1
Topco, which is referred to at times in this opinion as the 'association,' is actually composed of 23 chains of supermarket retailers and two retailer- owned cooperative wholesalers.
2
In addition to purchasing various items for its members, Topco performs other related functions: e.g., it insures that there is adequate quality control on the products that it purchases; it assists members in developing specifications on certain types of products (e.g., equipment and supplies); and it also aids the members in purchasing goods through other sources.
3
The founding members of Topco were having difficulty competing with larger chains. This difficulty was attributable in some degree to the fact that the larger chains were capable of developing their own private-label programs.
Private-label products differ from other brand-name products in that they are sold at a limited number of easily ascertainable stores. A&P, for example, was a pioneer in developing a series of products that were sold under an A&P label and that were only available in A&P stores. It is obvious that by using private-label products, a chain can achieve significant cost economies in purchasing, transportation, warehousing, promotion, and advertising. These economies may afford the chain opportunities for offering private-label products at lower prices than other band-name products. This, in turn, provides many advantages of which some of the more important are: a store can offer national-brand products at the same price as other stores, while simultaneously offering a desirable, lower priced alternative; or, if the profit margin is sufficiently high on private-brand goods, national-brand products may be sold at reduced price. Other advantages include: enabling a chain to bargain more favorably with national-brand manufacturers by creating a broader supply base of manufacturers, thereby decreasing dependence on a few, large national-brand manufacturers; enabling a chain to create a 'price-mix' whereby prices on special items can be lowered to attract customers while profits are maintained on other items; and creation of general goodwill by offering lower priced, higher quality goods.
4
The three largest chains are A&P, Safeway, and Kroger.