Whole Foods Market announced today it has filed an action in the D.C. U.S. District Court to bar the Federal Trade Commission (FTC) from conducting a trial that would violate the company's due process rights because the FTC has already publicly prejudged the case against Whole Foods Market and has refused to give the company enough time to prepare for trial. The company has scheduled a press conference tomorrow morning at 10 a.m. EST on Capitol Hill to explain the bases of the suit.
Citing the Queen of Hearts' famous pronouncement in "Alice in Wonderland," which exemplifies indifference to due process rights, Whole Foods Market's complaint filed today begins:
"Now for the evidence," said the King. "And then the sentence."
"No!" said the Queen. "First the sentence, and then the evidence."
The complaint continues: "The Defendant FTC has acted no less blatantly than the Queen of Hearts in violating both the Constitutional due process rights of Plaintiff Whole Foods Market, Inc."
"The violations of Whole Foods Market's due process rights here are stark and, therefore, hurt the FTC's credibility," said Lanny J. Davis, attorney for Whole Foods Market, who signed the complaint filed today. "Even more so does the FTC's insistence on hearing this case rather than allowing an objective federal court to hear it."
Also participating in the lawsuit as counsel is the firm of Constantine Cannon LLP. Stephen Cannon, chairman of the firm, and a former member of the Congressionally-mandated Antitrust Modernization Commission and former Antitrust Counsel to the U.S. Senate Judiciary Committee, said, "The actions of the FTC in this case demonstrate why separate FTC administrative trials in pre-merger cases should be abolished. The FTC should be required to rely on U.S. trial courts if it wishes to block a merger, as does the U.S. Department of Justice."
First Count: Prejudgment of the Case
The first count of the complaint quotes specific biased prejudgments of the FTC made publicly in legal findings in 2008, such as the FTC declaring categorically, without qualification, that the Whole Foods Market-Wild Oats Markets merger reduced competition and was anti-competitive. In 2009, the FTC will be asked to review the same evidence and make a decision.
"How can the same FTC sit as judge and jury sometime in the future of the very same case in which it has already declared that the Whole Foods-Wild Oats merger is illegal and its key expert testimony 'garbage'?" asked John Mackey, co-founder and CEO of Whole Foods Market. "The answer is - it shouldn't be allowed to. It has obviously already closed its mind. That's not our understanding of what due process and principles of fundamental fairness are all about."
Second Count: Prejudicial "Rush to Trial"
Davis said the complaint's second count shows another due process violation. "The FTC is forcing Whole Foods Market to go to trial in just five months and defend itself in 29 separate geographic jurisdictions in a merger that was not anti-competitive. That is unreasonable and impossible, and thus, a violation of Whole Foods' due process rights to a fair trial."
"The merger was completed over a year ago and we believe there is plenty of evidence that the consumer has already benefited - prices on many products are down, quality is up, overall competition from other supermarkets is up," said Mackey. "Why not let an objective federal judge decide this case over a reasonable period of time, rather than the FTC insisting on doing so itself, despite its prior public judgments and the appearance, if not the reality, that it is biased and has already made up its mind?"
Davis pointed out that the FTC "appears to be in such a rush to start its own trial that it isn't even willing to wait for District Court to address the 'equities' on remand, as the D.C. Circuit Court of Appeals mandated it to do. The Court may decide that such equities mean the merger should be left alone rather than trying to unravel it or force a sale, especially in the midst of an economic and credit crunch crisis."
Grassroots Fight for Fair Play for Whole Foods Market by FTC
Following the press conference tomorrow, regional and store managers from Whole Foods Market around the country will visit their Senators and House members and other key members of Congress to ask for "Fair Play for Whole Foods Market" from the FTC.
"We are not asking Congress to interfere with the merits of the litigation, but rather, simply to help change the venue from a biased one at the FTC to a U.S. federal judge, who has exhibited no previous categorical prejudgments of the facts and the law," said Walter Robb, co-president and chief operating officer for Whole Foods Market.
Robb also said many of the more than 50,000 Whole Foods team members in 37 states, as well as many customers, might also be contacting their Representatives and Senators, demanding that Whole Foods Market's case be heard by an objective federal judge, rather than a biased FTC.
FTC Allowed Merger to Proceed for One Year without Scheduling Trial
According to the complaint, four federal judges in 2007 (the D.C. District Court trial judge and a three-judge panel of the D.C. Court of Appeals) allowed the merger to proceed, and it closed on Aug. 31, 2007. The FTC voluntarily suspended plans for an internal administrative trial for more than a year, even though it had the right to begin one immediately.
It wasn't until the Whole Foods Market-Wild Oats Markets merger had been completed and the D.C. Court of Appeals had ordered the District Court to hold a hearing to consider the "equities" of stopping the merger instead of leaving it alone, that the FTC decided to schedule its internal administrative trial. It then gave Whole Foods Market less than five months to prepare for defense in 29 separate geographic areas. This means that Whole Foods Market must, in this short period of time, effectively defend itself in 29 separate trials, finding witnesses in most regions from supermarkets who are competing Whole Foods Market. Such a time frame, according to Whole Foods Market's attorneys, is not practical.
Whole Foods Market is asking the Court to issue an injunction, barring the FTC from holding the administrative trial, and from reviewing the case itself. Such relief is required, the complaint states, because the Commission "cannot, consistent with fundamental principles of due process, preside over an administrative proceeding where it cannot present itself, in fact or in perception, as an objective and open-minded adjudicator."
With such an injunction in place the FTC would still have the ability under current law to re-file the case in U.S. District Court, which, as Whole Foods Market has alleged, would allow a non-biased federal judge to decide the case.
The FTC Tries to Codify for Everyone Else What It Is Doing To Whole Foods Market
The FTC recently proposed a broad new rule with a short-circuited hearing schedule that would bypass federal courts. "That proposal was strongly objected to by a former Chair and General Counsel of the FTC, as well as the U.S. Chamber of Commerce, and it is inconsistent with the recommendations of the Congressionally-mandated Antitrust Modernization Commission and an American Bar Association report that was recently submitted to the transition team of President-elect Barack Obama," said Davis.
"The FTC is using Whole Foods Market as a 'crash-test dummy' and it is practicing a double standard. It is able to block mergers of companies under its jurisdiction, using a lower standard without going to federal court, when the Justice Department must go to federal court under a higher standard for companies under its jurisdiction. That is inconsistent and unfair," said Davis.
"The Antitrust Modernization Commission expressly recommended that Congress amend the law and bar FTC administrative proceedings, allowing all industries to be treated the same, whether under the FTC's jurisdiction or that of the Department of Justice," Davis continued. "Yet the FTC, in our case, is treating Whole Foods Market with the double standard that the Modernization Commission specifically criticized and asked Congress to eliminate."
About Whole Foods Market(R)
Founded in 1980 in Austin, Texas, Whole Foods Market ( www.wholefoodsmarket.com), a leader in the natural and organic foods industry and America's first national certified organic grocer, was named "America's Healthiest Grocery Store" in 2008 by Health magazine. The Whole Foods Market motto, "Whole Foods, Whole People, Whole Planet"(TM) captures the company's mission to find success in customer satisfaction and wellness, employee excellence and happiness, enhanced shareholder value, community support and environmental improvement. Thanks to its 53,000 Team Members, Whole Foods Market has been ranked as one of the "100 Best Companies to Work For" in America by FORTUNE magazine for 11 consecutive years. In fiscal year 2008, the company had sales of $8 billion and currently has more than 275 stores in the United States, Canada, and the United Kingdom. Whole Foods Market, Fresh & Wild(TM), and Harry's Farmers Market(R) are trademarks owned by Whole Foods Market IP, LP. Wild Oats(R) and Capers Community Market(TM) are trademarks owned by Wild Marks, Inc.