Natural Foods Merchandiser

Whole Foods lashes out at proposed FTC antitrust rules

In the latest round of sparring between Whole Foods and the Federal Trade Commission, Whole Foods on Monday called the FTC's newly proposed rules "egregious government regulation" that are "unnecessary, ill-advised, and unfair" and asserted that the new regulations strip power away from administrative law judges and consolidate it within the FTC.

"If a company happens to be under FTC jurisdiction, it will face a rushed administrative hearing, without a truly independent [administrative law judge], that carries serious risks of due process violations," wrote Paul T. Denis of Dechert LLP, who submitted the comment to the FTC on behalf of Whole Foods.

Antitrust expert and former FTC Bureau Director of Consumer Protection William MacLeod said the proposed rules are a cause for concern for companies who might face antitrust action.

"I think that the proposals the commission put forth raised serious concerns about the ability of respondents to adequately defend themselves in administrative proceedings," said MacLead, now head of the antitrust practice at Washington, D.C. law firm Kelley Drye & Warren.

"I think there will be a great deal of interest and a good deal of critical comments on this rule proposal," MacLeod said.

The FTC laid out a group of new regulations on Oct. 7 and gave the public a 30-day period to comment, which will end Nov. 6. Whole Foods said a 90-day comment period was more appropriate, calling the shorter time frame "wholly inadequate to deal with changes in the number and of the magnitude proposed."

One regulation, 3.22, would give the Commission the authority to rule on "dispositive prehearing motions" that administrative judges now preside over. This would violate the company's right to due process, Whole Foods said, noting that the regulation would allow the same commissioners who voted to charge a company with violating the law to decide whether to dismiss those charges before trial.

"Here, the commission is suggesting that it won't go to the judge right away but it will effectively handle the issue themselves. That raises some serious concerns as to whether the party is getting an impartial third party independent view of the dispute that the party now faces of the discovery dispute or the dispositive motion," MacLeod said.

Proposed Regulation 3.42 would give commissioners the option to preside over discovery and prehearing proceedings before sending the matter before an administrative law judge, a move Whole Foods said would "curtail" judicial independence and make any appearance of judicial independence "illusory."

Proposed Regulation 3.26 would allow the FTC to proceed with an antitrust case even after a federal court rules against the commission, such as the FTC did when it went after the Whole Foods/Wild Oats merger in 2008. The new rule would make such action "the norm."

MacLeod said the agency already had the ability to do so.

"The rules already provide that, so it's not as much changing a rule as announcing a policy," MacLeod said.

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