Full opinion text
Opinion by Judge REINHARDT; Partial Concurrence and Partial Dissent by Judge WARDLAW. OPINION REINHARDT, Circuit Judge: Our antitrust regime is the embodiment of Congress’s judgment that, with rare and specific exceptions, free competition for customers between firms protects and benefits the public by increasing efficiency and output, lowering prices, and improving the quality of the products and services available. Our labor laws exist to reduce strife between workers and employers and to ensure that workers are able to organize, and, by organizing, to promote their interests and protect their rights. These laws are not antithetical, but have been harmonized by Congress and the courts. In this case, the three largest supermarket chains in Southern California agreed to share profits amongst themselves and with a fourth supermarket chain during the indeterminate term of, and for a short period after, an anticipated labor dispute. The central issue here is whether a profit sharing agreement that would ordinarily violate the antitrust laws is excused from compliance under the nonstatutory labor exemption because it constitutes an economic weapon used by the employers in their efforts to prevail in a labor dispute. Alternatively, defendants contend that because the agreement will aid them in achieving lower labor costs, it results in a procompetitive benefit that outweighs its anticompetitive effects, and thus is not unlawful under Section 1 of the Sherman Act. See 15 U.S.C. § 1. The defendants also contend that the agreement is not anticompetitive because it may be of relatively short duration and because defendants between them control less than a 100% share of the market. Although we devote a considerable part of our discussion to explaining why the profit sharing agreement is anticompetitive, we doubt that anyone would seriously suggest that the agreement was lawful if it had been adopted simply in order to benefit defendants economically, and there had been no impending labor dispute. The most important part of our discussion, therefore, deals with the central issue: whether the fact that defendants’ agreement was designed for use as an economic weapon in a labor dispute changes or excuses the anticompetitive nature of the agreement. I. Defendants Albertson’s, Vons (for which defendant Safeway, Inc. is the parent company), Ralphs and Food 4 Less are supermarket chains operating in Southern California. Ralphs, Albertson’s and Vons, which are the three largest supermarket chains in that region, and possess a commanding share of the market, had a collective bargaining agreement with various unions affiliated with the United Food and Commercial Workers (“UFCW”) that was set to expire on October 5, 2003. Food 4 Less had a separate contract with the same unions that did not expire until four months later, the successor to which was to be reached through a separate negotiation. In July and August 2003, Ralphs, Albertson’s and Vons agreed with the unions that the three chains would act as a multiemployer bargaining unit for the purpose of negotiating a successor to their expiring contract. Among other goals, these firms sought terms that would decrease the costs of labor, in particular the cost of providing health coverage to workers. In anticipation of the unions using whipsaw tactics (in which unions strike or picket only one employer in a multiemployer bargaining unit), Ralphs, Albertson’s and Vons, along with Food 4 Less, entered into a Mutual Strike Assistance Agreement (hereinafter, the MSAA). In the MSAA, the four supermarket chains agreed that they would all lock out their union employees within 48 hours of a strike against any one or more of them, a traditional tactic in labor disputes. More significantly, in what defendants term a “revenue sharing provision,” the MSAA provided for the sharing of profits during the strike, regardless of its length. This provision stated that, in the event of a lockout or strike, any firm that earned revenues above its historical share of the combined revenues of all four firms would redistribute 15% of those surplus revenues among the other chains according to a fixed formula. According to Richard Cox, a Safeway (Vons) vice president who helped draft the MSAA, the 15% number was intended as an estimate of the profit that a chain would earn on increased sales without having to increase fixed costs. The purpose of the profit sharing provision was to maintain each defendant’s pre-labor dispute market share. Food 4 Less was included in the agreement to share profits despite being outside the multiemployer bargaining unit and despite having a separate collective bargaining agreement with the UFCW-affiliated unions that was expiring at a different time, the successor to which was to be negotiated separately. Additionally, the chains agreed to share profits according to the same formula in the event that Food 4 Less was struck during its later, separate collective bargaining process. Under the terms of the agreement, profit sharing was to continue for two full weeks after the termination of any strike or lockout. Thus, in the event that a strike or lockout involving the three largest supermarket chains in Southern California caused members of the public to patronize Food 4 Less, one of the next largest supermarket chains in the region, Food 4 Less was required to share its extra profits with the strike-bound firms. The profit sharing agreement covered 859 Ralphs, Albertson’s and Vons stores in Southern California, as well as 101 Food 4 Less stores that operated in the same area. According to data collected by AC Nielsen, Albertson’s, Ralphs, Vons, and Food 4 Less accounted for at least 55% and as much as 64% of the Los AngelesLong Beach metropolitan area market during every quarter of 2008-04, including the quarters during which the labor dispute occurred, and between 66% and more than 75% of the San Diego metropolitan area market during the same period. See Declaration of Thomas R. McCarthy, exs. 3A-3D. A fair estimate of the four chains’ collective market share of the Los Angeles-Long Beach portion of the Southern California market both before and after the strike would appear to be at least 60% and of the San Diego area portion at least 70%. On October 11, 2003 the unions struck local Vons stores. Pursuant to their agreement, Ralphs and Albertson’s (but not Food 4 Less) locked out their union employees the next day. The unions initially picketed all three supermarket chains but stopped picketing Ralphs stores on October 31, 2003. The strike received extensive news coverage, including a front page story in the Los Angeles Times on November 1, 2003 that reported the existence of a plan for the chains to share the financial burden of the strike. See Nancy Cleeland and Melinda Fulmer, In Tactical Move, Union Pulls Pickets from Ralphs, L.A. Times, Nov. 1, 2003, at Al. Selective picketing of Vons and Albertson’s stores continued until February 2004, when a new labor contract was reached and the strike ended. Pursuant to the profit sharing agreement, Ralphs and Food 4 Less paid Vons and Albertson’s approximately $142 million for the strike period, and $4.2 million for the two-week period following the strike. California filed a lawsuit against defendants, alleging that by entering into the profit sharing agreement, defendants had engaged in an unlawful combination and conspiracy in restraint of interstate trade and commerce in violation of Section 1 of the Sherman Act. The state sought a declaratory judgment that the profit sharing agreement violates Section 1, as well as attorney fees. Defendants contended, among other defenses, that the nonstatutory labor exemption applied, and the district court bifurcated the case to allow defendants to seek a ruling as to its applicability. Ultimately, the court denied defendants’ summary judgment motion based on their nonstatutory labor exemption contention. See California v. Safeway, Inc., 371 F.Supp.2d 1179 (C.D.Cal.2005). Defendants unsuccessfully moved the trial court to certify the nonstatutory labor exemption issue for interlocutory appeal, and unsuccessfully tried to appeal directly to this court. After this, California filed a summary judgment motion seeking a ruling that the profit sharing agreement was either a per se violation of § 1 or was unlawful under an abbreviated rule-of-reason, “quick look” analysis. The district court denied California’s motion, and subsequently denied its motion to certify the order for interlocutory appeal. It also denied defendants’ renewed motion for summary judgment based on the nonstatutory labor exemption. Final judgment was entered after a stipulation in which California agreed not to pursue judgment under a full rule of reason analysis, and defendants withdrew all affirmative defenses except for the claim that the profit sharing agreement was protected from antitrust review by the nonstatutory labor exemption. See State of California v. Safeway et al., No. CV 04-0687 (C.D. Cal., filed Mar. 27, 2008). Both California’s appeal and defendants’ cross-appeal were timely. The appeal is not moot because the case falls squarely within the rule for situations that are “capable of repetition, yet evading review.” See United States v. Brandau, 578 F.3d 1064, 1067 (9th Cir.2009). II. We must determine first whether defendants’ profit sharing agreement violates § 1 of the Sherman Act, which bans agreements or combinations that act as unreasonable restraints on interstate commerce. See State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997). Defendants entered into an agreement to share profits. Such agreements have traditionally been held to be anticompetitive because they remove the incentive to engage in competitive behavior. Defendants have three principal contentions as to why their profit sharing agreement is different: first, that their profit sharing is for a limited, if indefinite period; second, that their agreement does not include 100% of the participants in the market; and third, by way of response to plaintiffs prima facie case, that by aiding them to prevail in the labor dispute and achieve their goal of lowering wages and benefits paid to their employees, the agreement aids competition in the Southern California market. It is obvious intuitively and from a rudimentary knowledge of economics, as well as from a reading of the case law, that neither the agreement’s limited duration nor its failure to include the fragmented group of other firms operating in the market could do more than reduce the ordinary anticompetitive effects of such agreements. Certainly these factors would not eliminate such effects. In this section we confirm that conclusion by analyzing the details, logic, and circumstances of the particular profit sharing agreement, including its relationship to the anticipated strike. Our answer is still the same in every respect. The agreement’s effect is necessarily anticompetitive, and, like any other profit sharing agreement of limited duration among firms that control less than 100% of the market, the anticompetitive effects might be reduced to some extent but they certainly would not be eliminated. Accordingly, the only real question is whether the agreement, patently anticompetitive on its face, should be held valid because of its role as an economic weapon for the defendants in a labor dispute. This question has two different aspects: first, whether aiding employers in winning labor disputes and, as a result, in reducing the wages and benefits they pay their employees, constitutes a procompetitive benefit that would overcome the anticompetitive effects of their conduct and render their otherwise anticompetitive conduct lawful under the Sherman Act; and second, whether, because of its role in a labor dispute, the profit sharing agreement is exempt from the antitrust laws under the nonstatutory labor exemption. We address the first of these questions at the end of this section. The second is the subject of the subsequent and separate section, Section III. A. The basic method of analysis for determining whether an agreement is an unreasonable restraint on trade such as violates § 1 of the Sherman Act is rule of reason review, in which a court looks to factors such as “specific information about the relevant business,” “the restraint’s history, nature, and effect,” and “[wjhether the businesses involved have market power,” with the purpose of “distinguishing] between restraints with anticompetitive effect that are harmful to the consumer and restraints stimulating competition that are in the consumer’s best interest.” See Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 885-886, 127 S.Ct. 2705, 168 L.Ed.2d 623 (2007). Full rule of reason review is data-intensive, and, consequently, expensive for litigants; also, it consumes large amounts of courts’ time and resources. See Arizona v. Maricopa County Medical Soc., 457 U.S. 332, 344 & n. 14, 102 S.Ct. 2466, 73 L.Ed.2d 48 (1982). For these reasons, as well as to provide guidance to the business community, see Continental T.V., Inc., v. GTE Sylvania Inc., 433 U.S. 36, 50 n. 16, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977), courts have developed summary methods of identifying § 1 violations in circumstances in which such violations are discernible without a full rule of reason analysis: per se review and quick look review. Per se analysis examines whether prior judicial experience with the type of restraint at issue is sufficient to allow a determination that it would always or almost always tend to restrict competition and decrease output. See Leegin, 551 U.S. at 886, 127 S.Ct. 2705. The focus of the inquiry is on accumulated data from prior decisions: an agreement may be declared unlawful with no further analysis, simply by virtue of its being of a type that courts have previously determined to have “manifestly anticompetitive effects,” and no “redeeming virtue.” Id.' In contrast, an arrangement is violative of § 1 under a quick look approach when “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.” California Dental Ass’n v. F.T.C., 526 U.S. 756, 770, 119 S.Ct. 1604, 143 L.Ed.2d 935 (1999). Quick look review is not necessarily based on a history of rule of reason adjudications; rather, it asks whether “a great likelihood of anticompetitive effects can easily be ascertained” by examining the restraint, and considering defendants’ justifications of it. See id.; see also Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law, ¶ 1911a, p. 267 (3d. ed. 1996) (Quick look review “is usually best reserved for circumstances where the restraint is sufficiently threatening to place it presumptively in the per se class, but lack of judicial experience requires at least some consideration of proffered defenses or justifications.”). California contends that defendants’ profit sharing arrangement violates § 1 under both per se and quick look review. Its assertion that the agreement strongly resembles arrangements that prior cases have found violative of § 1 is correct, although the particular circumstances of the restraint in question do differ from the circumstances relating to the profit sharing arrangements examined in those earlier cases. It is, however, unnecessary for us to determine whether such differences are sufficiently material to cause us to refrain from holding that defendants’ profit sharing agreement was illegal under a strict per se analysis, because the agreement was plainly illegal under a quick look or, more accurately, a combined or mixed form of review. “[A] great likelihood” that defendants’ profit sharing arrangement produced “anticompetitive effects” is manifest, Cal. Dental Ass’n, 526 U.S. at 770, 119 S.Ct. 1604, and defendants offer no plausible procompetitive benefits such as would overcome or neutralize those effects so as to require full rule of reason analysis. Although the parties briefed the case on the traditional view that the two summary forms of review are separate and unrelated, and we discuss the questions they posed separately to some extent, we ultimately consider the lawfulness of the agreement in light of the Supreme Court’s recent explanation that “our categories of analysis are less fixed than terms like ‘per se,’ ‘quick look’ and ‘rule of reason’ tend to make them appear.” Id. at 779, 119 S.Ct. 1604. According to Justice Souter, writing for the Court, “what is required ... is an enquiry meet for the case, looking to the circumstances, details, and logic of a restraint,” with the object of determining “whether the experience of the market has been so clear, or necessarily will be, that a confident conclusion” can be drawn that the “principal tendency” of an agreement is anticompetitive. Id. at 780-71, 119 S.Ct. 1604. We follow the Court’s suggestion, and apply a mixed or blended approach, engaging in an analysis “meet for the case” — here, a thoroughgoing analysis that compels our confident conclusion that the principal tendency of defendants’ agreement is anticompetitive and that the agreement thus violates § 1 of the Sherman Act. Accordingly, we reverse the district court and hold that defendants’ profit sharing arrangement is unlawful. B. We first discuss the applicability of strict per se analysis. “The rationale of the rule of per se illegality depends on the premise[ ] that ... judicial experience with a particular class of restraints shows that virtually all restraints in that class operate so as to reduce output or increase price.” Areeda & Hovenkamp, ¶ 1911a, p. 265. Accordingly, application of the per se rule is limited to restraints of a type that courts’ “considerable experience” has revealed to have “manifestly anticompetitive effects,” and no “redeeming virtue,” such that judges can “predict with confidence that it would be invalidated in all or almost all instances under the rule of reason.” Leegin, 551 U.S. at 886-87, 127 S.Ct. 2705. Thus, the question for per se analysis is whether defendants’ agreement is of a type that courts have previously determined to have such pernicious effects. California argues that defendants’ profit sharing arrangement was both a profit pooling agreement and a market allocation agreement, each of which courts have determined to be subject to per se invalidation. As we explain below, the contention that defendants’ agreement was a market allocation agreement is without merit. The question whether it was a profit sharing agreement sufficiently similar to the profit sharing agreements that courts have previously examined and invalidated is much closer. Below, we discuss the relationship between defendants’ profit sharing agreement and profit sharing agreements invalidated in prior cases, but ultimately do not determine whether defendants’ agreement constituted a per se violation of the Sherman Act. Rather, as we explain in Section II.C infra, in determining that it was unlawful, we apply a per se-plus or a quick look-minus analysis, a combined or mixed approach, somewhere between pure per se and pure quick look, along the lines suggested by the Court in California Dental Association. 1. California contends that defendants’ profit sharing agreement is essentially identical to those profit pooling and sharing schemes that the Supreme Court has found to be per se violations of § 1. See Citizen Publ’g Co. v. United States, 394 U.S. 131, 134-35, 89 S.Ct. 927, 22 L.Ed.2d 148 (1969) (“Pooling of profits pursuant to an inflexible ratio at least reduces incentives to compete for circulation and advertising revenues and runs afoul of the Sherman Act.”); see also United States v. Paramount Pictures, 334 U.S. 131, 149, 68 S.Ct. 915, 92 L.Ed. 1260 (1948) (profit sharing agreement a “bald effort[ ] to substitute monopoly for competition”); N. Sec. Co. v. United States, 193 U.S. 197, 24 S.Ct. 436, 48 L.Ed. 679 (1904); Chicago, M & St. P. Ry. Co. v. Wabash, St. L. & P. Ry. Co., 61 F. 993 (8th Cir.1894); Anderson v. Jett, 89 Ky. 375, 12 S.W. 670 (1889). Profit pooling or profit sharing arrangements eliminate incentives to compete for customers along every dimension: there is little purpose in attempting to attract another firm’s customers by lowering prices, improving quality or taking any other measure if the profits earned from those new customers would be placed in a common pool in which the other firm is a participant, and the proceeds distributed in the same way no matter which participant in the profit pool generated the underlying sales, or if transfer payments are made between firms to achieve the same effect. See N. Sec. Co., 193 U.S. at 328, 24 S.Ct. 436 (pooling profits “destroys every motive for competition between ... natural competitors.... ”); Chicago, M. & St. P. Ry. Co., 61 F. at 997 (a profit sharing agreement by which railroads that carried less than a predetermined share of freight were compensated by other railroads such that their share of total revenues remained constant had “[t]he necessary and inevitable result of ... foster[ing] and creating] poorer service and higher rates.”). The Sherman Act was intended to curb just such restraints on competition. Defendants contend that there are three ways in which their scheme differs from the profit pooling or sharing that was held unlawful in prior cases. The first of these contentions is meritless. Defendants argue that, unlike the agreements in prior cases, which provided that the parties would share all profits, their agreement provides that any party that experiences an increase in relative market share would share with the others only 15% of its increase in relative revenue, and that the sums to be redistributed are less than all of the profits earned on those increased revenues. There is no question, however, that the 15% figure was the defendants’ estimate of the total additional profits to be earned as a result of any increase in relative market share while the profit sharing agreement was in effect. This intention to share all the additional profits earned is what is relevant. Richard Cox, a vice president of Safeway who helped to draft the agreement, stated in his deposition that the 15% was meant to represent accurately the profit that a chain would collect on increased revenues that were earned without an increase in fixed costs. Defendants do not dispute the accuracy of his testimony. Their proffer is the statement of their expert witness, who conjectured that it was “plausible” and “likely” that incremental profits were greater than 15% of revenues, but admitted that he had done no analysis of incremental profitability based on data. Defendants cannot force the expense of full rule-of-reason litigation on courts and opposing parties simply by speculating that they may have gotten their math wrong when they were setting up their scheme to share profits; their intent to share profits is sufficient, whether or not the scheme as implemented achieved that objective to perfection. Defendants’ other two contentions, however, persuade us that there is sufficient question as to whether we should invalidate their profit sharing scheme under a strict per se approach that we should refrain from doing so. Rather, we conclude that additional analysis of the agreement and its likely effects would be beneficial and that we should proceed to a quick look approach, or, more accurately, to a mixture or combination of the two approaches. First, while profit sharing agreements in previous cases were to last for decades or permanently, defendants’ scheme is scheduled to last only for the period of the labor dispute, plus two additional weeks. See Citizen Publ’g, 394 U.S. at 133, 89 S.Ct. 927 (fifty year agreement); Paramount Pictures, 334 U.S. at 131, 68 S.Ct. 915 (considering apparently permanent profit sharing agreements); N. Sec. Co., 193 U.S. at 197, 24 S.Ct. 436 (finding illegal an apparently permanent profit pooling arrangement); Chicago, M. & St. P. Ry. Co., 61 F. at 996 (“[t]he contract was to continue for 25 years”). That the term of the scheme could expire in a relatively short period — anywhere from a week or two to a year or more, depending on the length of the strike — is no defense if the scheme is anticompetitive. Section 1 of the Sherman Act proscribes all anticompetitive agreements, regardless of their duration: neither the text of the statute nor the case law contains an exception for anticompetitive agreements that last for less than a fixed period of substantial length. However, defendants’ contention is that no anticompetitive effects could result from their arrangement, because the potentially short term of the profit sharing leaves them with sufficient incentive to compete for customers, whose allegiance might be retained after the end of the strike. Because courts have not previously considered profit-sharing arrangements of a potentially short duration, we prefer not to simply apply a pure per se analysis to defendants’ arrangement. Second, unlike firms in most of the prior profit sharing cases, which were the only firms of their kind operating in the relevant market, defendants were not the only supermarkets in the affected areas. See, e.g., Citizen Publ’g, 394 U.S. at 133, 89 S.Ct. 927 (defendants the only general distribution newspapers in Tucson). As we conclude in Section IV.B below, California is correct that a profit sharing plan need not cover the entire market in order to affect competition. However, it is incorrect that the distinction between a profit sharing plan that covers the entire market and one that does not is unworthy of any consideration before we make a determination whether anticompetitive effects will result from an agreement. As with the previous distinction, courts have not explored the question sufficiently to allow us to feel entirely comfortable with applying a strict per se approach here. 2. California also contends that the profit sharing agreement was a market allocation agreement that allocated the Southern California grocery market according to defendants’ historic shares of that market. Market allocation agreements are “classic per se antitrust violation[s].” See United States v. Brown, 936 F.2d 1042, 1045 (9th Cir.1991). Courts have treated as unlawful market allocations agreements assigning particular territories to particular vendors, see Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49-50, 111 S.Ct. 401, 112 L.Ed.2d 349 (1990) (per curiam); United States v. Topco Assoc., Inc., 405 U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972), assigning certain customers to certain vendors, see White Motor Co. v. United States., 372 U.S. 253, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963), and capping total sales volume of the market and assigning participants fixed shares of that total volume, see United States v. Andreas, 216 F.3d 645, 666-68 (7th Cir.2000). The common thread to these decisions is that in allocating the market, firms ensure that customers attempting to purchase products in the relevant market will have fewer firms competing for their business. In contrast to the agreements at issue in the market allocation cases, however, defendants’ agreement is not alleged to have decreased the number of firms available to customers. Rather, California alleged that the agreement simply reduced the competition for customers among the defendant firms. Thus, it does not allege a market allocation claim appropriate for either strict per se analysis or a mixed or blended approach, and we need proceed no further with that question in this opinion. 3. In view of the above, we decline to hold that California prevails on a strict per se theory. C. Turning from a strict per se to a quick look, or rather, in this case, to a combined or mixed approach, our analysis requires a thoroughgoing inquiry. An agreement is violative of § 1 of the Sherman Act under a quick look analysis when “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.” Cal. Dental Ass’n, 526 U.S. at 770, 119 S.Ct. 1604. If so, the burden of proof shifts to the defendant “to show empirical evidence of procompetitive effects.” See id. at 775 n. 12, 119 S.Ct. 1604; Areeda & Hovenkamp, ¶ 1914d1, p. 315-16. Accordingly, a court seeking to determine on a “quick look” whether an arrangement is violative of § 1 must first determine whether it can “easily ... aseertain[]” a “great likelihood of anticompetitive effects,” see Cal. Dental Ass’n, 526 U.S. at 770, 119 S.Ct. 1604, and, if so, whether any such effects are neutralized or outweighed by procompetitive benefits. Taking into account the Supreme Court’s recent explanation that the “categories of analysis of anticompetitive effect are less fixed than terms like ‘per se,’ quick look,’ and ‘rule of reason’ tend to make them appear,” and that rather than drawing “categorical line[s]” between restraints, a court reviewing an agreement that is alleged to violate § 1 must conduct “an enquiry meet for the case,” see id. at 779-81, 119 S.Ct. 1604, we look here to the history of judicial experience with profit sharing agreements, apply rudimentary economic principles to the meaning and effects of the particular agreement in question, and thoroughly analyze the circumstances, details and logic of the agreement in order to determine the likelihood of anticompetitive effects. After doing so, we consider the purported procompetitive effects that the defendants suggest are sufficient to overcome any anticompetitive effects of the agreement. The question, then, under the combined or mixed approach is whether, after conducting the review and analysis we have just described, we reach a “confident conclusion [that] the principal tendency” of the agreement is to restrict competition. See id. at 781, 119 S.Ct. 1604. We note that a “confident conclusion” does not always prove ultimately correct. See supra note 8. Rather, it represents a tool of judicial economy designed to save the litigants and the courts a considerable investment of time and money, which in the balance is to the benefit of all. That occasionally we might be wrong is a price that it is long established that society is willing to pay. We might also note that some of the conclusions of which our leading economic experts have been confident have turned out to be incorrect. For example, Alan Greenspan, appointed and then reappointed Chairman of the Federal Reserve for five terms by four different Presidents, recently admitted to a significant flaw in the ideology that caused him to support and implement policies of financial deregulation: “I made a mistake in presuming that the self-interest of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders.” See Paul M. Barrett, While Regulators Slept, N.Y. Times, Aug. 6, 2009, at BR 10. And Judge Richard Posner, a highly respected jurist and a leading economics expert, has recently expressed his admiration for Keynesian economics, reversing a lifetime of reliance on the Chicago School’s approach. See John Cassidy, Letter from Chicago, The New Yorker, Jan. 11, 2010, at 28. Thus, a “confident conclusion” for purposes of quick look and other limited approaches means, at most, a reasonably confident conclusion that, on some occasions, may prove to be incorrect. Equally incorrect, however, may be a conclusion reached by economics experts after years of study or even a verdict reached by a jury following a full-scale trial with the most careful and thorough development of a full evidentiary record with the aid of the most experienced antitrust lawyers and expert witnesses. Here, we are confident in our conclusion that defendants’ profit sharing agreement creates “a great likelihood of anticompetitive effects,” and that such effects are not outweighed or neutralized by any plausible procompetitive benefits. We are confident that neither the duration of the agreement nor the fact that the defendants have less than a 100% share of the market significantly affects the anticompetitive “principal tendency” of the profit sharing agreement. In reaching our conclusion, we have considered whether, because the objective of the agreement was to affect the outcome of a labor dispute and to bring about a reduction in labor costs, our conclusion should be altered. Our answer is a definite and unqualified “No.” Finally, although the parties introduced some evidence to support their respective positions, we do not rely on such empirical proof in reaching our conclusion; we note, however, that to the extent that it is relevant, the evidence appears either to support the conclusion that we reach, or, alternatively, to add little or nothing of any significance to our analysis. 1. a. Defendants entered into an agreement under which they shared profits with one another according to their historic shares of the market. As discussed above, the only factors distinguishing defendants’ arrangement from a profit sharing agreement that would have constituted a per se violation of § 1 of the Sherman Act are the presence in Southern California of a number of supermarkets other than those operated by defendants, and the indefinite, if limited, term of the agreement. Absent these features, defendants’ scheme would simply constitute a profit pooling or sharing arrangement akin to the ones held violative of § 1 in earlier cases, and there would be no question that the agreement creates a “great likelihood of anticompetitive effects.” This is apparent from the fact that when firms sharing profits are the only firms in a market, each will receive the same portion of the total profits whether it cuts prices, invests in improving its products or services, or does nothing to win customers from the other firms; the result of this lack of competitive pressure is the high likelihood that prices rise towards monopoly levels or fail to fall with the same effect. It is for these reasons that the Supreme Court has said that “[p]ooling of profits pursuant to an inflexible ratio” is a “ § 1 violation[]” that is “plain beyond peradventure.” Citizen Publ’g, 394 U.S. at 135-36, 89 S.Ct. 927. The well-recognized effects of profit sharing that we have set forth above help to guide our discussion. We start from the premise that the sharing of profits between competitors ordinarily has substantial adverse effects on competition. We then consider whether either of the aspects of the agreement before us that defendants assert materially distinguish it from ordinary profit sharing arrangements would, in light of the “circumstances, logic and details of the restraint,” preclude that agreement from having the anticompetitive effect that would otherwise occur. In an ordinary period in which no profit sharing arrangement is in effect, defendants compete with one another and with a fragmented set of other grocers for customers and sales, the primary competition being among the defendants. The fruits of successful competition might accrue both in the present, as a supermarket makes sales in the current period, and in the future, as customers won or retained through such competition return to the store to make more purchases. Defendants contend that a profit sharing agreement of limited duration, restricted to the dominant market participants, does nothing to alter the ordinary incentive structure, and that the competitive pressure while such a profit sharing agreement is in effect is no less than the competitive pressure that would occur in the absence of such an agreement. Having reviewed their contentions and analyzed all the plausible effects of the agreement, we are confident in our conclusion that defendants’ profit sharing arrangement removes, or at the least significantly reduces, a key source of competitive pressure — competition among defendants for sales to be made during the agreement period — without there being any countervailing pressure sufficient to neutralize or overcome the overwhelming likelihood of anticompetitive effects. Although it is plausible that the two differences on which defendants rely will serve to reduce the competitive pressures to a lesser extent than would a long term agreement among competitors who control 100% of the market, it is evident that the lessening of the reduction in competitive pressure will be one of degree only, and that there is no likelihood whatsoever that the anticompetitive effects of a profit sharing agreement will be eliminated. Preliminarily, as we have already stated, when an arrangement redistributes all profits on current sales among a group of competitors according to a predetermined ratio, as defendants’ arrangement does, there is little reason for the individual firms within the group to compete with one another for those sales. Thus, we begin our analysis having determined that there is a high likelihood that defendants’ agreement has a substantial negative effect on their incentives to compete with one another for customers in order to make sales during the period in which the agreement is in effect. Defendants nonetheless contend that there is an incentive to compete with one another for customers during the profit sharing period, pointing to the indefinite duration of the agreement and to the possibility that customers who are won or retained through competition during that period will remain as customers after the agreement ends. Additionally, they contend that the other firms in the market will exert competitive pressure on them sufficient to make up for any loss of competitive pressure among themselves. We first consider these contentions for a period of limited duration in general, and then we consider whether the particular circumstance of the agreement — an impending labor strike — alters that general analysis. First, for a profit sharing agreement of limited but indefinite duration, the incentive to compete for sales and profits that would occur at some future time would be substantially less than the ordinary incentive to compete by seeking to attract customers who will patronize the stores starting immediately and will continue to patronize them in the future as well. Any decision to engage in competitive behavior in order to attract customers because they might buy goods at some future period in which profits would not be shared would be highly problematic at best. Defendants would face significant economic disincentives to the incurring of costs by advertising, discounting and engaging in similarly competitive behavior in order to compete for profits that would be realized, if at all, only at an indefinite point in the future. The sales that would produce those future profits might not be made for six months, or a year, or more. Intervening factors from the mobility of Southern California customers in general, to the willingness of short term customers to experiment with other vendors, to long term customers’ attachment to long time vendors, to the occurrence of future sales and promotions, might well render the obtaining of any new customers of dubious value, and hardly worth the economic cost. By paying money now for sales that would occur, if at all, only in the indefinite future, the defendants would incur the ordinary costs of obtaining customers without receiving the ordinary benefits that would accrue. Such conduct makes little economic sense. It is far more likely that, knowing that all of their chief competitors are in the same position, each of these once and future competitors would refrain during the profit sharing period from the expenses necessary to engage in such competition and count on their fellow defendants to do likewise. Thus, we cannot attribute significant weight to defendants’ argument regarding the economic pressure to compete with each other for future customers during the profit sharing period, although it is possible that this factor could serve to reduce to some degree the loss of such pressure that might occur were the profit sharing agreement of longer duration. In short, viewing matters most favorably to the defendants, the anticompetitive effects resulting from an agreement of limited, if indefinite, duration might be diminished to some degree but would certainly not be eliminated. With defendants exerting substantially reduced or no competitive pressure on one another during the profit sharing period, competition from firms not included in the profit sharing agreement would have to result in an extraordinary amount of increased competitive pressure to make up for the loss of the paramount pressure that the defendants ordinarily exert on each other. This too is highly unlikely. During the profit sharing period, defendants controlled at least 60% of the Los AngelesLong Beach portion of the Southern California market and at least 70% of the San Diego portion, and between them operated more than 950 stores in the areas affected by the agreement, a combined presence sufficient to suggest an ability to significantly affect prices and other outcomes in the Southern California market. Defendants would be at least partially insulated from competition from other vendors by virtue of the many and varied locations of their stores, which for numerous customers would be far more convenient to patronize than the markets operated by the other vendors. Defendants also would be partially insulated from such competition by the inability of the other vendors to compete effectively as a result of brand recognition (and, indeed, customer awareness of their existence), limited facilities, contracts with suppliers and staffing commensurate with their limited historical role in the market; factors that would substantially curtail the ability of the other vendors to serve additional customers. Those other vendors would no more be able to increase their capacity, staff, supplies, and brand recognition overnight than they could immediately open new locations convenient for defendants’ customers. Nor would they be inclined to spend money to do so, knowing that the profit-sharing agreement was of limited duration, and, in fact, could end at any time. Finally, those other vendors are mainly independent of each other, consist of various types of markets, and would have neither the inclination nor the ability to agree on a uniform marketing policy that would significantly increase whatever competitive pressure the totality of those vendors ordinarily exerts on the defendants. The overwhelming likelihood appears to be that, on the whole, smaller vendors would do little if anything to alter their marketing practices but rather would continue on their ordinary course, which would not serve to increase their economic pressure on defendants beyond what they ordinarily exert, or attract any substantial portion of the customers that ordinarily patronize defendants. In sum, were a group of defendants with 60% or 70% of the market share to agree to enter into a profit sharing agreement for a 6, 12 or 18 month period for ordinary business reasons, there can be no doubt that neither the length of the period of the agreement nor the defendants’ less than 100% market share would change the fact that the agreement, like profit sharing agreements in general, would be anticompetitive and would constitute a violation of § 1 of the Sherman Antitrust Act. Accordingly, there is little to support defendants’ contentions that the term of the agreement or the presence of other vendors in the market would result in a different outcome regarding the nature of the agreement than would otherwise be dictated by prior well-established law. We find it difficult to believe that any individual with a rudimentary knowledge of antitrust law would seriously contend that if the defendants agreed to share profits for a limited period for their mutual economic benefit, there would not be a violation of § 1 of the Sherman Act — at least in the absence of some extraordinary circumstance. Here, we consider whether the threat of a strike or the strike itself provides such a circumstance. First, we examine whether the profit sharing agreement loses its anticompetitive effects when it becomes operative during the course of a strike or labor dispute. We have no difficulty answering that question: the fact that the defendants’ agreement provides for profits to be shared only during a labor dispute and a brief ensuing period does not alter its inherently anticompetitive nature. Even during a strike period, a profit sharing agreement generates a “great likelihood of anticompetitive effects.” For a vendor, the principal features of an employee strike are diminished consumer demand, as some customers choose not to cross the picket lines; a reduced workforce, because some workers at least are on strike; and a more urgent financial condition, as fixed costs remain at non-strike levels, and revenues go down. While diminished demand, a reduced workforce, and a more urgent financial condition might affect defendants’ competitive behavior during the strike, these potential effects would occur independent of the existence of a profit sharing agreement. The profit sharing agreement itself would have an additional effect; it would cause defendants to compete even less during the strike period than they would were there no profit sharing agreement in effect at that time. Whatever the baseline circumstance as to competition in any given period, including a strike period, the existence of the profit sharing agreement results in a greater likelihood of less competition than there would otherwise be. That is the simple lesson that is apparent from a rudimentary knowledge of economics. Profit sharing necessarily serves to diminish the incentives to compete below whatever the level of competition would be in the absence of such an agreement; it is inherently, or as some courts have said, intuitively, see Cal. Dental Ass’n, 526 U.S. at 781, 119 S.Ct. 1604, anticompetitive and has the same, or a similar, effect on competition during a strike as it would have before the strike and after it ends. The only real difference is that the level of competition that would be reduced by the agreement might be lower or higher depending on other circumstances, such as the existence of the anticipated labor dispute. A strike or some other unusual circumstance might result in the agreement having a lesser or greater anticompetitive effect than it would have ordinarily; however, whether greater or lesser, the net effect in all circumstances would be anticompetitive. For the reasons explained above, we conclude that “a great likelihood of anti-competitive effects can be easily ascertained” by examining the agreement in light of prior cases, in light of its circumstances and details, as well as in light of logic and rudimentary principles of economics. Here, those anticompetitive effects are not only substantial, but they result from an agreement that removes fundamental incentives to engage in competition for an indefinite period. In short, neither the fact that there are a number of smaller companies in the market, the fact that the agreement is of an indefinite though limited duration, nor the fact that the agreement takes effect during a strike, warrants a departure from the well-established rule that profit sharing agreements are anticompetitive and violate section 1 of the Sherman Act. b. Defendants’ fall back position is that the state lacks empirical evidence to demonstrate that the effects of the agreement were anticompetitive in practice. However, neither per se nor quick look review ordinarily requires empirical evidence of anticompetitive effects, nor is it required for the combined or mixed per se/quick look approach that we apply here. As Professors Areeda and Hoverkamp explain, “[t]he main difference between ... the ‘quick look’ approach and the rule of reason is that under the former the plaintiffs case does not ordinarily include proof of [market] power or anticompetitive effects.” See Areeda & Hovenkamp, ¶ 1914d, at p. 315; see also Cal. Dental Ass’n, 526 U.S. at 779-81, 119 S.Ct. 1604 (explaining that the “quality of the proof required should vary with the circumstances;” that “naked restraints] on price and output need not be supported by a detailed market analysis in order to” move to the second step of the quick look analysis and “require” defendants to produce “some competitive justification”; and that not “every case attacking a less obviously anticompetitive restraint ... is a candidate for plenary market examination”) (citations, internal quotation marks omitted). So long as the anticompetitive nature of the likely effects of an agreement is, as a theoretical matter, “obvious,” it is not necessary for a plaintiff to provide empirical evidence demonstrating anticompetitive consequences. See Cal. Dental Ass’n, 526 U.S. at 770-71, 119 S.Ct. 1604; see also Nat’l Collegiate Athletic Ass’n v. Board of Regents of Univ. of Oklahoma, 468 U.S. 85, 109-110, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984). Such a rule is necessary in antitrust cases, where “reliable proof’ of such effects might be “impossible to produce.” See Areeda & Hovenkamp, ¶ 1901d, at pp. 188-89 (also noting that “in most [antitrust] cases ... the impact on output,” which in this case would be diminished sales at higher prices, “is assessed by inference from the nature of the agreement and surrounding circumstances, rather than empirical measurement”). This is a case in which reliable proof of anticompetitive effects or their absence through empirical evidence might be difficult to obtain. Defendants’ own expert explained that because the profit sharing agreement took effect only during the labor dispute and both the agreement and the labor dispute might affect defendants’ pricing decisions, the data required to best distinguish between the effects of the strike and those of the agreement and determine whether and how the agreement affected competition between the defendants does not exist. See Declaration of Thomas R. McCarthy at ¶ 47. This is, more important, a case in which the anticompetitive nature of the restraint is obvious. As discussed above, by the terms of the agreement any defendant that earns profits above its historic market share is required to give those additional profits to the other defendants. Because a defendant may not retain any profits that it made from competing with the other defendants and receives a proportionate share of whatever profits those other defendants make from competing with it, the profit sharing agreement plainly reduces the competitive pressure among defendants for sales whenever it is in effect, during the strike or otherwise. To justify their conduct, defendants rely not on the neutral or positive effect on competition arising out of their agreement, but on other sources of competitive pressure — increased competition from other vendors and competition with one another for post-strike business. As explained above, it is wholly implausible that those factors would be sufficient to overcome the reduction in competitive pressure that necessarily results from the profit sharing agreement. Defendants’ agreement plainly removes a significant source of competitive pressure without giving rise to any comparable counter-source to replace it. Accordingly, California has carried its burden by demonstrating the existence of a great likelihood of anticompetitive effects. Although given the nature of the restraint at issue in the case, California was not required to adduce empirical evidence of anticompetitive effects, the empirical evidence before us supports its contentions or is, at the least, of no substantial consequence. Defendants acknowledge diminished competitive behavior such as discounting and advertising during the period in which the profit sharing agreement was in effect. This, in all likelihood, resulted in at least some increase in, or some failure to reduce, the prices charged to the consumers. See Declaration of Thomas R. McCarthy, Backup to ex. 7A; Declaration of Steven Lawler aifii 8; Declaration of Carla Simpson at ¶ 6-7; Declaration of Charles Ackerman at ¶ 15-19. They explain this change in behavior by attributing it to the lack of manpower created by the strike, rather than to the profit sharing agreement. However, their expert, who relied on this explanation, performed no regression or other statistical analyses, which are typical means of determining the effects of multiple variables, such as the labor dispute and the profit sharing agreement, on a single dependent variable, such as competitive behavior by defendants. See, e.g., Hemmings v. Tidyman’s, Inc., 285 F.3d 1174, 1183-84 & n. 9 (9th Cir.2002). Instead, he simply looked at limited data from Albertson’s and declared that Alberton’s “did a lot of discounting during the strike,” and that it increased its use of certain discounting methods. See Declaration of Thomas R. McCarthy at ¶ 51-53. Because his analysis lacks a discussion of how much discounting Albert-son’s would have done absent the profit sharing agreement, it is beside the point. California’s expert, who did perform regressions, asserted in his deposition that those regressions revealed that competition between defendants during the strike was harmed by the profit sharing agreement. He further noted that Vons raised its prices in the face of the strike and a dramatic drop in demand for its products, exactly the opposite of the lower prices that are expected when demand drops in a competitive marketplace. Given the obviously anticompetitive nature of defendants’ profit sharing agreement, no empirical data about the effects of the agreement is necessary for “an enquiry meet for [this] case.” Nonetheless, we have reviewed the empirical evidence in the record for purposes of completeness. Doing so has only increased our certainty that defendants’ agreement generated a great likelihood of anticompetitive effects, that it is implausible that such effects could be overcome or neutralized by the conduct of defendants or others during the term of the agreement, and that requiring a full rule of reason inquiry would be contrary to the efficient and effective implementation of our antitrust laws. 2. Where, as here, a “great likelihood of anticompetitive effects can easily be ascertained,” the burden of proof is shifted to the defendant “to show empirical evidence of procompetitive effects.” See Cal. Dental Ass’n, 526 U.S. at 770, 775 n. 12, 119 S.Ct. 1604; Areeda & Hovenkamp, ¶ 1914d1, p. 315-16 (when “the restraint is of such a character that an anticompetitive effect may be presumed,” then “the only tolerance permitted to the defendant is to show” procompetitive effects). Procompetitive effects include efficiency gains, the development or improvement of products, and other benefits to consumers and socU ety. See Areeda & Hovenkamp, ¶ 1912c2, p. 289. In California Dental Association, for instance, the Supreme Court saw a plausible procompetitive justification for the dentist association’s restrictions limiting price and quality advertising in the potential of such restrictions to improve consumer information by eliminating false and misleading advertising. See Cal. Dental Ass’n, 526 U.S. at 771-772, 119 S.Ct. 1604. Here, we come to defendants’ real defense. They assert that conduct that serves to reduce the cost of labor serves a procompetitive purpose, such as may excuse otherwise anticompetitive behavior. They contend that the procompetitive benefit of their agreement is that it increased their chances of winning the labor dispute and reducing the wages and benefits they would be required to pay to their employees, which in turn would increase their ability to lower prices and compete more effectively with other companies. See Declaration of Thomas R. McCarthy at ¶10. As California points out, the chain of contingencies linking the profit sharing agreement to reduced prices for consumer purchases renders any such procompetitive benefits purely speculative. More important, driving down compensation to workers is not a benefit to consumers cognizable under our laws as a “procompetitive” benefit. “One of the important social advantages of competition mandated by the antitrust laws is that it rewards the most efficient producer and thus ensures the optimum use of our economic resources. This result, as Congress [has] recognized, is not achieved by creating a situation in which manufacturers compete on the basis of who pays the lowest wages.” United Mine Workers v. Pennington, 381 U.S. 676, 725, 85 S.Ct. 1607, 14 L.Ed.2d 626 (1965) (Goldberg, J., dissenting and concurring); see also 15 U.S.C. § 17 (“The labor of a human being is not a commodity or an article of commerce”). Depressing wages is not of societal benefit; it simply harms working people and their families, a significant part of the group that has come to be known as “the middle class.” In any event, the defendants’ argument is wholly unpersuasive in light of our nation’s labor laws and policies. It is a primary objective of our nation’s laws to protect the rights and interests of working persons, and to enable them to obtain a fair and decent wage through collective action. Reducing workers’ wages and benefits is hardly an objective that would justify a violation of our antitrust laws or a benefit so substantial to the public as to overcome the deleterious consequences of anticompetitive conduct. We see no reason, even if we had the authority to do so, to set aside the ordinary principles governing antitrust law in order to unbalance the carefully developed legal structures relating to our laws governing collective bargaining; nor do we see any reason or justification for assuming the function of increasing the economic power of employers to the disadvantage of their employees. To the extent that anticompetitive conduct is exempted from the application of our antitrust laws in order to facilitate the operation of labor/management processes, that is reflected in the implied labor exemption that we discuss in Section III infra. Accordingly, we conclude that defendants have not offered, much less demonstrated, any way in which their agreement generated procompetitive effects. 3. Defendants have put forward no plausible procompetitive effects to overcome or neutralize the great likelihood of anticompetitive effects that would result from the implementation of their profit sharing agreement. That likelihood is evident from a plain reading of the agreement’s terms, an examination of the ample case law regarding profit sharing agreements, a rudimentary knowledge of economics, and our analysis of the “circumstances, details, and logic” of the agreement. In the absence of a procompetitive justification that outweighs the likelihood of substantial anticompetitive effects, we conclude with confidence and certainty that the profit sharing agreement violates § 1 of the Sherman Act, and that requiring California to engage in a full rule of reason review would be contrary to the fundamental policies underlying our antitrust laws. III. Having determined that defendants’ agreement violates section 1 of the Sherman Act because of the great likelihood that its implementation would result in anticompetitive effects, we must next consider defendants’ principal contention— that because their agreement was entered into in anticipation of a labor dispute, and constitutes part of their method of dealing with such a dispute, it is excused from the application of the antitrust laws by virtue of the nonstatutory labor exemption. As we have previously noted, this contention lies at the heart of defen