Wednesday, August 15, 2007

Whole Foods to Investigate Release of Information in FTC Court Filings

While awaiting a ruling in the Federal Trade Commission’s action to block its acquisition of Wild Oats Market, Whole Foods Market, Inc. has announced that it is investigating the FTC’s “apparent improper release” of confidential and proprietary information belonging to itself, Wild Oats and third parties.

According to a statement issued by Whole Foods on August 14, the release of information violated a confidentiality order and two further orders to keep the information under seal.

“All information shared with the FTC was done so with the reasonable understanding that it would be handled appropriately,” the natural and organic supermarket chain said.

The allegedly improper release of information occurred when the FTC filed electronic documents containing information about the chain’s competitive strategies, it was reported yesterday. These electronic documents had portions shaded out, rather than blackened out. The shaded words could become legible when they were copied and pasted on other documents.

When court officials discovered this situation, they created a new version of the documents that had relevant potions blackened out and substituted the new version for the original one.

In the meantime, media outlets were able to view the unabridged documents and publish stories on the information.

Based on a reading of the documents, the Associated Press reported that:

 After a successful acquisition, Whole Foods planned to close 30 or more Wild Oats stores, which was expected to result in nearly doubling the revenue for some Whole Foods stores.

 The chain figured that a successful merger would send as many as 80 to 90 percent of Wild Oats shoppers to Whole Foods stores, which the FTC maintained would result in higher prices.

 Whole Foods prohibited its suppliers from selling directly to Wal-Mart.

 The chain looks to the density of college graduates in locating new Whole Foods stores.

A spokesperson for Whole Foods said that the company had no idea how many stores would close if the merger went through.

The litigation started on June 6, when the FTC filed a complaint in the federal district court in Washington, D.C. challenging Whole Foods Market Inc.’s approximately $670 million acquisition of Wild Oats Markets Inc.

The court issued a temporary restraining order on June 7, prohibiting the parties from consummating the deal until after a preliminary injunction hearing. That hearing was conducted July 31 through August 1, 2007

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