Corporate & Securities Law

The D.C. Circuit Re-Disappoints in Whole Foods: An Analysis of the Amended Opinions

Being a “glass is half-full” type of guy, I figured there was no way the D.C. Circuit’s decision on Whole Foods’ petition for rehearing en banc could turn out poorly: Either the court would grant the motion and correct the panel’s mistakes, or the court would deny the motion, setting up an attractive opportunity for the Supreme Court, which hasn’t decided a significant merger case since 1974 and badly needs to update its doctrine (see, e.g., Brown Shoe, upon which the D.C. Circuit heavily relied in Whole Foods).

It seems my optimism was unwarranted. On November 21, the July 29 panel decision was amended and reissued so that Judge Tatel no longer joins Judge Brown’s former majority opinion. Although the two judges agree that the FTC did present evidence that could establish a separate antitrust market of “premium natural and organic supermarkets” (”PNOS”) and that the district court’s denial of the FTC’s preliminary injunction of the Whole Foods/Wild Oats merger must therefore be reversed (and remanded for a weighing of equities), their grounds for reaching those conclusions differ. There is thus no majority opinion from the panel (the third judge, Judge Kavanaugh, dissented), and the other D.C. Circuit judges apparently reasoned that rehearing en banc would thus be unwarranted. (See the statement of Judges Sentelle and Ginsburg here.)

The good news is that neither of the two opinions in favor of the FTC commanded a majority of the panel, so neither stands as authoritative precedent. That’s cold comfort, though, for the panel holding has precedential effect, and, under the Marks rule, any common principles contained in the Brown and Tatel opinions and necessary to their conclusions will have such effect. Moreover, so few published decisions address merger challenges that those opinions — regardless of precedential effect — are likely to have substantial influence. That’s highly unfortunate, for both opinions contain fundamental mistakes, as I elaborate below the fold.

Full post as published by Truth on the Market on December 04, 2008 (boomark / email).