Tuesday, December 23, 2008

Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009

FTC v. Whole Foods Market - Whole Foods Market v. FTC

The U.S. Federal Trade Commission (FTC) has given Whole Foods Market, Inc. an extension on its scheduled February 16, 2009 administrative hearing/trial before an FTC Administrative Law Judge. The FTC has postponed the hearing, in which the FTC-picked judge will hear arguments for and against the deal and make a decision either way, until April 6, 2009.

Whole Foods Market had requested a postponement of the hearing until at least September of next year because it said it wants to await the rulings and outcome of the ongoing hearing in the U.S. Federal Court for the District of Columbia courtroom of Judge Paul Friedman.

At a hearing yesterday on the legal matter of the FTC's attempt to overturn Whole Foods' acquisition of Wild Oats Market, Inc. last year, Judge Friedman expressed his desire that both the FTC and Whole Foods Market, Inc. essentially freeze any actions they might take until he resolves the matter.

Judge Friedman said at the hearing yesterday he will first rule on a motion by the FTC to have Whole Foods' lawsuit against the regulatory agency dismissed. Whole Foods Market, Inc. is arguing in the lawsuit that the FTC has violated the company's due process rights with its ongoing campaign to overturn the merger with Wild Oats, a deal Whole Foods' says is essentially completed.

The FTC's postponing its administrative hearing until April 6 appears to be a nod to Judge Friedman's desires expressed yesterday at the hearing, along with a compromise with Whole Foods. Instead of waiting until September, which is the general hearing date Whole Foods' lawyers requested, the FTC opted for April 6, 2009.

An FTC spokesperson says an extension of the February 16 hearing date to April 6 was warranted because the outcome of Judge Friedman's hearings, of which yesterday's was the first, in which he is reconsidering the FTC's request for an injunction to suspend the merger, could impact the FTC's administrative hearing.

The federal court judge originally ruled in Whole Foods Market, Inc.'s favor in its friendly acquisition of Wild Oats last year, giving the natural foods grocery chain the green light to go forward with integrating Wild Oats and its stores into Whole Foods' operations and culture.

However, the FTC reopened its administrative case against the deal after that. This summer a federal appeals court ruled the FTC could go forward with its legal request to overturn the acquisition-merger. That's how the February 16, now April 6, 2009 administrative hearing/trial was set.

Meanwhile, earlier this month Whole Foods' filed a lawsuit asking that the case be removed from the FTC's jurisdiction and settled once and for all in federal court. The FTC fired back, asking Judge Friedman's court, where the matter is being heard, to dismiss Whole Foods Market, Inc.'s lawsuit.

Yesterday Judge Friedman held the first new hearing on the case. As mentioned, he said he will first rule on the Whole Foods Market lawsuit before taking up the overall case.

[You can learn more by reading our coverage and analysis from yesterday at the links here: December 22, 2008: Retail Memo: At Hearing Today Judge Tells FTC to Provide Road Map of How Whole Foods Could Take About Merged Companies Should Ruling Go In its Favor. December 22, 2008: Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation. December 22, 2008: Retail Memo: Only Slightly More Than Half the 93 Natural Foods Retailers Issued Subpoenas By Whole Foods in its Case against the FTC Have Complied.]

It isn't clear if Judge Friedman will have made a decision on the merger by the April 6 FTC hearing date. He said yesterday he will take up the FTC v. Whole Foods overall case only after he rules on a number of motions and on the Whole Foods Market, Inc. lawsuit against the FTC.

Up next will be Judge Friedman's ruling on various motions and on Whole Foods Market, Inc.'s lawsuit in which it argues the FTC violated its due process rights and in which it wants the federal court to take over the proceeding, which if granted would be a ruling by the judge against the FTC's holding its April 6 administrative hearing/trial.

Right now we don't see the judge stopping that hearing. However, if he rules on the overall legal issue, Whole Foods acquisition of Wild Oats, such a ruling could make the FTC administrative hearing on April 6, 2009 moot.

But there are plenty of appeal opportunities as well. If the April 6 hearing is held, and Whole Foods were to lose and is ordered to break up the combined Whole Foods-Wild Oats, it can appeal such a decision by the FTC Administrative Law Judge to the federal court.

Conversely, if Judge Friedman rules in favor of Whole, which would be the second time he did so if it happens, before the FTC April 6 administrative hearing next year, the rules allow the FTC to appeal that decision to the U.S. federal court of appeals, the same body that overturned Judge Friedman's original ruling in favor of Whole Foods Market, Inc.

There are limitations for both parties throughout this process however.

Even so, like the great New York Yankee baseball player and sidewalk philosopher Yogi Berra liked to say, we could be seeing deja vu all over again, in this case in the matter of FTC v. Whole Foods Market, Inc.

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