Whole Foods Offers FTC Settlement

Whole Foods Market last week offered to settle the government's antitrust investigation of its 2007 acquisition of Wild Oats Markets. The terms of the company's proposal to the Federal Trade Commission were not disclosed. The FTC suspended its administrative case against the retailer for five days, beginning last Thursday, to allow the two sides to discuss a possible settlement. Andrew

WASHINGTON — Whole Foods Market last week offered to settle the government's antitrust investigation of its 2007 acquisition of Wild Oats Markets.

The terms of the company's proposal to the Federal Trade Commission were not disclosed. The FTC suspended its administrative case against the retailer for five days, beginning last Thursday, to allow the two sides to discuss a possible settlement.

Andrew Wolf, an analyst with BB&T Capital Markets, Richmond, Va., said he believes Whole Foods could agree to sell a limited number of locations.

“It's in everyone's interest to settle,” he said, noting, as previously reported in SN, that the FTC may be seeking to establish this case as another legal precedent for future antitrust cases involving specialty retailers.

“The FTC may want to be able to continue to define specialty markets narrowly,” he said.

In 2007 the FTC filed suit to block Whole Foods' acquisition of Wild Oats, saying the two chains competed in a unique niche of “premium natural and organic” retailers. Although it failed to get a preliminary injunction against the merger then, it won an appeal of that decision, which has been returned to U.S. District Court.

The FTC also is proceeding with a separate administrative trial against the merger. Last week, shortly before the proposed settlement, a court threw out Whole Foods' lawsuit seeking to invalidate that procedure.

In an interview with SN, Dave Wales, head of the Bureau of Competition at the FTC, declined to discuss the contents of Whole Foods' proposal, but said the commission was “looking for meaningful relief.”

“We are going to devote our resources to see whether a settlement is possible here,” he said. “And if it's not possible, if the five days go by with no settlement, we are going to be right back before the District Court and right back before the commission with the [administrative case].”

In a prepared statement, Whole Foods said, “We welcome this opportunity to hold constructive discussions directly with the commissioners as well as the FTC's attorneys.”

Wolf of BB&T suggested that Whole Foods could be seeking to settle the case before the Obama administration makes changes at the FTC that could result in a more aggressive antitrust stance.

Wales, however, said so far there have been no changes that would influence the case. “We still have the exact same four people here that have overseen the litigation, so nothing has changed on that front,” he said.

One of the challenges to reaching a settlement, Wolf pointed out, is that Whole Foods has already closed many of the acquired Wild Oats locations that would have been strong candidates for sale under terms of a settlement. Of the 109 stores that Whole Foods originally acquired, only 55 remained open at the end of last year, Whole Foods said.

The FTC had initially identified 29 markets, where Whole Foods and Wild Oats competed with each other, for antitrust purposes.