Estimation, Loss Valuation Providers Abandon Merger After FTC Wins Preliminary Injunction

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

CCC Information Services Inc. and Mitchell International, Inc. have abandoned their plans to merge and become “the leading provider of information, work-flow management systems, and integrated software to insurance companies and collision repair facilities.”

The companies announced the joint decision on March 11, just two days after the federal district court in Washington, D.C. granted the Federal Trade Commission’s request for a preliminary injunction blocking the merger.

“In light of the court's decision, we have jointly decided to terminate the merger,” stated Githesh Ramamurthy, Chairman and CEO of CCC. “A year ago when we announced the transaction, our stated objective was to deliver greater innovation to our customers and partners. This theme has remained a constant and will continue to be at the forefront of our efforts.”

FTC Challenge

The FTC had sought temporary injunctive relief pending the outcome of administrative litigation challenging the merger, valued at $1.4 billion. The agency challenged the transaction on the ground that it would hinder competition in the two relevant markets: (1) electronic systems used to estimate the cost of collision repairs, known as "estimatics," and (2) software systems used to value passenger vehicles that have been totaled, known as total loss valuation (TLV) systems.

According to the FTC’s administrative complaint, dated November 25, 2008, the merger-to-duopoly would have harmed insurance companies, repair shops, and ultimately U.S. automobile owners.

Preliminary Injunction

On March 9, the federal district court in Washington, D.C. found that the FTC raised questions necessitating investigation through an adjudicatory hearing at the Commission and made a proper showing that issuance of a preliminary injunction was in the public interest. The court ordered the companies to refrain from taking any steps toward combining, pending outcome of the administrative proceeding.

The order was released on March 9; however, the underlying opinion remained under seal. The court has instructed the parties to identify any facts that should be redacted as sensitive business information no later than March 13.

The text of the FTC complaint appears at CCH Trade Regulation Reporter ¶16,221.

Whole Foods Market Agrees to Divestitures to Settle FTC Suit

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

The FTC announced on March 6 that it has reached an agreement with Whole Foods Market, Inc., the largest premium natural and organic supermarket chain in the United States, to resolve the agency's charges that Whole Foods' acquisition of its closest rival, Wild Oats Markets, Inc., in 2007 violated federal antitrust laws.

Under a proposed consent order, Whole Foods would sell 32 premium natural and organic supermarkets and related assets in 17 geographic markets.

As a result of this settlement, American consumers will see more choices and lower prices for organic foods, said FTC Chairman Jon Leibowitz. Leibowitz further remarked that the settlement “allows the FTC to shift resources to other important matters and Whole Foods to move on with its business.”

Case History

After Whole Foods and Wild Oats announced in February 2007 their intention to merge, the FTC in June filed a federal court complaint seeking a temporary restraining order (TRO) and preliminary injunction, as well as an administrative complaint for permanent relief, claiming that the acquisition would be unlawfully anticompetitive. In each of the markets in which Whole Foods and Wild Oats overlapped, the agency claimed, they were each other’s closest competitor and competed directly on quality, service, and price.

Although the federal district court initially granted the TRO, in August 2007 it denied the FTC's motion for a permanent injunction pending an administrative proceeding (2007-2 Trade Cases ¶75,831), enabling the supermarket chains to consummate the transaction.

Administrative proceedings resumed after the U.S. Court of Appeals in Washington, D.C. reversed the district court’s denial of injunctive relief (2008-2 Trade Cases ¶76,233) in July 2008, finding that the FTC had demonstrated the requisite likelihood of success on the merits. The matter was scheduled to go to administrative trial this April.

Proposed Settlement

The 32 former Wild Oats stores that Whole Foods would have to divest under the proposed consent order comprise 13 currently-operating and 19 formerly-operating stores. These stores represent a significant portion of the Wild Oats stores that Whole Foods acquired and is currently operating, as well as all of the formerly operating Wild Oats stores for which leases still exist, within the alleged geographic markets.

The divestitures would provide competitive relief in the majority of geographic markets defined in the Commission’s administrative complaint and would allow consumers in these markets to once again enjoy competition among premium organic markets, the Commission noted. The agency added that newly divested stores also could provide a “springboard” from which an acquirer might expand into other geographic markets.

In addition to requiring the transfer or divestiture of all rights to 32 stores, the settlement also would require Whole Foods to divest related Wild Oats intellectual property, including unrestricted rights to the “Wild Oats” brand, which retains significant name recognition and loyalty among consumers, the FTC said. These assets will allow one or more Commission-approved buyers to re-establish competition with Whole Foods in the majority of the markets in which the agency alleged the acquisition would reduce competition and harm consumers through higher prices and reduced quality and services.

The proposed order would immediately place the responsibility for marketing and selling the stores with a divestiture trustee, who would have six months to sell the Wild Oats stores and related assets to one or more FTC-approved buyers. If the trustee were unable to sell the assets within six months, the Commission could extend the time provided to do so for an additional six months. The order also would require Whole Foods to maintain the viability and competitiveness of the stores until the divestiture is complete.

Opportunity for Public Comment

The proposed agreement will be subject to public comment through April 6, 2009, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, Room H-135, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

The administrative action is In the Matter of Whole Foods Market, Inc. and Wild Oats Markets, Inc., Docket No. 9324. A news release on the proposed settlement appears here on the FTC website. An agreement containing consent orders and a decision and order—as well as other relevant documents—appear here.