Did wholesalers' conspiracy keep food prices artificially high?

The Des Moines Register published a fascinating story on Saturday about a Mount Vernon grocer’s lawsuit against the industry’s top two wholesalers, SuperValu Inc. and C&S Wholesale Grocers. Gary’s Foods filed suit eight months ago and was joined by a Maine grocer in January. What’s at issue:

The class-action lawsuit seeks monetary damages equal to triple what grocers in the Midwest and New England allegedly have overpaid for food due to the lack of competition since September 2003. […]

Court papers describe C&S and SuperValu as the nation’s top two grocery wholesalers by dollar volume, with combined 2008 revenues in excess of $28 billion. Documents say the companies strongly competed against each other in New England for much of the late 1990s, but things changed dramatically after C&S purchased the assets of a bankrupt Midwestern wholesaler in 2003.

“Faced with the prospect of competing against C&S in the Midwest, SuperValu had one of two options: Either vigorously compete, which would have substantially reduced prices to retailers, or conspire with C&S to eliminate competition between the wholesalers,” court papers say.

C&S ultimately sold its new Midwestern assets to SuperValu in September 2003 as part of a deal that also had C&S purchase all of SuperValu’s distribution facilities in New England. But court papers allege that there was a separate, “secret noncompete agreement” signed at the same time – a deal that was not publicly disclosed and unknown to the plaintiffs until “a former SuperValu executive” disclosed its existence to them in late 2008.

The wholesalers are trying to have the lawsuit dismissed on procedural grounds. According to the Des Moines Register, a hearing is expected next month in a Minnesota court.

If these allegations are true, millions of consumers probably have been paying too much for food for nearly six years.

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