heirs at the Adam Smith Institute don’t seem all that interested in his ideas on combinations of masters, despite their eagerness to “smash trade unions”:http://www.adamsmith.org/80ideas/idea/26.htm. An oversight that I’m sure they’ll be rushing to rectify.)



Brett Bellmore 05.27.05 at 1:09 pm

But, of course, a union itself is a cartel. So who the heck cares if one cartel beats up on another?


bi 05.27.05 at 2:26 pm

So if we smash one, we should smash the other too.


uptown 05.27.05 at 3:44 pm


n. An association of independent businesses organised to control prices, production, etc.

“Webster’s II – New Riverside Edition” 1984


rea 05.27.05 at 6:22 pm

That’s right, Mr. Bellmore–we all know that it’s as immoral for the chickens to gang up on the fox as it is for the foxes to combine against the chickens.


urizon 05.27.05 at 8:06 pm

Wanna buy a bridge?


Brett Bellmore 05.27.05 at 8:11 pm

Can’t get more of an independent business, than one person selling their own labor.


Publius 05.27.05 at 11:46 pm

This is something I’ve been on about for a while. Capitalism is all about “divide and conquer”. Competition weakens the competitors, and strenghtens those for which whose resources (labour, purchasing power) they are competing.

Capitalism works well for workers and consumers when corporations compete with one another. It keeps them in check– they are non-living robot entities which mustn’t be allowed to dominate their human creators– and gives real humans (workers, consumers) the upper hand. Capitalism fails when corporations “consolidate” into uncompetitive monopolies or collude or abuse the legal system to approximate one: workers lose, consumers lose.

Much of this could be solved by reversing Southern Pacific vs. Santa Clara. Then, producers, consumers, and labourers will all be on a more even playing field– much more like Mr. Smith’s theoretical Capitalist utopia. But at present the power imbalance between corporations and individuals is so huge that even individuals grouped together in unions don’t stand a chance against them.


Anthony 05.28.05 at 1:32 am

What does Kroger gain by making these payments?

If one of the other chains settled with the union, after having lost customers, its expenses will be higher while its revenue would be lower, and thus potentially likely to fall into bankruptcy. That would end up making Kroger *more* money, as it picked up more customers in a less-competitive environment.

The benefit to the other chains is obvious, but I don’t see a significant benefit to Kroger to maintain this arrangement.


Brett Bellmore 05.28.05 at 7:45 am

Well, simply put, the union can’t afford to strike all the grocery stores at once. (Not the least because people have to buy their food SOMEWHERE, so striking everywhere at once guarantees people will shop at stores being striked, rather than go elsewhere.) But if it settles elsewhere, it WOULD then be in a position to strike at Kroger’s, and a better position, too. Because having prevailed in the first strike, the members at Kroger’s would be more confident of eventual victory, and thus willing to hold out longer.

So by making the payout, Kroger avoids a future strike by a union confident of victory. That’s worth some money.


Anthony 05.28.05 at 1:42 pm

Brett – thank you. I don’t live in LA, so I wasn’t aware that Kroger’s was not struck. (I suppose also that the union could get in trouble for striking Kroger’s if the contract with Kroger’s didn’t expire at the same time.) The folks I know in LA shifted their shopping to non-union stores like Trader Joe’s.


Brett Bellmore 05.28.05 at 5:17 pm

I don’t live in LA either, I was just answering the question hypothetically. In fact, as I look into the matter, Kroger’s (Or at least chains they own.) were in fact striked. But that doesn’t change the fact that the union settling on it’s terms at one strike location would strengthen it’s hand at other strike locations. So it was definately in Kroger’s economic interest to help other stores being struck win their disputes, provided the cost wasn’t too high.

If they didn’t hang together, they’d have been hung separately, as I believe someone once said…

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