Tuesday, August 12, 2008

FTC Lifts Stay in Administrative Challenge to Whole Foods/Wild Oats Merger

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The Federal Trade Commission has lifted a stay of the administrative challenge to the combination of Whole Foods Market, Inc. and Wild Oats Markets, Inc. The agency also ordered the parties to appear at an August 18 scheduling conference to be presided over by Commissioner J. Thomas Rosch.

Approximately six weeks after the FTC issued a complaint in the matter on June 28, 2007, the agency imposed the stay on the administrative proceedings due to the “pendency of the federal court proceedings and as a matter of discretion.”

Denial of Preliminary Injunction

On August 16, 2007, the federal district court in Washington, D.C. denied the Commission’s request for a preliminary injunction blocking the combination of the companies alleged to be the largest operators of premium, natural, and organic supermarkets (2007-2 Trade Cases ¶75,831).

The agency claimed that the merger would create monopolies in 18 markets where Whole Foods and While Oats were the only premium, natural, and organic supermarkets (“PNOS”). The district court, however, rejected the PNOS market as the relevant product market, suggesting that the two companies competed within the much broader market of all grocery stores and supermarkets.

Reversal, Remand

On July 29, 2008, the U.S. Court of Appeals in Washington, D.C. reversed the district court’s decision, concluding that the lower court “underestimated the FTC’s likelihood of success on the merits” (2008-2 Trade Cases ¶76,233). It remanded the matter, instructing the district court to balance the public and private equities to determine whether enjoining the merger would be in the public interest.

Following the appellate court decision, the Commission decided to lift the stay and restart proceedings based on its policy of conducting administrative proceedings as expeditiously as possible.

The August 8 order rescinding the stay will appear in the CCH Trade Regulation Reporter. It appears here on the FTC website.

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