Judge Asks FTC to Detail Remedy in Whole Foods Merger
By Fawn Johnson
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--A federal judge on Monday directed the U.S. Federal Trade Commission to map out how Whole Foods Market Inc. (WFMI) could stop its integration with Wild Oats Markets Inc. since their 2007 merger while he determines whether the deal was anticompetitive.
U.S. District Judge Paul Friedman already has ruled in Whole Foods' favor regarding the merger, which allowed Whole Foods to buy Wild Oats in August 2007.
Almost a year after the sale, Friedman's decision was rejected by a three-judge appeals panel. The U.S. Court of Appeals for the District of Columbia Circuit in July sent the case back to Friedman's courtroom for a more thorough look at the merger's impact on the public.
At Monday's first status hearing since the appeals court's ruling, Friedman said he hoped that Whole Foods and the FTC could come to a "possible agreement to keep things frozen in place or semi-frozen in place while I tee up the remand proceeding."
Paul Denis, an attorney representing Whole Foods, said Whole Foods and Wild Oats stores already operate as one unit. "We have one human resources system...We have one purchasing system," he told Friedman. Denis is a partner with Dechert LLP.
FTC attorney Matthew Reilly said it would be difficult, but not impossible, for Whole Foods to stop the integration with Wild Oats that has been occurring for the past 16 months. Judge Friedman agreed, noting that a higher court wouldn't have sent the case back to his courtroom "if they thought nothing could be done."
Reilly said 19 Wild Oats stores have closed since the merger. Another 70 Wild Oats stores are in the process of "rebranding" to operate under the Whole Foods banner.
The FTC argues that the Whole Foods and Wild Oats deal has limited competition in an already-small sector. It says the combination of Whole Foods, of Austin, Texas, and Wild Oats, of Boulder, Colo., has caused lost jobs and raised prices for consumers.
Whole Foods argues that the merger has created substantial benefits for consumers. Denis told Friedman Monday that his review of the merger should take into account the evolution of the organic foods market in the year and a half since the deal was completed.
Meanwhile, the FTC is pressing ahead with its own parallel proceeding against Whole Foods. That complaint is scheduled to go to trial before an administrative law judge in April.
Earlier this month, Whole Foods filed its own lawsuit to stop the FTC's challenge. Whole Foods Chief Executive John Mackey said the FTC already has prejudged the case and can't possibly give Whole Foods a fair administrative trial.
The Whole Foods lawsuit against the FTC also is before Judge Friedman. The federal government has moved to dismiss that complaint.
Friedman said Monday that he would rule on the government's dismissal motion before tackling the far thornier question of whether Whole Foods' purchase of Wild Oats was anticompetitive, and if so, what remedies should be imposed to rectify the situation long after the transaction took place.
-By Fawn Johnson, Dow Jones Newswires; 202-862-9263; fawn.johnson@dowjones.com
online.wsj.com |
