A bit more on the court proceedings from the Austin paper:
Mackey has his say in videotaped testimony
Whole Foods CEO doesn't pull punches in court battle with FTC
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By Lilly Rockwell
AMERICAN-STATESMAN STAFF
Thursday, August 02, 2007
WASHINGTON — Whole Foods Market Inc. chief executive John Mackey had his say in court Wednesday, even though he wasn't there.
In videotaped testimony, the central figure in a court battle with the Federal Trade Commission bluntly explained why his company wants to buy rival organic grocery chain Wild Oats Markets Inc.: to stop a competitor.
Competitors are "bad for Whole Foods," Mackey said, and he considers companies such as Trader Joe's and Wal-Mart strong competitors, too.
Whole Foods chose to show the video during its closing arguments in a lawsuit filed by the FTC in June to stop the purchase of Wild Oats for $565 million, the biggest acquisition ever for the Austin-based grocer.
"John Mackey is a very competitive guy," said Paul Denis, a lawyer for Whole Foods. "And he is a very provocative guy. And he is a very outspoken guy."
He went on to say that Mackey says things very "literally," and his comments on competition should not be taken to mean that he wants to charge higher prices.
The showdown between Whole Foods and the FTC in U.S. District Court in Washington brought out dozens of spectators Tuesday and Wednesday, from financial analysts to lawyers representing other grocery chains or investors. Some spectators wanted a seat so badly they hired professional line-holders to arrive as early as 3:30 a.m.
The FTC, which also made its closing arguments Wednesday, once again brought up Mackey's internal e-mails that urged his board of directors to buy Wild Oats to "avoid nasty price wars" and "eliminate a competitor." The e-mails were among thousands of documents gathered in the government's investigation of the proposed acquisition.
"Nasty price wars are nasty to Mr. Mackey and nasty to Whole Foods shareholders, but they are not nasty to consumers," said Michael Bloom, an FTC lawyer.
Bloom said Mackey was candid about his desire to close some of the Wild Oats locations, citing an internal document.
Judge Paul L. Friedman interjected with a joke: "He's candid regardless of which name he uses," referring to Mackey's postings on Internet message boards under a pseudonym.
But Whole Foods lawyer Denis said the hubbub over Mackey's messages distracted from the legal issue at hand: Will this merger result in higher prices?
Bloom said the purchase would affect up to 25 markets, 18 where the companies overlap and seven where Wild Oats might enter if it wasn't bought by Whole Foods.
The cities of Boulder, Colo., and West Hartford, Conn., were cited as areas that would have fewer natural and organic store options if the merger is approved.
Whole Foods argues that it competes against a wide variety of grocers, from specialty stores such as Trader Joe's down to local chains such as H.E. Butt Grocery Co., which operates Central Market.
Bloom, the FTC lawyer, said he agrees that Whole Foods also competes with traditional grocers, but he said there is a group of core customers who don't see such stores as alternatives.
Whole Foods could raise prices, particularly in areas such as seafood, meat and produce, and these core customers wouldn't have an alternative, Bloom said.
The last time the FTC won a case against a retail store chain was in 1996, when it stopped the merger of Office Depot and Staples.
Antitrust experts said this case rests on the strength of expert witness testimony, which was given Tuesday. The FTC needs to prove Whole Foods' and Wild Oats' prices are substantially lower in cities where they compete than in cities where they don't.
Friedman is expected to rule on the case within two weeks. Both sides are expected to appeal the decision, he said.
But Denis said the preliminary injunction hearing is extremely important to Whole Foods, which may be forced to walk away from the deal if it can't meet the Aug. 31 deadline to complete the merger without financial penalties.
lrockwell@statesman.com; 445-3819
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