The antitrust division of the Justice Department is investigating possibly illegal efforts to limit competition in the wholesale grocery business in the Washington-Baltimore area.
Target of the investigation is an informal committee formed earlier this year by representatives of several local grocery industry organizations to deal with what one industry official called "market circumstances and market stability."
Antitrust investigators are trying to determine whether the group's activities may have violated the Sherman Antitrust Act, which prohibits businesses from working in collusion to restrict competition.
Justice Department officials yesterday confirmed that an investigation is under way but refused to disclose details of the probe, which they said involves only the Washington-Baltimore area.
Federal investigators have asked for and obtained information about the organization and activities of a food industry committee formed earlier this year, said Albert H. Evans, president of the Mid-Atlantic Food Dealers Association, a Baltimore trade association, and one of the founders of the committee.
Belittling the Justice Department inquiry, Evans said he had cooperated fully with the investigators: "We had one file with one memo, which we gave them.
"We think those fellows are on a fishing expedition and there just aren't any fish."
Rather than seeking to stifle competition, Evans added, several local food industry associations joined in an informal group "to maintain competition" in the Baltimore and Washington market.
Federal investigators, however, are said to be concerned that the committee may serve to protect wholesale food sales representatives in the Baltimore-Washington area from competitors outside the territory.
The Justice Department investigation does not involve the big supermarket chains, but rather a little-known group of middlemen who serve as the link between food manufacturers and retailers.
Although some food companies have their own sales staffs to call on stores, many handle sales through independent companies known as manufacturers' representatives and food brokers.
The local sales agents earn a tiny commission on each case of merchandise sold in their territory by the manufacturers they represent. In recent years, the local brokers have lost millions of dollars of business to out-of-town distributors, who for various reasons are sometimes able to offer stores lower prices.
Grocery manufacturers frequently offer special discounts or "deals" to stores to increase sales. Some deals are not made nationwide, but are offered only in areas where the manufacturer is concentrating sales efforts.
Some grocery wholesalers--known in the trade as diverters--specialize in buying goods at low prices in one part of the country and shipping the merchandise to areas where the manufacturer's discount was not originally available.
Food industry sources said the local sales agents formed their committee to deal with competition from the diverters. The goal of the group was to encourage manufacturers to make the same discounts available to everyone simultaneously, so the diverters could not offer lower prices.
Evans said the committee originally included representatives of the Baltimore-Washington Food Brokers Association, the Baltimore and Washington Grocery Manufacturer's Representatives and the Mid-Atlantic Food Dealers.
Restaurant food supply organizations later joined the group, Evans added, and the committee's activities were expanded to include fund raising for Johns Hopkins Hospital in Baltimore. "If you can make an antitrust investigation out of that, go ahead," he said.