Friday, February 27, 2009

Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6

The week has come to an end without a settlement deal being reached by Whole Foods Market, Inc. and the U.S. Federal Trade Commission (FTC) over the FTC's legal challenge to Whole Foods' 2007 friendly $565 million acquisition of Wild Oats Market, Inc.

The two parties will take the weekend off from the settlement talks and resume them on Monday, March 2, 2009. (Remember, February only has 28 days.)

The FTC has set March 6 as the day when its current halt of legal proceedings regarding its attempt to overturn the merger ends. The federal regulatory agency can extend its halt if it so desires.

However, the FTC has set April 6, 2007 as the start date of its administrative trial at which an Administrative Law Judge chosen by the U.S. federal government agency responsible for antitrust issues and consumer protection will hear arguments from both sides regarding the 2007 acquisition. Plans are that after the end of the trial, the Administrative Law Judge will make an administrative ruling on the status of the now nearly 100% combined Whole Foods-Wild Oats.

It's been about 18 months since the deal was done. U.S. Federal Judge Paul Friedman ruled in Whole Foods Market, Inc.'s favor nearly a year ago, giving Whole Foods the green light to merge Wild Oats into its operations and rebrand the former Wild Oats' stores to Whole Foods -- a ruling that was later overturned by a federal appeals court -- which is why the two parties are where they are today.

All but about 6-10 of the former Wild Oats stores have been rebranded to the Whole Foods banner. After selling off some of the stores after the acquisition, most notably the then Wild Oats'-owned Henry's stores in Southern California (26 stores) and Sun Harvest stores (9) in Texas -- which were bought from Whole Foods Market, Inc. by Los Angeles, California-based Smart & Final LLC -- along with closing a few of the Wild Oats banner stores, Whole Foods is left with about 100-110 former Wild Oats stores, all bought the handful mentioned above now integrated into Whole Foods' culture and operations.

When the Whole Foods Market-FTC. settlement negotiations start-up again on Monday morning, March 2, there will only be five full business days left until March 6, the date the FTC plans to end its halt of legal proceedings regarding the merger.

The FTC initiated the halt after outside legal counsel for Whole Foods Market, Inc. came to the regulator with a settlement proposal from the company in January, 2009. The initial halt, which was to have ended earlier this month, was extended to march 6 by the FTC as a good faith gesture designed to give both parties some "breathing room" in the settlement talks.

We believe both parties are motivated to reach a settlement deal rather than go to trial on April 6. The question remains: Can they collectively come to an agreement-settlement that satisfies the needs and requirements of both parties this late in the game?

FTC. v. Whole Foods Market: News & Notes

Fear & Loathing in the Texas Congressional delegation: The 'silence of the pols'

Whole Foods Market, Inc., which had gross sales in 2008 of $8 billion, is headquartered in Austin, Texas, it's hometown since 1980 when the very first Whole Foods Market natural foods store was opened in the city.

The company is ranked as the 21rst-largest food and grocery retailing chain in the U.S. by the supermarket industry trade publication Supermarket News, which each year ranks the 75 top food and grocery retailers based on total annual sales, regardless of format, in the U.S.

Whole Foods' is a major corporate citizen and employer in Austin and throughout the state of Texas. The natural grocery chain currently operates 278 stores in the U.S., Canada (6 stores) and the United Kingdom (5 stores). Of those 267 Whole Foods stores that are in the U.S., 16 are located in the state of Texas, the natural grocer's home state

Three of the 16 Texas natural foods markets are located in Austin, including Whole Foods biggest store, it's flagship, Austin natural foods emporium that's over 80,000 square feet in size. [Click here for a full list of Whole Foods' Texas stores.]

Whole Foods Market currently has five new stores in various stages of development in Texas.

In other words, with $8 billion in annual sales, its corporate headquarters in Austin, and 16 current and five new stores in development in Texas, Whole Foods Market, Inc. is an important company for Texas in terms of job creation, tax generation and revenue, and corporate philanthropy, among other benefits of having it located in the state.

One would think so at least. But we just have to ask: Where are Texas' two United States Senators and its 32 members of the U.S. House of Representatives when it comes to speaking out for Whole Foods Market, Inc. on the FTC. v. Whole Foods Market, Inc. legal case? The answer: basically silent.

Are they "for it (the merger) or are they agin' it (the FTC's challenge)," as they like to say in Texas? One should expect some rather vocal public show of support for the local grocery chain in this battle, shouldn't they? We've been listening closely for a long time and haven't heard it.

We've been covering the issue closely since the summer of 2007, and even more closely since November of 2008, when things started heating up again, to the present, where the heat is even hotter. In this time we have not been able to find one of Texas' 32 Congress members, including those from Austin, Whole Foods' hometown, who has taken a strong, public stand on the issue and spoken out regularly on the FTC's legal attempt to overturn the deal.

[You can view a complete list of all 32 members of Congress from Texas here. The list includes links to their e-mail addresses. So if you want to ask them where they stand on FTC. v. Whole Foods and why they haven't spoken out on it, just click the little folder at the bottom of this post and you can e-mail the story to them.]

The two Senators from Texas, John Cornyn and Kay Bailey Hutchinson, both Republicans, haven't said anything we can find, and certainly not in any significant public way, about the FTC's continued attempt to overturn the acquisition of Wild Oats Market, Inc. by one of their state's leading corporate citizens, Whole Foods.

Since Whole Foods Market, Inc.'s growth means more jobs in Texas, more taxes paid by the corporation, and other related things favorable to Texas, one would think the state's Senators, especially since both are Republicans who are self-stated strong anti-government regulation types, would speak out in favor of Whole Foods Market and urge the FTC to reach a settlement with their home town grocer wouldn't you? [Click here for information on the two Senators from Texas.]

This should have particularly been the case since the FTC launched the challenge in 2007 when a fellow Republican, George W. Bush, was President. President Bush just left office at the end of January. But then it's the two Republicans on the FTC who have been the most aggressive in wanting to break-up the merger. So, go figure.

Austin, Texas, where Whole Foods Market was founded and is headquartered, is in Texas' 25th Congressional district, which is represented in the House by Democratic Congressman Lloyd Doggett.

Congressman Doggett has been near as silent as one can be in public office about the FTC. v. Whole Foods Market, Inc. case. We find that rather strange. For example, take a look at his House Web site here. There's lost of news about issues dear to his heart but not one thing we could find about the FTC-Whole Foods issue, which is currently at his high point and affects his home city of Austin. Doggett was born in Austin and still lives there.

Neither Texas Senator has said much of anything about the FTC's 18-month challenge to Whole Foods friendly 2007 acquisition of Wild Oats Market, Inc. Since Whole Foods' spend $11 million alone in its first quarter of this fiscal year, and many millions more since the FTC challenge in 2007 started, millions the natural grocery chain could have used to hire employees in Texas, for example, you would think the company's biggest defenders would be the two Republican Senators from Texas, along with Congressman Doggett and the other 31 members of the House of Representatives from Texas.

We now some of the members of the Texas delegation have been working the issue from a lobbying perspective on Capital Hill among fellow members. But we also know many of the members from Texas have done little or nothing regarding the case. And we can't find one who has taken a strong position against the FTC's legal challenge and spoken out against it on a regular and sustained basis, such as appearing on the cable news channels, talk radio and the other normal venues members of congress always use when they want to make a point and influence regulatory agencies, the press, fellow politicians and the public.

Not even former Republican candidate for President and Congressman from Texas, Ron Paul, who like Whole Foods Market, Inc. CEO John Mackey is a Libertarian, has spoken out in any way in public about the FTC challenge to his home state grocer, which is really odd since Paul is arguably the leading elected official in Washington against excessive government regulation, not to mention the fact he represents people who work at Whole Foods stores in Texas.

The "Silence of the Texas Delegation" is indeed odd to us. It's not like they are shy people after all. And its not like Texas couldn't use a few more new jobs that a combined Whole-Foods, or even a healthier Whole Foods Market, Inc., will bring it.

You can bet if Whole Foods' was based... let's see... say in California, where it currently operates 53 stores -- three times as many as it has in Texas -- and has 20 new stores in the development pipeline, that Democratic Senator Barbara Boxer, a Whole Foods Market shopper in Washington D.C. and at home in Marin County, and Senator Diane Feinstein (also a Democrat -- who's husband, financier Richard Blum, has been known to comb the aisles of the Whole Foods Market store on California Street in the city not just as a shopper but also to get ideas for investments by looking at products on the shelves -- would be speaking out publicly and strongly in favor of Whole Foods' and against the FTC, even if they were lukewarm on the whole thing -- without a doubt. It's called good constituent service, not to mention job savings and creation.

We also are willing to bet that if the Colorado Congressional delegation, especially those members representing the city of Boulder and the surrounding metropolitan region, which lost Wild Oats' corporate headquarters after Whole Foods acquired the company, thought it possible that Whole Foods Market, Inc. might be interested in moving its corporate headquarters to Boulder, there would be no 'silence of the pols" like is the case with the Texas delegation.

We think that's food for thought for Whole Foods Market, and the members of the Senate from Texas, and the Texas Congressional delegation.

By the way, what's really with the Texas Congressional pols' and their silence vis-a-vis the FTC's ongoing attempt to break up the Whole Foods Market acquisition of Wild Oats?

Maybe they agree with the FTC?

Are the Republicans afraid to look soft if they support crunchy Whole Foods?

What about Democrat Doggett, the Congressman from Austin? He should have been on CNN's Larry King and MSNBC (and Fox News if they let him on) talking up the issue last year when the FTC got tough again. He wasn't there. He didn't do it. Too late now.

It's hard to know the answers though -- because of the "silence of the Texas pols" on the FTC. v. Whole Foods Market legal case and issue.

Leibowitz is in as new FTC Chairman

On Tuesday, February 24 we reported in this piece [Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks] that current FTC Commissioner Jon Leibowitz, the only Democrat out of the current four sitting FTC commissioners, was a lock to be named by President Obama to head the regulatory agency, replacing the current Republican Chairman. We also said President Obama would likely announce his decision by the end of this week.

Yesterday (Thursday, February 27) in our Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 9 Days to March 6 column we wrote this item:

"On Tuesday in this piece [Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks]we wrote that current FTC Commissioner Jon Leibowitz, a Democrat, appears to be a lock as the new chairman of the regulatory agency. We said President Obama was likely to make the announcement before the end of this week. We are told by our sources the President will do so tomorrow. But President Obama is a rather busy President these days, so it might not happen on Friday. However, we continue to believe Leibowitz is the man."

Today, Friday, February 28, a spokesperson from the White House press office told correspondents that cover the White House that Jon Leibowitz indeed is President Obama's choice as the new FTC Chairman. The spokesperson said a formal announcement would be coming next week.

We made it by the skin of our teeth in terms of saying the choice would be announced by the White House by the end of business today. We will have some analysis on Mr. Leibowitz being named the new FTC Chairman as it relates to FTC. v. Whole Foods Market, Inc. next week. Stay tuned.

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