Whole Foods Retailiates to FTC Antitrust Case
January 1st, 2009 at 9:06 pm - by admin
American consumer grocer Whole Foods has been subject to a long-winded antitrust case with regard to the takeover of it’s competitor, Wild Oats Markets in early 2007 for $565 million.
June of 2007, the FTC announced they would be challenging the merger, citing that it “would violate federal antitrust laws by eliminating the substantial competition between these two uniquely close competitors in the operation of premium natural and organic supermarkets nationwide” and contending that “if the transaction goes forward Whole Foods would have the ability to raise prices and reduce quality and services.”
As soon as August, the federal appeals court granted the takeover to Whole Foods citing increasing competition in the organics and natural supermarkets business from traditional grocers like Safeway as a sufficient competitive force to allow the move.
Whole Foods, shortly after the takeover, sold all 35 of the Henry’s Market and Sun Farmer’s Market stores, previously held under the Wild Oats brand, to grocer Smart & Final, Inc. for $165 million.
Nearly two years later, Whole Foods has launched a counterattack against the FTC, saying that regulation has stiffled their business in a time where recession makes inefficiency hugely expensive.
“Instead of concentrating on our business, we are forced to focus on dealing with regulators in Washington at a time when business is declining,” says John Mackey, Chairman of Whole Foods.
Mackey says that the way the Federal Trade Commission operates is simply too convenient. By defining Whole Foods’ niche, and any other niche business’s market as “natural and organic food supermarket,” a natural monopoly can be found in effectively any narrow niche.
What Mackey is suggesting the Federal Trade Commission doesn’t understand, is what economists and analysts in this particular case refer to as substitutibility of goods: a factor, which determines how much a change in price causes consumers to move to similar goods; such as non-organic foods.
As the demand for natural and organic goods increased over the last few years, effectively all supermarkets - as far reaching as Wal-Mart - offer a organic products section, targeting the niche that Whole Foods targets.
Senators on the Judiciary Committee in December, announced that they did not support the FTC’s recent antitrust actions, and that a hearing to consider removing the Commission’s administrative proceedings was in planning.
