FTC. v. Whole Foods Market, Inc. - Settlement NegotiationsIn this Tuesday, February 2 story [Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?], in which we reported that a source close to the settlement discussions between Whole Foods Market, Inc. and the U.S. Federal Trade Commission (FTC) told Natural~Specialty Foods Memo (NSFM) progress was being made towards reaching a potential agreement over the FTC's legal challenge of the 2007 Whole Foods-Wild Oats merger, we said the FTC would likely extend its current five business day halt order in its antitrust challenge of the deal if it felt negotiations were promising.
The FTC did just that late yesterday afternoon.
David P. Wales, the acting director of the FTC's Bureau of Competition, issued a one paragraph statement late yesterday afternoon in which he announced the regulatory agency was extending by an additional 30-days it's order to halt the antitrust proceedings so that Whole Foods and the FTC could continue the ongoing settlement negotiations. The FTC's challenge is now on hold until March 6, 2009. The five business day halt order was set to expire this morning.
This is all the FTC's Wales said in his statement extending the halt order until March 6: "We look forward to continuing our discussions with Whole Foods to determine whether we can reach a mutually agreeable settlement that would be in the best interest of consumers." [Link to the full FTC statement.]
The 30-day extension allows both parties more time to negotiate, and possibly come to a settlement deal over the $565 million friendly acquisition by Whole Foods of Wild Oats Market, Inc., before the scheduled FTC administrative trial designed to decide the fate of the combined Whole Foods-Wild Oats starts on April 6, just 30-days after the FTC's 30-day extension of proceedings ends.
Based on what our sources have been telling us, as well as yesterdays decision by the FTC to extend the order to halt proceedings, its our analysis that both parties are hoping to reach a settlement agreement before that April 6 FTC trial start date.
In fact, in this January 29, 2009 piece [ Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement] NSFM called for the FTC and Whole Foods Market, Inc. to reach a settlement, suggesting the time has come for a meeting of the minds. We also set forth a simple blueprint both parties could use to aid them in negotiations.
In our Tuesday piece [Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?] we said this:
"Here is what we've learned thus far: Our source tells us the FTC has reviewed Whole Foods' initial settlement offer but wasn't completely satisfied by what it contained. We are told one element of the offer involves a willingness on Whole Foods' part to sell a number of the former Wild Oats stores, now rebranded under the Whole Foods Market banner, in some of the 29 U.S. markets where the FTC says a combined Whole Foods-Wild Oats is a monopoly in what the regulator calls the "premium natural and organic retailing segment (PNOS).
After reviewing the Whole Foods' settlement offer, we're told the FTC sent the natural grocery chain's outside legal counsel back to company CEO John Mackey and his top executives, suggesting the grocer needs to sharpen its pencil a bit more regarding its settlement offer. We were unable thus far to find out if the FTC has made any specific suggestions to Whole Foods' lawyers regarding in what specific ways Whole Foods Market, Inc. needs to sharpen the settlement offer."
Based on our source information we believe it was this turn of events, elaborated on more fully in the Tuesday story, which led to the FTC's decision late yesterday to extend its order to halt for an additional 30-days.
At the core of the FTC's legal challenge of the 2007 merger is that it argues a combined Whole Foods-Wild Oats is a monopoly in what the regulatory agency calls the "premium natural and organic retailing segment (PNOS)." This segment as defined by the FTC includes "premium natural and organic foods retailers" like Whole Foods Market, Inc., Portland, Oregon-based New Seasons Market (9 stores) and Ashville, South Carolina-based 15-store Earth Fare, Inc.
The fact Whole Foods Market and New Seasons Market have qualitatively different retail formats and focuses -- something that shouldn't be lost on those of you reading this who have experience in or with natural foods retailing and know about both retailers' formats and positioning -- apparently hasn't stopped the FTC from lumping the two natural grocers together in its PNOS category, which is a category we've argued in stories like this one [ Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly] is irrelevant because it doesn't describe the way natural and organic foods and related consumer packaged goods products are retailed in the U.S. in 2009.
This central argument, despite the fact it fails to describe the reality of the market, forms the core of the FTC's antitrust action against Whole Foods Market, Inc. post merger with Wild Oats. It's the fulcrum, so to speak.
And despite the folly of the argument -- the FTC is sticking to it. Therefore, as we suggested in our January 29 piece, the best course of action for Whole Foods Market, Inc. (and for the FTC) is to attempt to obtain a settlement deal, thereby saving it from further legal proceedings, which it has done.
We also believe it's in the best interest of the FTC to work out a settlement deal with Whole Foods Market, Inc. Fighting the merger has become much to much of a priority, perhaps even an obsession, for the FTC in the larger scheme of its mission as one of the U.S. Federal Government's antitrust watchdog agencies, even if it believes a combined Whole Foods-Wild Oats is a monopoly in what we argue is an artificial category -- PNOS -- which in our analysis is irrelevant to how natural and organic food and grocery products are retailed in the U.S. today. [We describe the multi-format retailing of natural and organic products in this piece, as well as in numerous others linked at the "recent bibliography at the end of this story.]
Therefore, we believe the 30-day extension by the FTC is a positive and wise move for both parties, as well as consumers. In 11 days, February 16, Whole Foods Market, Inc. will report its financials for the company's first fiscal quarter of the year. Those numbers aren't going to be very good. And they won't reflect the sort of income one would expect a monopolist retailer to turn in. As a result, the Q-1 numbers will add an additional and current argument to the "Whole Foods isn't a category monopolist" argument, in our analysis and viewpoint.
Meanwhile, our sources tell us the settlement negotiations between Whole Foods and the FTC are thus far progressing in a positive way. Stay tuned.
Natural~Specialty Foods Memo (NSFM) Linkage
FTC. v. Whole Foods Market: Recent Bibliography From NSFM
February, 2009
February 3, 2009: Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?... February 1, 2009: Promotional Merchandising Memo: Whole Foods Market's Super Bowl In-Store Promotional Merchandising Message: 'Value'....
January, 2009
January 31, 2009: Store Brands - Private Label Memo: Smart & Final-Owned Henry's Farmers Market Preparing to Debut New Natural & Organic 'Sun Harvest' Store Brand....January 29, 2009: Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement....January 25, 2009: Retail Memo: Judge Sets February Hearing Dates On FTC Motion That Could Result in Whole Foods Market Having to Rebrand 100 Former Wild Oats Units....
January 24, 2009: Retail Memo: Despite its Battle With the FTC and Other Struggles, Whole Foods Market Still Ranked 22nd 'Best Place' to Work in America By Fortune....January 24, 2009: Retail Memo - News & Analysis: Gelson's Chain Challenges Whole Foods' Subpoena For Trade Secrets; FTC Says No Like it said to New Seasons Market....
January 23, 2008: Retail Memo: Three Judge Federal Appeals Court Panel Rules Against Whole Foods' FTC Lawsuit Today; What's Next?.... January 21, 2008: Retail Memo: An Argument in Favor of the FTC in FTC v. Whole Foods Market, Inc. -- Or At Least Against Whole Foods' Legal Tactics....
January 19, 2009: Retail Memo: Concerned With Fast-Looming FTC Hearing Date Whole Foods Re-Files Lawsuit Taking it Directly to Washington, D.C. Federal Appeals Court....January 19, 2009: Retail Memo - Breaking News: Portland's New Seasons Market and Whole Foods Market, Inc. Reach Agreement; New Seasons Will Provide Trade Secrets....
January 16, 2009: Read Memo: Colorado Newspaper Columnist Joins NSFM's 'Whole Foods Market Isn't A Monopoly' Bandwagon....Friday, January 16, 2009: Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors....Thursday, January 15, 2009: Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly....
January 15, 2009: Retail Memo: Fresh & Wholesome Market Fears Not A Whole Foods Market Monopoly; In Fact Part of its Competitive Strategy is to Be the Anti-Whole FoodsRetail Memo: Whole Foods Offers Carrot and Stick to Retailers That Have Yet to Comply to Subpoena For Trade Secret Data and Information....
December, 2008
December 29, 2008: Retail Memo - Breaking News: New Seasons Market Doesn't Turn Over Trade Secrets to Whole Foods Market Despite Deadline to Do So Being Today....December 29, 2008: Independent Grocer Memo: Natural-Organic, Local, Fresh and Premium Keys to Pacific Northwest USA's Haggen Foods; Now Adding Value....December 28, 2008: Retail Memo: Web Site and Blog-Driven Viral Boycott of Whole Foods Market Stores in Portland, Oregon Region Going On; Could it Intensify?....December 28, 2008: Retail Memo: Tomorrow Deadline For Portland, Oregon's New Seasons Market to Turn Over Trade Secrets to Whole Foods Market's Legal Counsel....
December 24, 2008: Christmas Eve Memo 2008: 'Twas the Night Before Christmas' - FTC v. Whole Foods Market, Inc. Version....December 24, 2008: Independent Grocer Memo: From Mrs. Gooch's to the Auto Body Business, Then Back to Retail, Chris Kysar is On A Healthy Organic Foods Retailing Roll....December 24, 2008: Retail Memo: It's 'Deja Vu All Over Again' - Judge Paul Friedman to Whole Foods Market, FTC: 'What's My Role Here?'....
December 23, 2008: Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009....December 23, 2008: Independent Grocer Memo: National Grocers' Association Asks President-Elect Obama to Look Out For Independent Grocers When He takes Office in January....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....
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: 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 19, 2008: Retail Memo: Whole Foods' Lobbying Effort Baring More Fruit - House Committee Leaders Send Letter to FTC Chair Similar to One Sent By Senate Leaders....
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 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.
Natural~Specialty Foods Memo (NSFM) Archives
FTC v. Whole Foods - Linkage from the 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.
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