A three-judge panel in Washington yesterday rejected the Federal Trade Commission's request for a delay of a lower-court judge's ruling in favor of the acquisition, which the commission opposed on antitrust grounds. The agency last week sought the delay pending the outcome of an appeal.
The appellate court ruled that, while the commission "has raised some questions about the district court's decision," it failed to make a strong case it could win on appeal. ("Court Clears Whole Foods Deal" by David Kesmodel, Wall Street Journal, p. A2)
The decision by Judge Paul L. Friedman that the FTC was seeking to overturn makes interesting reading. Although Judge Friedman did not adopt Whole Foods' arguments completely, he unequivocally rejected the FTC's case. The basis of that case was the claim that Whole Foods is a member of a market called "premium natural and organic supermarkets," which market includes only Whole Foods, Wild Oats, and two or three small regional chains. Because there are so few market players, argued the FTC, and because Whole Foods and Whole Oats are by far the largest of those players, it was extremely likely that Whole Foods' purchase of Wild Oats would give Whole Foods the ability to impose a "small but significant non-transitory increase in price," which, apparently, is one of the primary criteria by which the FTC is to judge the potential monopolistic implications of any proposed merger or acquisition. Whole Foods, and Judge Friedman, countered that "premium natural and organic supermarkets" market was a figment of the FTC's imagination, that in reality Whole Foods' most significant and dangerous competitors like Safeway and other mainline grocery store chains, which, in recent years, have been expanding their selection of Whole Foods-like items and altering their formats to be more like Whole Foods. To me, the most telling fact that was mentioned in the decision was that Whole Foods, which obsessively comparison shops all of its significant competitors, has not comparison shopped Wild Oats in years. Wild Oats is not significant competition to Whole Foods. Randall's and Kroger and Central Market are. If Wild Oats isn't even a viable competitor to Whole Foods, how can the combination of the two be monopolistic? I'm pleased to see that Judge Friedman and the Court of Appeals have agreed with me.