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Safeway Settles Boycott Case, Will Pay Million-dollar Fine

March 18, 1988
See Original Daily Bulletin From This Date

Safeway Stores Inc. is claiming a victory in agreeing Tuesday to pay $995,000 to the U.S. Commerce Department to settle charges that the supermarket chain cooperated with the Arab boycott against Israel.

But an American Jewish Congress boycott expert is calling the record settlement the actual victory as well as further proof that the government’s Office of Anti-Boycott Compliance is doing its job.

Peter Magowan, board chairman and chief executive officer of Safeway, based in Oakland, Calif., said the cash settlement, a fraction of the one originally levied, “is a victory for us and in no way constitutes an admission by the company that we violated the law.”

Moreover, he said, Safeway’s conduct has been vindicated by the fact “that its practices did not merit the harsh penalties the government previously sought.”

Last August the Commerce Department charged Safeway with 449 violations of the Export Administration Act of 1977, imposed a $4.5 million fine on the supermarket chain and sought a two-year suspension of the company’s export privileges.

Besides reducing the fine in Tuesday’s settlement, the government dropped its demand to keep Safeway from doing business overseas.

Nevertheless, the penalty is the largest of its kind. Will Maslow, AJCongress legal counsel and author of its monthly Boycott Report, called the agreement “a victory for the OAC (Office of Anti-boycott Compliance) and shows how strong its case was from the very beginning.”

The Commerce Department originally charged Safeway with supplying approximately 10 stores in Kuwait and Saudi Arabia between 1981 and 1986 with a list of the company’s suppliers, some of whom were Israeli. According to the OAC, that list subsequently enabled the Arab-run grocery stores to boycott certain Israeli-manufactured products.

The Arab stores were licensed to operate under the Safeway name, but were not owned by the company. Safeway claims it no longer sells products to the Arab stores.

Safeway also was accused of requiring one of its wholesalers to submit the names of its manufacturers to an office in Kuwait for boycott clearance and of answering a Kuwaiti government questionnaire regarding its relationship with Israel and Israeli companies.


At the time, Safeway vigorously denied any wrongdoing and charged the government with over-zealous application of technicalities within the boycott law.

Bernat Rosner, Safeway’s chief legal counsel, said this week that Safeway was “so confident of our case, that had we chosen to pursue it to the finish, not only would we have won, it would have forced a re-evaluation of the way in which the anti-boycott law is administered.”

Maslow disagreed. “The fact that Safeway denies it’s guilty is meaningless, because no company is required to do so,” he said, calling the company’s response the equivalent of a no-contest plea.

Moreover, Maslow contended that the settlement “is yet another indication of how well-prepared the OAC cases are, that they can prove them to the hilt, and that companies, when faced with the evidence, are always willing to settle.”

Safeway’s own decision to settle may have been based in part on the number of Jewish shoppers that patronize the store. The company is one of the largest grocery store chains in the United States and the firm has corporate and personal ties to Israel and the Jewish community here.

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