Natural Foods Merchandiser

Whole Foods antitrust hearings canceled, adjudication postponed

In the seemingly endless saga between Whole Foods and the Federal Trade Commission, the FTC today issued an order extending the period that the Whole Foods matter is withdrawn from adjudication for an additional 30 days, until March 6.

On Tuesday U.S. District Court judge Judge Paul L. Friedman granted a joint motion filed by both Whole Foods and the FTC to vacate the antitrust hearings scheduled for Feb. 17 and 18, and previously, on Jan. 28, the FTC postponed the case until Feb. 5 pending a possible consent agreement.

"We look forward to continuing our discussions with Whole Foods to determine whether we can reach a mutually agreeable settlement that would be in the best interest of consumers," David P. Wales, acting director of the FTC's Bureau of Competition said in a statement today.

The news implies that some kind of settlement may be approaching in the now 18-month-long legal battle between the natural retailer and the government.

"Between what happened last week and this, it sounds like the parties are in negotiation," said Los Angeles-based antitrust lawyer Heather Cooper of Sheppard, Mullin, Richter & Hampton, LLC. "We might see a consent decree that would be filed in District Court."

A consent decree would include no trial and, typically, no admission of a violation of law, but there would be a statement governing the conduct of Whole Foods and legal obligations on Whole Foods' part for a defined period of time, Cooper explained. Whole Foods may have to refrain from certain conduct or take affirmative steps, both of which would be designed to alleviate competition concerns.

In June 2007, the FTC requested a temporary injunction on Whole Foods' acquisition of Wild Oats, saying the merger would prevent or limit competition in the relevant market. Whole Foods argued that they are not solely in competition with natural retailers, but also with supermarkets and grocery stores. The injunction request was denied.

"The injunction would have stopped the merger from happening so that the FTC could review it more carefully," said Cooper. "And when the FTC didn't get the injunction, they appealed and the Court of Appeals decided that the District Court should have granted the injunction because it hadn't considered all of the FTC's evidence."

At this point, a settlement in the form of consent decree or otherwise would have to be accepted by the FTC and then filed and accepted by the District Court for the merger to stand under settlement conditions. Reversing the merger could be very costly for Whole Foods.

"Between the District Court's and the Appellate Court's decision, Whole Foods completed the merger and now the District Court will have to look at how difficult it would be to unscramble the eggs," Cooper said. "Obviously Whole Foods doesn't want the District Court to find that they can dismantle the merger, so it looks like they have made some sort of proposal to settle the administrative case [with the FTC] and get rid of the District Court case."

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