No Rehearing of Appellate Decision in Whole Foods Merger Case

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Whole Foods Market, Inc. on November 21 was denied rehearing en banc of a federal appellate court’s decision that the FTC was improperly denied a preliminary injunction blocking the combination of Whole Foods and specialty grocer Wild Oats Markets Inc. That merger was consummated on August 28, 2007, after a federal district court’s denial of injunctive relief to the FTC.

The agency had claimed that the combination would create a monopoly in the market for premium, natural, and organic supermarkets in 18 different geographic areas. The appellate court refused to enjoin the deal pending appeal of that decision.

Product Market Analysis

The latest ruling of the U.S. Court of Appeals in Washington, D.C. amends and revises the court’s 2-1 decision of July 29. That decision held that the trial court analyzed the product market incorrectly when assessing the competitive impact of the transaction and therefore erred in concluding that the FTC was not likely to succeed on the merits of its claims (see Trade Regulation Talk, July 30, 2008).

In conjunction with the order, the court also reissued its July opinion, which it had amended to reflect that U.S. Circuit Judge David S. Tatel still concurred with Circuit Judge Janice R. Brown in her judgment to reverse the trial court’s ruling, but no longer concurred in her opinion in support of that judgment.

The November 21 amended opinion in FTC v. Whole Foods Market, Inc. will appear in CCH Trade Regulation Reports. The vacated August 2007 decision of the federal district court in the District of Columbia appears at 2007-2 CCH Trade Cases ¶75,831.

FTC Reaction

“We are quite pleased with the ruling on Friday by the appeals court reaffirming its decision to vacate the district court’s denial of the Commission’s application for an injunction against the acquisition of Wild Oats by Whole Foods,” said David Wales, acting Director of the FTC’s Bureau of Competition, in a November 24 announcement.

“Importantly, the decision rendered by the majority of the appellate panel reaffirms that the proper role of the district court in considering whether to grant the Commission’s request for a preliminary injunction is limited to whether the case raises sufficiently serious and substantial issues so as to make them fair ground for litigation during the full trial on the merits in the administrative proceeding,” he observed.

The Commission looks forward to showing why the merger is unlawful and “should be undone at the plenary trial in a few months,” according to Wales.