American Culture

FTC suit against Whole Foods/Wild Oats merger is like a bad pro wrestling angle

Good to see the Feds finally cracking some greedhead skulls by sacking up and opposing an anti-consumer megamerger. Ummm, wait a sec…

FTC wants to stop Wild Oats/Whole Foods deal
New Mexico Business Weekly
2:47 PM MDT Tuesday, June 5, 2007

The Federal Trade Commission says it will sue to stop a pending merger between rival natural foods grocers Wild Oats Markets Inc. and Whole Foods Market Inc.

Boulder, Colo.-based Wild Oats (NASDAQ: OATS) has agreed to be acquired by Austin, Texas-based Whole Foods (NASDAQ: WFMI). The deal was announced in February. Wild Oats said Tuesday it was informed the FTC will file a federal lawsuit to block the acquisition. (Story.)

You simply must be kidding me, right?

I have no idea what kind of rationale the FTC thinks it has, but it’s hard to imagine how they reached this decision without doing a serious Abu Ghraib on the facts.

  • For starters, there are precious few places in the US where these two companies are slugging it out head to head. I live in one of those places now and I moved here from a town where Whole Foods was the only organic-only option. There is no meaningful difference in price or service between the two situations. However, a merger of the two might enable some economy of scale on the buying front, which would be pro-consumer.
  • Second, in case nobody at the FTC does their own shopping, it needs to be pointed out that feckin’ everybody out there is jumping into the organic market. Kroger, Harris Teeter, Lowe’s, Safeway – all of them are ramping up to address the competitive threat posed by organic grocers. So, hypothetically speaking, which is the greater threat to competition and the consumer – a merged Whole Foods/Wild Oats or a MegaGroceryCorp with the financial resources to overwhelm smaller operations? Who is served by a government agency’s decision to tie the hands of the little guy? It’s like watching one of those pro wrestling angles where the heel has paid off the referee.
  • Ummm, isn’t Wal*Mart getting into the grocery biz? Yeah, that’s good for the consumer. I missed the FTC action on that – anybody have a link for me? Anybody?
  • As the Motley Fool notes, if the FTC is so darned worried about the two biggest competitors in a sector merging, why haven’t we heard from them on XM/Sirius?

Frankly, I’m just livid over this. It’s not so much the question of the merger itself as it is the hypocrisy and the overpowering stench of of big money influence wafting from the direction of the FTC’s offices. This suit is bad for consumers and bad for a couple of comparatively small companies that provide a tremendous service in the communities where they operate. Who is it good for? Big corporate grocers and Wal*Mart, who have a lot of lobbyist cash to fling around. I can’t prove that the FTC is bought on this one, but you can’t blame me for being suspicious, can you?

Here’s hoping that when this crap gets to court the judge lobs it out about three seconds into opening arguments and then has some FTC lawyers shackled and jailed for contempt for wasting public money on such a transparent and frivolous assault on the public interest.

9 replies »

  1. I’m sure Wal Mart has something to do with it. Wal Mart is now the biggest purveyor of groceries in the country (from nothing 15 years ago), and they’re going into organics in a big way.

    Sometimes, the FTC is on crack.

    Aloha,

    Jeff

  2. I’ve read that the key decision in each case is how the market is defined-and that decision, therefore, is open to manipulation depending on the desired outcome. Makes sense to me. You can say the market is either all retail groceries or just high-end organic specialist groceries–and either all radio or just satellite radio. Are the firms in the specialized niches competing principally with each other or equally with those in the more general category?

    I’m outraged about the groceries case too, because without Whole Foods, the obvious outcome will be for Wild Oats to be snapped up by a large chain. This will leave Whole Foods (by the FTC definition) as a monopolist, but in fact it will be at a tremendous disadvantage because it’s really competing with WalMart and the other chains.

    I can’t say I really see any difference between that and the radio case, Jim, because the merged Sirius/XM firm would be more viable than either alone, therefore less likely to be snapped up by a larger predator.

  3. I probably wasn’t as clear as I could have been, Robert – I’m more concerned about hegemony – there’s back story on who controls Sirius and XM.

  4. Thank God the big oil companies can merge and the media outlets can merge and be gobbled up by a handful of companies. How dare you complain about the FTC not allowing the Whole Food companies from merging. Don’t you realize this is a market that is not needed but rather wanted. The FTC is also busy trying to stop the XM/Sirius Satellite radio merger as well. I agree with you it seems that as a whole the government is a little f’ed up in their priorities.

  5. had to chime in. there really is a difference between whole foods and wild oats. prices and quality. the prices at whole foods are substantially greater than those at wild oats. i have two whole foods and one wild oats walking distance from where i live. we commonly refer to the whole foods as “whole check”. the quality of whole foods is better than wild oats, and their employees make better money than their counterparts at wild oats. personally, i had hoped that they would not merge, so that we would have some competition going on.

  6. Wild Oats’ largest shareholder is billionaire Ron Burkle’s Yucaipa Companies, which controls more than 15% of the stock. If this merger takes place at the original $18.50/share price, Burkle/Yucaipa stands to make about $50 million. Ron Burkle is a leading contributor to the Democratic Party, and has hosted fundraisers for Hillary. Bill and Al both sit on Yucaipa’s board. This is the Bush-appoined FTC commissioners sticking it to the Democrats (Whole Foods CEO John Mackey is Libertarian, not Republican or Democrat, so there’s no love lost there either).

  7. Hey, do you know ? I’ve been trying to find out if there’s been any lawsuits against the FTC. Since the FTC can just start any lawsuit and just the lawsuit itself brings on an onslauth of Costs, I wonder if anyone has ever sued the FTC for ungrounded lawsuits (like if the judge ends up throwing the suit out). The fact that they can just start a lawsuit without due grounds, allowes for corruption, as discussed above. Even the FTC should be limited in its power so that doesn’t happen…. I think.

  8. I think if you look deeper into what Whole Foods is doing and start learning more about food issues (books like In Defense of Food & the movie Food Inc.) you’ll see that they are actually part of the problem, not the solution.

    Plus that op-ed in the WSJ by their CEO about health care reform is reason enough to never shop their again. Their CEO is a real prick.

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