The Federal Trade Commission on Tuesday announced that it was filing a lawsuit in federal district court to prevent Whole Foods from buying Wild Oats.
Jeffrey Schmidt, Director of the FTC's Bureau of Competition, said in a press release put out by the agency, "Whole Foods and Wild Oats are each other's closest competitors in premium natural and organic supermarkets, and are engaged in intense head-to-head competition in markets across the country. If Whole Foods is allowed to devour Wild Oats, it will mean higher prices, reduced quality, and fewer choices for consumers."
In making its decision, the FTC rejected the basic notion that other grocers were in the same business as Whole Foods and Wild Oats. The result is that the two natural food chains have a much larger share of "channel" sales than they would if all stores selling natural and organic foods were included.
The FTC argued: "Whole Foods and Wild Oats are differentiated from conventional retail supermarkets in several critical respects. These include the breadth and quality of their perishables - produce, meats, fish, bakery items, and prepared foods - and the wide array of natural and organic products and services and amenities they offer. In addition, premium natural and organic supermarkets seek a different customer than do traditional grocery stores. Whole Foods' and Wild Oats' customers are buying something more than just the food product - they are seeking a shopping 'experience,' where environment can matter as much as price."
John Mackey, chairman and CEO of Whole Foods Market, said in a press release, "We intend to vigorously challenge the FTC in court. The FTC has failed to recognize the robust competition in the supermarket industry, which has grown more intense as competitors increase their offerings of natural, organic and fresh products, renovate their stores and open stores with new banners and formats resembling Whole Foods Market. Evidently the FTC does not appreciate the many benefits for consumers of the proposed merger, including our plan to invest capital in and improve many of the stores currently owned by Wild Oats."
Greg Mays, chairman and CEO of Wild Oats Markets, said in a release from that company, "While we disagree with the FTC's position and believe it is without legal and factual merit, we are confident that, once presented with the facts, the Court will agree that this merger is pro-competitive and the FTC's application for an injunction will be denied, thus allowing us to proceed forward with the merger. We intend to cooperate with Whole Foods in all respects and to vigorously challenge the FTC in Court."
Discussion Questions: What is your reaction to the Federal Trade Commission's decision to seek to block the Whole Foods/Wild Oats deal? Do you think a combined company would improve or diminish competition in the supermarket channel? What do you expect to happen after the parties have their day in court?
- FTC Seeks to Block Whole Foods Market's Acquisition of Wild Oats Markets - Federal Trade Commission
- Whole Foods Market to Challenge FTC's Opposition to Wild Oats Merger - Whole Foods Market, Inc.
- Wild Oats Markets Announces It Will Fully Cooperate with Whole Foods Market to Challenge the FTC's Opposition to Merger - Wild Oats Markets, Inc./Business Wire