Antitrust Lawyer Blog Commentary on Current Developments

FTC Seeks to Block Whole Foods Market’s Acquisition of Wild Oats Markets

On June 5, the FTC authorized the staff to seek a temporary restraining order and preliminary injunction in federal district court to halt Whole Foods Market, Inc.’s approximately $670 million acquisition of its chief rival, Wild Oats Markets, Inc., pending an administrative trial on the merits. According to the complaint, the transaction would violate federal antitrust laws by eliminating the substantial competition between these two uniquely close competitors in numerous markets nationwide in the operation of premium natural and organic supermarkets. If the transaction continues unopposed, the FTC contends that Whole Foods is likely to raise prices and reduce quality and services unilaterally.

Whole Foods and Wild Oats are allegedly each other’s closest competitors in premium natural and organic supermarkets, and are engaged in intense head-to-head competition in markets across the country.

Through the transaction, Whole Foods, the largest premium natural and organic supermarket chain in the United States, would acquire its closest competitor and longtime rival, Wild Oats. In each of the markets in which they overlap, Whole Foods and Wild Oats are each other’s closest substitute and compete in quality and prices, according to the FTC. After the merger, Whole Foods likely would be able to raise prices unilaterally, to the detriment of customers of premium natural and organic supermarkets.

In defining the relevant markets, the FTC found that premium natural and organic supermarkets, such as Whole Foods and Wild Oats, are differentiated from conventional retail supermarkets in several critical respects. These include the breadth and quality of their perishables – produce, meats, fish, bakery items, and prepared foods – and the wide array of natural and organic products and services and amenities they offer. In addition, premium natural and organic supermarkets seek a different customer than do traditional grocery stores. Whole Foods’ and Wild Oats’ customers are buying something more than just the food product – they are seeking a shopping “experience,” where environment can matter as much as price.

The complaint alleges that through the transaction, Whole Foods would acquire its closest rival, reducing direct competition and leading to the exercise of unilateral market power, resulting in higher prices and reduced quality, service and choice for consumers. The Commission voted 5-0 to authorize the staff to seek a temporary restraining order and preliminary injunction blocking the transaction pending an administrative trial.

The preliminary injunction hearing is scheduled to start on July 31 and to be completed on August 1.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com