Mamdani Grocery Antitrust Suit Tests Supreme Court Rule on Predatory Pricing

A federal antitrust lawsuit seeking to stop New York City Mayor Zohran Mamdani’s municipal grocery plan is testing whether a Supreme Court rule built around private-sector price wars can reach a taxpayer-backed program promising 30% discounts on staple foods.

The National Supermarket Association and two independent grocers sued New York City and the New York City Economic Development Corporation on September 9, accusing the city of attempted monopolization and predatory pricing. They are also seeking a preliminary injunctionpreliminary injunctionA preliminary injunction is a temporary court order issued before a case is finally decided that requires a party to take or stop an action while the litigation continues. Federal courts generally consider the likelihood of success, irreparable harm, the balance of equities, and the public interest before granting one.Read more → that would halt the city’s operator selection process while the case moves forward.

Their theory centers on the financial structure of N.Y.C. Groceries, Mamdani’s plan for five municipal supermarkets, one in each borough. Private companies would operate the stores under city requirements, while public funding would help support the program and keep designated foods below prevailing retail prices.

The association argues that the arrangement gives the municipal stores an advantage private grocers cannot match. Existing supermarkets must cover their operating costs through sales, while the city can use public money to sustain lower prices, according to the lawsuit.

Federal antitrust law, however, sets a demanding test for turning low prices into an unlawful pricing scheme.

In its 1993 decision in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., the Supreme Court held that a predatory pricing claim requires proof that prices fall below an appropriate measure of the seller’s costs and that the seller has a dangerous probability of recovering those losses later.

That second requirement is known as recoupment. A traditional predatory pricing scheme works by accepting losses while prices remain artificially low, weakening or eliminating competitors, then using the resulting market power to raise prices enough to recover the earlier losses.

The rule reflects a central concern in antitrust law. Aggressive price competition usually benefits consumers, so courts require evidence that the low prices are part of a strategy capable of producing greater harm once competition has been reduced.

Mamdani’s program presents a different model. Rather than alleging that the city plans to raise grocery prices after driving competitors from the market, the grocers argue that taxpayer support could allow municipal stores to continue absorbing losses without relying on higher prices later.

Their court papers contend that the Supreme Court’s recoupment rule developed around private businesses that eventually need to recover the money spent on below-cost pricing. A government-backed competitor, they argue, can draw on public funds instead.

The grocers argue that the recoupment requirement should apply differently when public funding allows a competitor to sustain losses.

The taxpayer funding cited by the grocers could also complicate their effort to satisfy the recoupment requirement. If municipal stores can maintain discounted prices with public money, the alleged conduct differs from the traditional model in which a company later raises prices to recover its earlier losses.

The plaintiffs also must establish below-cost pricing. Mamdani’s promise to sell selected groceries 30% below typical retail prices establishes a discount from what other stores charge, while the Supreme Court standard looks at whether the challenged price falls below an appropriate measure of the seller’s own costs.

The lawsuit argues that city subsidies make the discount possible and could allow the stores to operate at price levels private grocers cannot sustain. The plaintiffs say the combination of discounted food, publicly supported locations and other city assistance threatens independent supermarkets already operating on thin margins.

New York City has presented N.Y.C. Groceries as an affordability initiative aimed at cutting household food costs. The administration announced in July that all fresh produce, meat and seafood would receive the 30% discount, along with roughly 20 categories of pantry staples, dairy and refrigerated goods.

Prices on the core basket would be set monthly rather than fluctuating week to week. City officials estimate the program could save participating households about $90 a month.

Mamdani has committed $70 million in capital funding to the initiative. The city will set the program’s pricing and operating requirements, while selected private companies handle staffing, sourcing, merchandising and other day-to-day functions.

Two businesses involved in the federal case operate near locations already announced by the city. R&E Corporation runs a supermarket near the planned Hunts Point store in the Bronx, while The Real Chance Inc., which operates City Fresh Market, does business near the proposed La Marqueta location in East Harlem.

The first municipal store is expected to open in Hunts Point by the end of 2027, with additional locations planned across the five boroughs by 2029. Proposals from potential operators are due October 16.

The plaintiffs are asking U.S. District Judge Jennifer L. Rochon to halt the operator selection process while the case proceeds. Their request puts the city’s funding structure, and whether it can satisfy the Supreme Court’s rules on below-cost pricing and recoupment, before the court months before the first store is scheduled to open.