Published on: December 9, 2008Whole Foods has announced that its CEO, John Mackey, will be in Washington, DC, today to announce the filing of a lawsuit against the Federal Trade Commission (FTC) that will attempt to stop the agency’s ongoing attempts to derail the company’s $565 million acquisition of Wild Oats – a deal that was concluded a year ago, and that has resulted in virtually every Wild Oats store being converted to the Whole Foods banner.
The FTC has continued to fight the deal, despite court rulings that it did not violate antitrust law, on the premise that it would reduce competition in the natural/organic segment and result in higher prices for consumers. Whole Foods maintains that there are no competitive issues because so many retailers now sell natural and organic foods, and notes that as the economy has spiraled down, prices have dropped in many categories.
The new Whole Foods lawsuit, according to this morning’s Wall Street Journal, “alleges prejudice and due-process violations against Whole Foods by the FTC … The import of Whole Foods' lawsuit reaches beyond the deal because it spotlights divergent standards that companies sometimes face at the FTC and the Justice Department, which share jurisdiction for merger reviews. The Justice Department must quickly make its case in federal court, and it usually walks away from a case when it loses. The FTC has an added administrative process that the agency can use even if it loses its initial court case.
“The lawsuit and lobbying effort on Capitol Hill is the latest twist in the battle between the FTC and Whole Foods, which says it has already spent more than $12 million on legal fees and millions more upgrading and rebranding dozens of Wild Oats stores. The FTC won the latest round in November when the court of appeals in Washington denied a request by Whole Foods for a rehearing in federal court, not a trial before the FTC .”
“The violations of Whole Foods Market’s due process rights here are stark and, therefore, hurt the FTC's credibility,” said Lanny J. Davis, the attorney for Whole Foods Market. “Even more so does the FTC's insistence on hearing this case rather than allowing an objective federal court to hear it.”
- KC's View:
- The irony is that Mackey now says that if he could get a do-over, he wouldn’t do the Wild Oats deal because in retrospect it didn’t make sense to take on so much debt right before an economic decline. But the FTC isn’t exactly offering a do-over, and even if it were to win it is unlikely that Mackey would get his $565 million back.
The other irony is that beyond the statement, “the merger is unlawful and should be undone,” nobody seems to know why the Ahabs at the FTC have turned the Whole Foods-Wild Oats deal into their own great white whale, while ignoring other deals, like Rupert Murdoch’s acquisition of the Wall Street Journal.
Actually, I think that the FTC continues to fight this deal because some lawyer or regulator there has a bug up his…well, you know.
But that’s hardly a defensible position.