Thursday, December 18, 2008

Retail Memo: 'This Isn't Over Yet' - New Seasons Market CEO On Judge's Decision the Natural Gorcer Must Turn Over Trade Secrets to Whole Foods Market

Yesterday we reported in this story ["Breaking News: Judge Orders New Seasons Market to Comply With Whole Foods' Subpoena and Submit Sales Data, Financial Records and Other Trade Secrets] (and none of the mainstream press that's been covering the issue has yet to report that we can find accept for Dow Jones News Service) that an FTC Administrative Law Judge ruled against Portland, Oregon-based New Seasons Market's legal motion to the FTC to quash the subpoena issued the nine-store natural grocery chain by Whole Foods Market, Inc. demanding New Seasons turn over its sales and financial records and other trade secrets as part of Whole Foods' defense against the regulatory agency's legal attempt to overturn its 2007 acquisition of Wild Oats Market, Inc. [You can view the Whole Foods Market subpoena to New Seasons Market here.] [Here’s a link to the FTC Administrative Law Judge's ruling. ]

At the end of our story on the ruling, we mentioned the FTC Administrative Law Judge's ruling that New Seasons Market comply with the Whole Foods Market, Inc. subpoena left few if any alternatives for the Portland natural grocer. We suggested essentially that New Seasons can either comply with the judge's legal order and submit the information or not do so and be in violation of the court order.

New Seasons Market CEO Brian Rohter wasn't available to comment on the ruling yesterday. However, he did respond to the FTC Administrative Law Judge's ruling today in the New Seasons Market company Blog.

Writing in the Blog today, CEO Rohter says of the subpoena and yesterday's decision by the judge: "This isn't over yet;" This meaning the natural grocer's fight against the subpoena. Below (in italics) is New Seasons Market CEO Brian Rohter's response to yesterday's decision in favor of Whole Foods and its subpoena:

It's Getting Harder to Mind Our Own (Local) Business. Updated 12-18

Yesterday we heard from our attorneys that the Federal Trade Commission ruled that we have to turn our confidential internal financial, marketing and planning information over to Whole Foods Market. We disagree with and are disappointed in this decision. We’re huddling with the lawyers to figure out what our next step is going to be and I’ll get back to you once we have a clear direction. This isn’t over yet.

In the meantime, if you’re wondering why one of our competitors is demanding access to our private information, you can read about the details on this link. Thanks again to the hundreds of people in Portland (and actually all over the country) who have offered us their support

--Brian Rohter, CEO, New Seasons Market

We suspect New Seasons Market is considering if it can appeal the FTC Administrative Law Judge's ruling ordering the Portland, Oregon-based natural foods grocer to turn over its sales, financial and marketing-related information to Whole Foods Market, Inc. immediatly.

We asked an experienced antitrust lawyer today if appealing is possible. His answer: it is possible...but could be very expensive, and it isn't simple to do.

He suggested a better alternative might be if New Seasons Market and Whole Foods could work out a side-arrangement that perhaps would limit some of the information demanded in the subpoena, along with perhaps providing additional or stronger assurances to the Portland natural foods chain that only Whole Foods' legal council will view the company's trade secrets.

In its motion to quash the subpoena New Seasons Market says if it turns over the information, Whole Foods could use it competitively against the natural grocer in the Portland market region. The FTC Administrative Law Judge didn't accept that argument, or the others made in the motion by New Seasons, saying the law and the FTC process will protect its trade secrets.

Working out such a side-arrangement is something Whole Foods Market, Inc. co-president Walter Robb said he offered to attempt to do in a telephone conversation he had with New Seasons' CEO Rohter a couple weeks ago. However it appears nothing positive came of that discussion between the two men since New Seasons Market went on with its motion to quash the subpoena, which it certainly had the right to do.

It also appears such a negotiated solution is likely a moot point now because the FTC Administrative Law Judge has ruled in Whole Foods' favor.

It isn't likely -- and it was highly unlikely even before the ruling yesterday in our analysis -- that Whole Foods Market Inc.'s outside legal council would indulge New Seasons Market in Walter Robb's offer to amend the subpoena because the lawyers included the specific information contained in the subpoena, which was submitted to 93 other natural foods retailers, because it's the information they need to help prove their case that Whole Foods Market, Inc. isn't a monopolist in what the FTC calls the "premium natural/organic retailing segment" in the 29 or so U.S. markets it argues the chain is such a creature in. Antitrust lawyers like those at three of the top Washington, D.C. law firms working for Whole Foods Market seldom put extraneous information in subpoenas. Also, we expect the FTC itself wants the subpoena information as is.

So it appears, as of today, "This isn't over yet," according to New Seasons Market CEO Brian Rohter. Stay tuned.

Reader Resources

Below are recent posts from Natural~Specialty Foods Memo about Whole Foods' subpoena of New Seasons Market's trade secrets, FTC. v. Whole Foods Market, Inc. and Whole Foods Market, Inc. v. FTC:

December 18, 2008: Retail Memo: The 'Whole Primary Source Scoop' -- FTC and U.S. Federal Court Documents on the FTC v. Whole Foods Market, Inc. Case....December 17, 2008: Breaking News: Judge Orders New Seasons Market to Comply With Whole Foods' Subpoena and Submit Sales Data, Financial Records and Other Trade Secrets....December 16, 2008: Retail Memo: Whole Foods, Wild Oats and Boulder, CO...And the Rocky Mountain News' Editorial Take On FTC v. Whole Foods Market, Inc....

December, 15, 2008: Retail Memo: Eight Members of U.S. Senate Judiciary Committee Send Letter to FTC Chairman Regarding FTC's Legal Case Against Wild Oats' Acquisition.... December, 13, 2008: Retail Memo - Analysis & Commentary: More On FTC v. Whole Foods Market, Inc. and Whole Foods Market, Inc. v. FTC.... December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Likley With Mass Market Lift....

December 9, 2008: Retail Memo: Whole Foods Markets' 'Whole Legal Paycheck:' Three Top Washington, D.C. Law Firms Teaming Up On The Natural Grocery Chain's FTC Lawsuit....December 9, 2008: Retail Memo: Whole Foods Market CEO John Mackey and Team Launch First Aggressive Attack Against the FTC's Legal Case at Press Conference This Morning....December 8, 2008: Retail Memo: Mr. Mackey (and the Whole Foods Market Troops) Goes to Washington....

December 8, 2008: Retail Memo: Breaking News - Whole Foods Market, Inc. Files Lawsuit Against the FTC; Argues the Regulator Violated the Company's Due Process Rights....December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter and Whole Foods Market Co-President Walter Robb Discuss and Debate the Subpoena Issue Online....December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter Speaks Out Again Today on the Whole Foods Market, Inc. Subpoena of His Company's Data....

December 7, 2008: Retail Memo: Whole Foods Market Retains Top Washington D.C. lawyers and Politically-Connected Lobbyists to Plead its Case Against the FTC....December 6, 2008: Retail Memo: Fast-Growing and Scrappy Sunflower Farmers Market Ventures Deep in the Heart of (Whole Foods Country) Texas....December 6, 2008: Retail Memo: Fast-Growing NF Chain Sunflower Farmers Market Responds to Whole Foods Market, Inc. Subpoena For Sales, Financial and Related Information....

December 3, 2008: Retail Memo: More on the Whole Foods Market-New Seasons Market Subpoena Issue; FTC Holding Firm For February, 2009 Hearing....December 2, 2008: Retail Memo: Whole Foods Market, Inc. Closes $425 Sale of Stock to Private Equity Firm; Adds Members of the Firm to its Board of Directors....December 2, 2008: Retail Memo: Portland, Oregon-Based New Seasons Market CEO Brian Rohter Responds to Whole Foods Market's Paige Brady....

December 2, 2008: Retail Memo: Whole Foods' Paige Brady Responds to Yesterday's New Seasons Market Piece; Lots of E-Mails; Issue Heats Up On the New Seasons Market Blog....December 1, 2008: Retail Memo: Whole Foods Wants A Court-Mandated Financial Records Dump from Portland-based New Seasons Market; it Says For its Battle Against the FTC.

FTC v. Whole Foods: Linkage from the Natural~Specialty Foods Memo archives:

Click here, here and here for stories about the FTC-Whole Foods issue from our archives.

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