MADISON, Wis. — A single-store operator in Iowa has filed a complaint in U.S. District Court here against Supervalu and C&S Wholesale Grocers, charging them with conspiracy to allocate territories, causing prices for goods and services to escalate and thereby unjustly enriching themselves.
The suit was filed by D&G Inc., parent of Gary's Foods, Mount Vernon, Iowa, a Supervalu customer for 40 years who reportedly switched three years ago to Nash Finch Co., Minneapolis, after Supervalu and C&S “swapped assets” in the Midwest and New England.
The complaint seeks class-action status and a jury trial, and says the number of potential class members could be “in the thousands.”
Supervalu and C&S officials could not be reached for comment.
According to the complaint, Minneapolis-based Supervalu and C&S, Keene, N.H., began competing with each other in the New England area after Supervalu acquired Sweet Life Foods in 1994; that competition was set to expand to the Midwest in 2003 when C&S acquired some of the assets of Fleming Co. after it went into bankruptcy.
“The prospect of C&S expanding into Wisconsin, Iowa and other Midwestern states … was a substantial threat to Supervalu, particularly considering the intense price competition between [them] in New England,” the complaint says.
“Supervalu had … two options: either endure the competition, which would have substantially reduced prices to retailers, or seek an arrangement with C&S to eliminate competition between the wholesalers.”
In August 2003, Supervalu and C&S “entered a conspiracy,” the complaint notes, “to allocate markets and refrain from competing,” with Supervalu agreeing to pull out of New England and transferring its customers there to C&S in return for a commitment by C&S not to enter the Midwest and transferring the former Fleming accounts to Supervalu.
While the two companies referred to the agreement as an asset swap, “this term proved to be a misnomer,” the complaint alleges, “[because] rather than swapping assets, each company closed three facilities in the others' operating area and terminated more than 1,000 employees at each one.
“Rather than swapping bona fide assets, the co-conspirators simply traded retail accounts, eliminated competition between them and substantially reduced the supply of wholesale sales and services in the Midwest and New England by closing distribution facilities that had served retailers for years,” the complaint states.
According to the complaint, the anti-competitive effects of the market allocation have been substantial because it raised prices for retailers through the elimination.
Also, by closing distribution facilities, “the co-conspirators increased transportation fees for a number of retailers,” the complaint says.