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Shrewd Operator
by Ron Davis

Was the sale of property by a California retailer simply a disguised and unlawful attempt to stifle competition from a nearby shopping center development?

California’s courts have ruled that, no, the retailer’s actions did not violate any state or federal law. Instead, the retailer simply employed shrewd business practices.

The retailer in question operates a grocery store and gasoline station in a suburban Sacramento shopping center that the retailer developed more than a decade ago. Across the street from the shopping center, however, was where a group of developers decided to put together property that would be suitable for Safeway, Inc., to locate a supermarket and gasoline station. After negotiations with Safeway, all the developers needed to close a deal with the supermarket giant was the purchase of an additional adjacent one-acre tract.

But before the developers could act, the neighboring retailer purchased the one-acre tract, and then sold it to a third party—though with a concession. That concession was that the third party could not resell the acre if its use was for a gasoline station. The third party agreed because another property that he wanted to buy from the retailer was thrown in as part of the deal.

Even though they knew of that obstacle to their plans, the developers bought the acre. Then they asked the courts to remove the restriction on grounds that it was an unfair and illegal business practice. Specifically, they accused the neighboring retailer of committing an improper “tie-in agreement,” where one sale is conditioned to another sale.

California’s courts disagreed with that argument and ruled in favor of the neighboring retailer. Explained the judges, “The property buyers purchased the acre of property with full knowledge of the recorded restriction and they were free to negotiate the price of the property as restricted. Nor did the restriction threaten to create a monopoly. Restrictions that merely limit the buyer’s right to purchase a small or limited part of a business are lawful.

“In sum” the judges added, “a restriction that merely restricts the sale of gasoline on one corner of an intersection in a county the size of Sacramento does not threaten to give the seller in this case a monopoly in the combined grocery and gasoline business where as here the restriction does not restrict the buyers from building and operating a gas station on the other acres of their property at that same intersection.” (Petrovich v. Raley’s, 2008 WL 2861685 [Cal. App. 3 Dist.])

Decision: August 2008
Published: September 2008



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