Corporate & Securities Law

FTC Settles Challenge to Whole Foods’ Acquisition of Wild Oats

By Matthew S. Wild

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).

Full post as published by Antitrust Commentary on March 06, 2009 (boomark / email).