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Mar

06

FTC Settles Challenge to Whole Foods’ Acquisition of Wild Oats

Posted by : Matthew Wild | On : March 6, 2009

Category: Antitrust, Consent Decrees, FTC Actions, Intellectual Property, Relevant Markets, Section 7 (Clayton Act)

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Today the FTC announced a settlement with Whole Foods that requires Whole Foods to divest 32 supermarkets in 17 geographic markets.  The FTC also required to Whole Foods to transfer Wild Oats’ intellectual property, including the “Wild Oats” name.  The divestiture, which will have to be an FTC approved buyer, is intended to restore competition between these stores that was adversely affected by the acquisition.  The FTC press release, agreement containing consent order and analysis to aid public comment are attached — FTC Press Release (Whole Foods), Whole Foods Consent Order, Whole Foods Analysis to Aid Public Comment.

The remedy in this case illustrates how rescission rather than divestiture is rare.  The preference is to put the assets in the hands of a firm that is eager to run the business as opposed to a firm seeking to exit.  Thus, it is in the seller’s interest to force consummation of the transaction as soon as legitimately possible.  (Note that there are certain limited circumstances that will justify rescission where although legal, the parties gamed the system, see, e.g., FTC v. Elders Grain, 868 F.2d 901 (7th Cir. 1989 (Posner, J.)).

This merger has resulted in considerable litigation.  Whole Foods defeated the FTC federal action for a preliminary injunction.   That decision was reversed (see July 29, 2008 Post).  Then on Whole Foods’ application for rehearing en banc, the original panel amended its decision to make clear that one judge did not join the opinion reversing the order below.  With one judge dissenting, there was no opinion of the Court, which would have been binding on future panels, and thus there was no need for en banc review (see December 1, 2008 Post).  The FTC had also imposed a harsh expedited schedule for its administrative proceeding and took the unusual step of appointing an FTC commissioner as the presiding judge.  Whole Foods unsuccessfully challenged this process as a denial of due process in a plenary lawsuit it brought in federal court (see December 11, 2008 Post).

Dec

11

Whole Food’s Sues FTC to Enjoin Administrative Proceedings

Posted by : Matthew Wild | On : December 11, 2008

Category: Antitrust, FTC Actions, Section 7 (Clayton Act)

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On December 8, 2008, Whole Foods brought an action in federal court claiming that the FTC’s administrative process is unconstitutional as applied to it.  (Whole Foods Complaint)  Whole Foods claims that the FTC has prejudged the FTC’s challenge to its merger with Wild Oats.  Whole Foods also claims that the Scheduling Order entered in the administrative proceedings is so expedited that it is impossible for it to complete discovery and be ready for trial and therefore represents a denial of due process.  Whole Foods seeks to have the FTC’s challenge heard in federal court and bypass the administrative process.  One would think that Whole Foods is ensured of due process because it can file a petition for review of an adverse administrative decision before any United States Court of Appeals and if it was denied due process, the administrative decision would be vacated.  This is the latest saga in the Whole Foods litigation.  While Whole Foods defeated the FTC’s federal court action for a preliminary injunction in aid of the administrative process to enjoin consummation of the merger, the D.C. Circuit reversed.  The transaction had closed but the D.C. Circuit remanded to the action to the district court to inquire whether there was any way to restore competition notwithstanding consummation.  After Whole Foods sought reharing en banc, the original panel amended its decision to make it on behalf of a single judge with one judge concurring in the result and the other judge dissenting.  This effectively mooted any need for en banc review because there was no decision of the Court which would have been binding on future panels. See Posts of December 1 and July 29, 2008 for more coverage of FTC v. Whole Foods.

Dec

01

Whole Food’s Denied Rehearing But D.C. Circuit Amends Its Earlier Decision

Posted by : Matthew Wild | On : December 1, 2008

Category: Antitrust, FTC Actions, HSR Review, Mergers and Acquisitions, Section 7 (Clayton Act)

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On November 21, 2008, the United States Court of Appeals for the D.C. Circuit denied rehearing and rehearing en banc in FTC v. Whole Foods with Judge Kavanaugh dissenting.  Judge Kavanaugh had dissenting in the original decision.  The original opinion is linked to the July 29, 2008 Post, which also analyzes it.  On November 21, the court also issued a revised and amended decision.  The revision and amended decision is particularly interesting because it clarifies that Judge Tatel concurred only in the judgment and not in Judge Brown’s opinion.  (Whole Food’s Amended Decision )  As a result, it has become clear that Judge Brown’s opinion has no binding affect on the rest of the Court.  Judges Ginsburg and Sentelle voted against rehearing en banc “because, there being no opinion for the Court, that judgment sets no precedent beyond the precise facts of this case. See King v. Palmer, 950 F.2d 771, 783 (D.C. Cir. 1991) (en banc) (‘without implicit agreement’ among a majority of the judges ‘we are left without a controlling opinion’).”  (Whole Food’s Rehearing Denial)

Jul

29

D.C. Circuit Reverses Decision Denying Preliminary Injunction in Whole Foods/Wild Oats Merger

Posted by : Matthew Wild | On : July 29, 2008

Category: Antitrust, FTC Actions, Mergers and Acquisitions, Section 7 (Clayton Act)

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Today, the D.C. Circuit reversed the district court’s decision that denied a preliminary injunction in the Whole Foods/Wild Oats merger. FTC v. Whole Foods Markets, Inc., No. 07-5276 (D.C. Cir. July 29, 2008) (Whole Foods decision). Crucial to the decision was the D.C. Circuit’s holding that the FTC might have been able to establish a submarket consisting of premium natural and organic supermarkets.

The case was remanded to the district court and one of the questions was whether there was some remedy available during the pendency of the FTC administrative proceedings. The D.C. Circuit noted that the FTC complained of adverse effects on competition in only eighteen different local markets. The D.C. Circuit also noted that neither party discussed whether sufficient distribution facilities were available for Wild Oats to remain a viable competitor and if only one Wild Oats store can re-open that would be better than nothing. The D.C. Circuit suggested a hold separate order, which seems to imply that the assets would be carved out and transferred from Whole Foods to a trustee. This begs the question, however, of who would (and could) manage the store(s) independent of Whole Foods.

Ultimately, it seems like Whole Foods can expect to lose the administrative proceedings. If it does, Whole Foods may have to divest stores in these markets. The Supreme Court long ago held that divestiture is the preferred remedy. Neither the courts nor the agencies favor rescission.