FTC v. Whole Foods Market - Whole Foods Market v. FTC
Lawyers for Whole Foods Market, Inc. at a hearing today requested a legal ruling from U.S. Federal Judge Paul Friedman which would allow the natural foods retailing chain to depose and obtain e-mail correspondence from an FTC official, J. Thomas Rosch, who is one of four current members of the regulatory agency that's trying to overturn Whole Foods' friendly acquisition last year of Boulder, Colorado-based Wild Oats Market, Inc. on anti-competitive grounds. Judge Friedman's court is in the U.S. Federal Court for the District of Columbia circuit.
Whole Foods wants to depose Commissioner Rosch, a Republican on the FTC appointed by current President George W. Bush, because he voted to investigate the merger while also briefly acting as the internal FTC administrative judge hearing the case.
Whole Foods Market also wants Judge Friedman to permit it to view e-mail correspondence from the FTC commissioner.
Whole Foods' lawyers are looking for any e-mails between Rosch and members of the FTC investigative staff, which Lanny Davis, a partner at the Washington, D.C. office of the Orrick law firm and the outside counsel who is heading up the case for Whole Foods Market, Inc., says could demonstrate a possible conflict of interest because the commissioner's acting as an internal FTC judge on the case at the time might conflict with his communicating with staffers investigating the case.
"We think there's an inference to be drawn that Commissioner Rosch was in contact with investigative staff," Davis said today, arguing that the Whole Foods legal team needs to obtain e-mails between Rosch and the staff.
Davis argued today that an appropriate remedy for FTC v. Whole Foods Market, Inc. would be to allow an FTC Administrative Law Judge to decide the case. But instead of requiring the loser to go to the four FTC commissioners, the case would be taken directly to an outside court. In other words, the federal court would decide the ultimate fate of the deal, which is what Whole Foods argues should be the remedy in its lawsuit filed earlier this month.
By statue the FTC has five members. However, it is one short at present. President-elect Barack Obama will choose a new commissioner after he takes office on January 20, 2009. Obama also will name a new chairman of the FTC. He can choose the new (fifth) member to be chairman, which is highly probable, or the President-elect can name a chairman from one of the four sitting members.
Regarding Lanny Davis' proposed remedy, the FTC has scheduled an administrative trial for February, 2009 in which an Administrative Law Judge picked by the FTC will hear the regulator's anti-competition case against Whole Foods and rule on it. Whole Foods can if it loses appeal the case to a U.S. federal court.
[See our story from earlier today for related and additional information on today's hearing at this link: 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.]
In his proposed remedy, Whole Foods Market, Inc. lawyer Davis is essentially saying all four members of the FTC would have to recuse themselves from making a decision on the matter. "Yes, we would say the entire commission would have to be recused," he said today.
We don't see this happening. The FTC has held on for too long, 16 months, to recuse themselves from making a decision on the matter, unless of course the federal court rules that they can't do so.
Judge Friedman didn't make a ruling at the hearing today on Whole Foods' request to be able to depose Rosch and to obtain copies of his internal FTC e-mail correspondence.
As we reported in our piece earlier today, Whole Foods' lawsuit against the FTC, which it filed earlier this month, was discussed and debated by lawyers for both sides today. Whole Foods Market, Inc. says in its lawsuit the FTC has denied the company due process because it has not been impartial in its case against the natural grocer's friendly acquisition of Wild Oats Market, Inc. last year.
Mark Nebeker, an assistant U.S. attorney arguing for the FTC, asked for the Whole Foods lawsuit against the government (FTC) to be dismissed. "Our view is the court doesn't have a role," he said during the hearing.
Paul Denis, outside legal counsel for Whole Foods, disagreed, arguing not only that the case belongs in the federal court, and should be decided once and for all by Judge Friedman, but also that until the case is decided by the court the FTC should freeze any further administrative action on the case, including not holding the February, 2009 administrative trial is has planned.
As we reported here, Judge Friedman ordered the FTC to provide the court with a written outline of how it expects Whole Foods Market, Inc. to take apart the now nearly full-merged into Whole Foods Wild Oats corporation and stores. The judge also said it was his hope the FTC and Whole Foods would freeze their actions until he rules, meaning he wants neither to take any further steps regarding the case. He didn't put this in the form of a legal order though.
The FTC also brought up at the hearing today something it's argued for in the past but hasn't pushed for thus far in court, which is its opinion that Whole Foods Market, Inc. should set up separate divisions to operate Whole Foods and Wild Oats until the acquisition-merger case is finally resolved. It's not clear the FTC could get a court ruling on this even if it desires.
Whole Foods has said doing so is impossible, something Whole Foods' lawyer Paul Denis repeated again today at the hearing, because for all intents and purposes the two companies are now effectively fully-merged.
Denis argued that Whole Foods has integrated functions like human resources and purchasing, as well as creating a single distribution network -- all true -- and said if the natural grocer were to have to set up two operating companies it would have to create two separate functions for every department, resulting in huge costs and inefficiencies to the company, as well as making little sense at this point in the merger's integration process, which is nearly completed.
Judge Friedman didn't seem too concerned about this. When Denis was finished making his argument, the judge replied: "So what."
Judge Friedman previously ruled in favor of Whole Foods on the deal, giving the natural grocery chain the green light to integrate Wild oats into its operations and culture.
A federal appeals court overturned that decision, tossing the case back into Judge Friedman's court now, about 16 months after the deal was first announced.
In addition to the FTC v. Whole Foods Market, Inc. core case, the judge also now is considering Whole Foods Market, Inc. v. FTC, the natural grocer's lawsuit to have the case taken away from the FTC and decided by the federal court.
Something tells us Judge Friedman is less than happy to have the case back in his courtroom. However he signaled today he plans to give the deal complete new consideration in terms of the anti-competitive arguments from the FTC, saying at the hearing that the appeals court wouldn't have sent the case back to him unless it thought doing so was valid.
Judge Friedman didn't make any rulings today besides the order that the FTC provide his court with a written road map of sorts describing what it sees as potential ways (remedies) Whole Foods Market, Inc. could take apart the combined Whole Foods-Wild oats should the natural grocer lose the case.
Note: You can read new materials filed by the FTC on Friday, December 19 at the FTC Web site here .
NSFM Related story from today: 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
FTC v. Whole Foods Market - Whole Foods Market v. FTC: Recent coverage and analysis in Natural~Specialty Foods Memo (NSFM):
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 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 (NSFM) archives:
Click here, here and here for stories about the FTC-Whole Foods issue from our archives, including pieces about mass market and natural foods class of trade retail competitors.