Court Shoots Down Antitrust Move Against Whole Foods

Attempts by antitrust regulators to stall the takeover of Wild Oats by rival company Whole Foods came to naught, thanks to the ruling by a federal judge yesterday. The judge’s ruling means Whole Foods can now go ahead and expand its market reach. Whole Foods is already the largest organic and natural food chain in the U.S.

Earlier, the Federal Trade Commission had asked for a preliminary injunction, a move that was shot down by Washington District’s U.S. District Judge Paul Friedman. Judge Friedman’s ruling means Whole Foods can complete the $565 million acquisition of Wild Oats.

While turning down the move by the FTC, the judge said it still had the option of filing an appeal for an emergency delay. The basis for Judge Friedman’s ruling remains confidential.

The reactions from the two parties in question, Whole Foods and the FTC, were markedly different. Reacting to Judge Friedman’s appeal, Whole Foods CEO John Mackey said the judge's ruling was the first step in providing customers, vendors, and shareholders of the two companies with long-term value.

The FTC director, Jeffrey Schmidt, on the other hand sounded disappointed with the ruling. He said the FTC had challenged the proposed merger on the basis of evidence that it would burden consumers with reduced options and increased prices. He also said the FTC would now look at further options.

In the meantime, Whole Foods announced it was prolonging the period for tender offers through Monday. What this means is that the FTC would have to take whatever action it deems fit before Monday noon, EST. Failing this, the two companies would be free to merge at any point in time after Monday noon.

The FTC move to shoot down the deal came about in June. One of the core issues in the case was the way FTC officials defined the market for natural and organic products in the U.S.

Another core issue was the remarks Mackey purportedly made through anonymous postings on various Internet chat rooms promoting Whole Foods and making derisive comments against its rivals. Whole Foods is conducting an investigation into this claim, as are officials at the Securities and Exchange Commission (SEC).

FTC officials relied on analysis provided by formed Wild Oats CEO Perry Odak. Odak himself is a worried man these days, afraid his former company would hit back at him for cooperating with the FTC by holding back on his payments due.

Whole Foods' description of Odak as an embittered and biased individual would certainly not help his case much.