An antitrust lawsuit challenging New York Mayor Zohran Mamdani\u2018s (D) plan to open city-run grocery stores has vexed attorneys who say the case doesn\u2019t meet the high bar set by the US Supreme Court for proving predatory pricing suits.<\/p>\n
The National Supermarket Association\u2018s complaint said Mamdani\u2019s plan to open stores where some goods will be 30% cheaper than at private grocers is a tax-subsidized gambit that gives the city stores a \u201cmassive and unfair advantage.\u201d <\/p>\n
But the trade group\u2019s argument that taxpayer-supported stores can operate at a deficit indefinitely \u2014 something competitors can\u2019t do \u2014 seems to inadvertently highlight the program\u2019s strengths rather than its flaws, attorneys said.<\/p>\n
\u201cIt\u2019s a very weird complaint because a lot of it is very complimentary of the program,\u201d said David Schwartz of Bryan Cave Leighton Paisner LLP. <\/p>\n
The lawsuit faces a steep legal climb. The case runs headlong into decades of Supreme Court precedent requiring plaintiffs to show that consumers will ultimately be harmed, a difficult argument to make when the entire point of the program is to lower prices for New Yorkers.<\/p>\n
\u201cConsumers have to be harmed at some point and there\u2019s no consumer harm here. In fact, consumers win,\u201d said Sam Weinstein, co-director of the Cardozo School of Law\u2019s Heyman Center on Corporate Law and Governance.<\/p>\n
Taxpayer-Funded Competition<\/p>\n
Supreme Court precedent and subsequent cases focused on private actors recouping losses from consumers are distinct from this case where the city program is funded and losses absorbed by taxpayers, the association said in court papers.<\/p>\n
\u201cTraditional antitrust concerns about rational private actors, the speculative nature of recoupment, and the risk of chilling legitimate price competition simply do not apply when the predator is funded by compulsory taxation,\u201d it said.<\/p>\n
The city\u2019s first store will open by the end of 2027, and the remaining four by the end of Mamdani\u2019s term, the mayor has said. Proposals for potential grocery store operators are due Oct. 16.<\/p>\n
The association wants the court to enjoin the city from making a determination on the proposals until after the merits have been decided. The city will seek dismissal.<\/p>\n
Predatory Pricing Hurdles<\/p>\n
Legal observers doubt the association\u2019s case can clear the high bar courts have set for predatory pricing claims.<\/p>\n
Predatory pricing is one of the hardest types of claims to win in court, and people rarely if ever bring it, Schwartz said.<\/p>\n
That\u2019s because of the 1993 Supreme Court case Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp. that established a two-prong test to determine whether the pricing at issue harms competition. Courts must ask whether the prices are below production costs, and whether the company setting the prices has a dangerous probability of recouping its investment by raising prices later down the road.<\/p>\n
\u201cThere\u2019s decades of Supreme Court law saying, \u2018We don\u2019t want courts to be in the business of deciding when cutting prices is bad or good.\u2019 It all looks a lot like competition on the merits, which is what antitrust laws are designed to create,\u201d Schwartz said.<\/p>\n
The association\u2019s complaint admits that it can\u2019t prove there\u2019s a dangerous probability of the city recouping its losses from the discount, said Brian Shearer of Vanderbilt University\u2019s Policy Accelerator for Political Economy and Regulation. The plaintiffs aren\u2019t trying to hide that point, and instead \u201care trying to make new law by arguing they don\u2019t need to prove recoupment because banning this wouldn\u2019t chill any market \u2018innovation,\u2019\u201d he said.<\/p>\n
Judges don\u2019t want to prohibit a practice that leaves consumers better off, Shearer added. \u201cIf the prices won\u2019t be raised later, what\u2019s the problem?\u201d<\/p>\n
Other Efforts<\/p>\n
The NSA asserts there\u2019s \u201calmost no modern example of a municipal government entering the retail consumer-goods market,\u201d but that isn\u2019t true, Shearer said. <\/p>\n
Libraries, public pharmacies, publicly run liquor stores, and state-run lotteries fall into a similar category, he said. \u201cAnd of course, public provision of services as opposed to retail goods is even more common and wouldn\u2019t be treated differently under the Sherman Act.\u201d<\/p>\n
Somerset, Ky., opened its city-run gas station, the Somerset Fuel Center, back in 2014. While it was criticized by local business owners at the time, there have been no suits filed to challenge it, Julie Nelson Harris, the city\u2019s communications director, said.<\/p>\n
Atlanta last year opened its first city-run grocery store, Azalea Market, without any significant pushback, Mayor Andre Dickens (D) told Bloomberg Law. That was in part because the idea was a public-private partnership that came \u201cwith a full package of support\u201d for the store operator and other local grocers, including $50,000 in grants to 15 local stores.<\/p>\n
The lack of legal challenges in those cities has led some attorneys to conclude that something other than legal principle is driving this lawsuit. The supermarket association\u2019s co-lead counsel is the America First Policy Institute, a think tank led by President Donald Trump\u2018s former economic adviser, Lawrence Kudlow.<\/p>\n
Vanderbilt\u2019s Shearer contends the federal suit, and two others filed in state court, are politically motivated.<\/p>\n
The association\u2019s attorney pushed back on that characterization. <\/p>\n
It\u2019s up to \u201cNew Yorkers and pundits to draw whatever conclusions they like,\u201d said the association\u2019s co-counsel Eric R. Levine of Eiseman Levine Lehrhaupt & Kakoyiannis PC. \u201cWe believe that the facts and the law are with us and that we will ultimately prevail.\u201d<\/p>\n
\u2018Love to Sue\u2019<\/p>\n
Regardless the motivation behind the antitrust lawsuit, it\u2019s not the only legal challenge against Mamdani\u2019s grocery plan. <\/p>\n
The Multicultural Business Coalition\u2019s parallel state court lawsuits take a different tack, asserting the grocery plan discriminates against small and minority-owned businesses, which will be put out of business.<\/p>\n
That suit raises questions about whether the city did its homework before \u201cdropping an economic bomb\u201d on other retailers in the area that already provide highly discounted goods, Columbia University business school professor Stephen Zagor said.<\/p>\n
The city \u201cshould\u2019ve expected a lot of these lawsuits,\u201d Zagor said. \u201cWe love each other and we love to sue each other.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
An antitrust lawsuit challenging New York Mayor Zohran Mamdani\u2018s (D) plan to open city-run grocery stores has vexed attorneys who say the case doesn\u2019t meet the high bar set by the US Supreme Court for proving predatory pricing suits. The National Supermarket Association\u2018s complaint said Mamdani\u2019s plan to open stores where some goods will be<\/p>\n","protected":false},"author":2,"featured_media":29116,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[25222,2568,25223,332,389,2567,20134,25224],"class_list":["post-29405","post","type-post","status-publish","format-standard","has-post-thumbnail","category-new-york","tag-class-actions","tag-grocery-store","tag-monopolization","tag-new-york-city","tag-nyc","tag-nyc-grocery-store","tag-predatory-pricing","tag-variable-interest-entities"],"share_on_mastodon":{"url":"https:\/\/vive.im\/@dc\/117327102246613940","error":""},"_links":{"self":[{"href":"https:\/\/www.diningandcooking.com\/us\/wp-json\/wp\/v2\/posts\/29405","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.diningandcooking.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.diningandcooking.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.diningandcooking.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.diningandcooking.com\/us\/wp-json\/wp\/v2\/comments?post=29405"}],"version-history":[{"count":0,"href":"https:\/\/www.diningandcooking.com\/us\/wp-json\/wp\/v2\/posts\/29405\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.diningandcooking.com\/us\/wp-json\/wp\/v2\/media\/29116"}],"wp:attachment":[{"href":"https:\/\/www.diningandcooking.com\/us\/wp-json\/wp\/v2\/media?parent=29405"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.diningandcooking.com\/us\/wp-json\/wp\/v2\/categories?post=29405"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.diningandcooking.com\/us\/wp-json\/wp\/v2\/tags?post=29405"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}