Judge Slaps Down FTC's Attempt To Block Whole Foods/Wild Oats Deal

from the buh-zing! dept

Fri, Aug 17th 2007 12:16pm — Joseph Weisenthal

When the FTC stepped in to block the merger between Whole Foods and Wild Oats, it seemed like an obvious case of a market being defined too narrowly. Yes, both companies place a similar emphasis on organic foods, but organic foods represent a small slice of the overall food market, and there's no question that organic and conventional foods are substitute goods. The whole situation was roughly analogous to the situation facing XM and Sirius in their attempt to merge, as the NAB would like the FCC to define the market as simply satellite radio, while in fact it's clearly much broader. It looks like the FTC's argument has been thoroughly rejected as a federal judge declared that the merger should not be blocked. The judge's ruling remains sealed, so his exact rationale isn't known, but it sounds like this could be a useful precedent in other cases going forward.

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Filed Under: antitrust, ftc
Companies: whole foods, wild oats

16 Comments

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Bah who needs one, 17 Aug 2007 @ 12:20pm

Why would the judge's ruling "remain sealed"?
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TheDock22, 17 Aug 2007 @ 12:28pm

Re:
Judges rulings usually remained sealed if there is a merger going on since evidence is gathered independently for both parties which could affect the terms of the merger unfairly for one side or the other. Merger's are not subject to full disclosure terms.

I agree with the judge. Two organic food giants merging is not going to create a monopoly in the food industry, so why block it? Beside, I don't know anyone who buys organic food. I think the organic food industry is making a good effort to try and compete.

But, I'm not sure how this relates to technology...
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Brian, 17 Aug 2007 @ 12:31pm

Finally...
Maybe we can finally let XM/Sirius merge and reap the benefits of having both worlds. I'm a Stern/Sirius guy but call me bi-curious...I'm wondering what's on XM that I'm missing.
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Kurt Tappe, 17 Aug 2007 @ 12:54pm

Why is everyone in favor of monopolies these days?
Are you all blind to the dangers of monopolies?!? Has it been that long since the Standard Oil and AT&T breakups that you've all forgotten that consumers only suffer under monopolies and the only beneficiaries are the few CEOs at the top who get golden parachutes? Brian, do you really think your satellite radio bill will go down when there is nobody for the merged Sirius/XM monopoly to compete against? They will undoubtedly keep inching your bill upwards knowing you have nowhere else to turn for satellite service. Ditto for Whole Foods/Wild Oats--if they are the only organic store in town, what is to keep them from reducing offerings and raising prices?
This is so simple and basic it's unfathomable to me how many of you are unable to grasp the concept.
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TheDock22, 17 Aug 2007 @ 12:57pm

Re: Why is everyone in favor of monopolies these d
They will undoubtedly keep inching your bill upwards knowing you have nowhere else to turn for satellite service. Ditto for Whole Foods/Wild Oats--if they are the only organic store in town, what is to keep them from reducing offerings and raising prices?

No people to buying their hippie food if the price goes up. =)

I don't eat organic food (it's pricey already), so I really don't care if they raise the prices. Go pesticides!
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Killer_Tofu (profile), 17 Aug 2007 @ 1:02pm

Re #4 & #2
#2
I actually buy organic food.
All the time.
I am not 100% strict to the diet, but it is probably about 80% of what I eat. And I SWEAR I feel way way better than I did before I ate this way.
Also lost 20 pounds, but thats partly because my family cut out gluten, which is in most organic foods as well. And the losing 20 pounds is with me exercising the same amount before and after, all that changed is what I eat.

#4
From all the people I know who have talking about AT&T from way back when they were literally a monopoly, they say those days were better for phone service.
Everything always connected and the prices were low because it was all one company. Not trying to gleam connection fees off of each other. But, I am very ready to admit, I was not alive then, and have no personal opinion. It is just what I have heard of people comparing everything about today's phone systems to those of when it was only AT&T of old.
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Anonymous Coward, 17 Aug 2007 @ 1:45pm

Well in addition to the obvious monopoly danger (saying that the market is food as a whole ignores the fact that this subset of the food market has many unique products and/or producers which makes price competition sketchy under the best of circumstances, and nonexistent in large swath of the country when major players merge) there's the little matter of (alleged) stock price manipulation that Whole Foods CEO engaged in. Martha Stewart went to jail for less, this guy gets to further consolidate an empire.
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pudro, 17 Aug 2007 @ 1:45pm

Re: Why is everyone in favor of monopolies these d
Read. Think. Then post.

"obvious case of a market being defined too narrowly"

"substitute goods"

Hey, looky there. I just refuted your long-winded argument with two short excerpts from the summary. Those two things explain why these wouldn't be dangerous manipulative monopolies.
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Garibaldi, 17 Aug 2007 @ 1:51pm

Whole Foods/WildOats
1) Saying that organic and conventional foods are substitute goods is one of the most specious and ignorant arguments I've heard. The organic food industry exists PRECISELY because consumers identified a clear and radical difference between the two.

2)Here in Portland, ME we had a wonderful locally owned whole foods store. In its infinite wisdom, the city manager allowed Wild Oats to place a 10,000 square foot foodplex literally next door. Whole Foods ultimately bought out the local store and was allowed to build their new foodplex (you guessed it) right next door to Wild Oats. Prices at the new national stores are significantly higher and their target audience is guilty soccer moms. That's what a monopoly is all about.

3) AT & T worked as a monopoly because, in exchange for its monoply status, it was highly regulated by the Federal Government, hence prices were low, but AT&T was the ultimate "Set and forget" stock for 50 years.

4) I know history may seem boring, but if you read and study it, you'll know what people are talking about
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Engin Grad, 17 Aug 2007 @ 2:05pm

Oligopolies gone wild
I torn over this article: I admire Whole Foods for several reasons and they are the only company I know who has put voluntary caps on executive pay, however, I'm very wary of monopolies as well as oligopolies (markets with few sellers). U.S. Anti-trust law is designed to prevent the formation of tight oligopolies as well as monopolies. For more info on this I recommend "Market Domination!" by Stephen Hannaford. The book documents the problems of market concentration, and shows that market concentration will only lead to more market concentration. I also recommend "Is Wal-Mart Good for America" by PBS. The documentary shows how Wal-Mart went to court defending a Chinese suppliers practices, which the court later ruled clearly violated trade-laws. Its scary to think the amount in influence large corporations wield these days.
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Anonymous Coward, 17 Aug 2007 @ 2:32pm

It's just food
It is a super market. There are a bunch out there.
If you really must have organic food, grow your own.

People already pay a premium for organic food, half of which has no benefit over non-organic food.
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Anonymous Coward, 17 Aug 2007 @ 2:41pm

It's not a monopoly
To those who think that this somehow creates a monopoly, food (and the subset organic food) are available from other sources, and plenty of them. Thousands and thousands of them. If you think your only choices are one of those two national chains, you aren't looking very hard.

If Shell stations decided to brand themselves as a performance-gasoline supplier and started selling only 92 octane gas (and was the only chain that made that choice), that wouldn't be a monopoly any more than this is.
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Charles Griswold, 17 Aug 2007 @ 3:09pm

Re: Why is everyone in favor of monopolies these d
Ditto for Whole Foods/Wild Oats--if they are the only organic store in town, what is to keep them from reducing offerings and raising prices?
It's simple. Just because they're the only organic store in town doesn't mean that they're the only place in town to go to get organic foods. Most major grocery stores these days have an organic foods section. The ones in the Fred Meyer's stores are actually fairly impressive. There's also the fact that there is a fair number of independent health/organic food stores that would compete with the Whole Foods/Wild Oats "monopoly".
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Anonymous Coward, 17 Aug 2007 @ 3:41pm

Re: Why is everyone in favor of monopolies these d
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Anon, 17 Aug 2007 @ 3:46pm

Re: Why is everyone in favor of monopolies these d
Since when were Whole Foods and Wild Oats the only organic food stores in the world. There is still Trader Joe's which is nationwide though on a smaller scale and they have existed for the past 12 years. This is not a monopoly anymore than seeing Albertson's closing up shop and a Smith's or King Soopers or some other chain popping up in their place. I agree with you that to expect a decrease in subscription costs from the merger of XM/Sirius is naive at best. What I don't agree with you is that is because they will be a monopoly. The costs will increase because you now have one company supporting both sets of stations on one device meaning that their infrastructure will combine. As a result you will suddenly have 2x as many stations that they can warrant charging you for. But a 15% increase in subscription for a broader spectrum of choice would certainly be better than having to buy two recievers and pay for two providers.
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John Hankie, 19 Aug 2007 @ 9:56am

Re: Why is everyone in favor of monopolies these d
Sirius/XM compete with traditional satellite and cable TV companies, broadband / fibre cable TV/internet companies, the internet/internet radio, mobile Mp3 devices, traditional radio stations, HD radio, and more.

Whole Foods / Wild Oats are competing against small and large forces. Wal-Mart, etc sells organic, as does a lot of small stores and medium sized chains. Do more research before spouting off your unfathomable incredulity.
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