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

News & Analysis:

FTC. v. Whole Foods Market, Inc. - A Major Motion

Judge Paul Friedman, who presides in the U.S. Federal District Court for the District of Columbia, has set a two-day hearing on his court's calendar -- February 17-18, 2009 -- in which he will listen to arguments from U.S. Federal Trade Commission (FTC) and Whole Foods Market, Inc. lawyers regarding the FTC's motion asking the court to rebrand all of the former Wild Oats stores Whole Foods has thus far integrated and changed to the Whole Foods Market name. Judge Friedman also plans to offer a ruling on the FTC motion shortly after the two day hearing next month.

We first reported in this January 12, 2008 piece [ Retail Memo: FTC Asks Judge to Force Whole Foods to Put Most of the Wild Oats' Genie Back in the Bottle Pending A Resolution of its Merger Challenge] on the FTC's motion to Judge Friedman's court when the regulatory agency filed it.

In its legal filing the FTC asks Judge Friedman to rule in its favor on three key points:

>Order Whole Foods to rebrand (change the signs, ect.) the about 100 Wild Oats stores it's converted to the Whole Foods banner back to the Wild Oats banner.

>Put the operation of those rebranded stores in the hands of a third party.

>Order Whole Foods to stop converting any additional former Wild Oats stores into Whole Foods stores. Note: there are just a few of such stores left to integrate and convert.

points one and two are the most ominous for Whole Foods Market, Inc. should Judge Friedman rule in favor of the FTC's motion. Rebranding the about 100 stores already converted, which is nearly all of them except 6-12 former Wild oats units, would not only cost Whole Foods a substantial of money (did they save the Old Wild Oats signs, for example) but would essentially mean putting back together a format -- Wild Oats -- that didn't work all that well in the first place. It also would be a marketing nightmare as it would take away any benefits the stores have gained from the Whole Foods name and style of merchandising.

The FTC and some others may not be aware but when Whole Foods acquired Wild Oats in the summer of 2007 it was only after the Boulder, Colorado-based then minor rival to Whole Foods had shopped the company around all over to potential buyers, including the mega-supermarket chain Kroger, which took a pass on acquiring Wild Oats, as did all the others.

Point number two, which goes with rebranding the 100 or so already converted former Wild Oats stores, which is putting the operation of those stores in the hands of a third party, not only seems like a draconian request by the FTC -- one sure to cost Whole Foods lots of financial losses and loss of business at those stores -- but also one without any kind of clear road map.

What does Whole Foods do? Create a new corporate entity? After all, Wild Oats no longer exists as a corporate entity of any kind. Who would want to run it? Does doing so mean creating new finance, HR, marketing departments? A new President? (of this third-party entity). New buyers? Who would provide the employees at the 100 stores health insurance, something Whole Foods Market, Inc. pays 100% of for its employees? The third party?

And, would Whole Foods be forced to pay for all this? To fund the third party entity, including health insurance, ect.? We think so. It really might be better at that point for Whole Foods Market to just close those 100 stores and walk away. Take a write down. Sell the real estate when the economy improves. Or, ask the FTC to appoint a receiver to dispose of the "surplus" stores, arguing the costs of complying with the order are too massive to make keeping them profitable, which would be a real argument. Maybe even ask for a bailout? It's not unheard of these days.

Perhaps the FTC would be willing to run the 100-store former Wild Oats entity, taking a page from the U.S. Treasury Department which now owns huge chunks (and the best preferred stock in) of America's top banks like Citi and Bank America. Many economists think the next step for the Treasury Department is the nationalization of these banks because they now are asking for billions more. Perhaps the FTC should just nationalize the 100-store former Wild Oats entity. We bet Whole Foods would entertain a decent offer -- one as decent as Treasury gave the big banks -- for those 100 stores.

Regarding point three, Whole Foods' ceasing to further integrate any more of the former Wild Oats stores, that would be something Whole Foods Market, Inc. could live with without much grief. In fact, lawyers for Whole Foods told Judge Friedman last week that the natural grocery chain has voluntarily stopped integrating and rebranding any additional stores, along with agreeing to not close any more former Wild Oats stores until the case is settled.

We think that's a smart move in that it tosses a somewhat real and largely symbolic bone to the FTC in terms of the hearing in Judge Friedman's court on the three-part motion.

Plus, since lawyers for the FTC argue there are exceptions to the voluntary offering from Whole Foods, exceptions they say will allow the company to continue to integrate Wild Oats assets into the Whole Foods brand, ruling in favor of the FTC on just that one point would still be a "real" ruling by Judge Friedman for the FTC.

The judge's ruling?

Natural~Specialty Foods Memo (NSFM) is going to go out on a limb and offer what we think will be Judge Friedman's decision on the FTC motion.

We think he will grant the third point of the FTC's wish list, that Whole Foods' cease from rebranding and closing any additional former Wild Oats stores.

But we don't think the judge will grant the other two key points in the FTC's motion: That all of the former Wild Oats store so far rebranded be returned to the original Wild Oats' status, and that those about 100 stores be turned over to a third party entity to run them.

It's also possible that the judge could rule that the about 100 stores be rebranded, but still allow Whole Foods to operate them. If he does grant that aspect, we are rather certain he would do so in this way, based on close observation of how he has handled the case since the summer of 2007.

Of course we could be wrong on all counts.

If so, such a decision will be extremely costly for Whole Foods Market, Inc. at a time when the value of the company has decreased by a whopping 70% since its friendly acquisition of Wild Oats -- a deal Whole Foods' CEO John Mackey now says publicly he would never do over. Like Whole Foods Market's lead outside legal counsel Lanny Davis has sais, in a different context though, "You can't put the toothpaste back in the bottle."

In our analysis, rebranding the stores and turning the operations over to a third party does nothing to further the FTC's case.

What it does do though is give the FTC a de facto temporary victory in breaking up the merger. Why? Because were Whole Foods have to rebrand these 100 stores, then later if it wins the case, change them back again to Whole Foods stores, the cost of doing so, and the loss of customer goodwill would likely result in Whole Foods' ending up getting rid of or closing a number of these stores because of the extensive costs from all of the rebranding and the loss of business during the process.

This motion makes no sense other to to play hardball with Whole Foods. Judge Friedman, who originally issued the ruling in favor of Whole Foods that gave the natural grocer the green light to go forward with the integration process, has played it pretty fair throughout this long process, in our analysis. Therefore it would surprise us if he ruled in the FTC's favor on the two draconian aspects of the regulator's motion -- the rebranding of the about 100 former Wild Oats stores, now changed to Whole Foods, back to the Wild Oats name and their placement with a third party to operate them.

But it's merely our analysis and opinion. It won't be until after the February 15-16 hearings until we know what Judge Friedman's actual ruling will be. And for Whole Foods Market that ruling has profound consequences as it prepares for the April 6, 2009 trial on the merger to be held by an FTC Administrative Law Judge in Washington, D.C. It also has profound consequences for the natural grocer's everyday operations. Stay tuned.

Retail Memo: Three Judge Federal Appeals Court Panel Rules Against Whole Foods' FTC Lawsuit Today; What's Next?

Whole Foods Market, Inc. v. FTC: The Lawsuit

A three-judge panel of the United States Court of Appeals for the District of Columbia didn't waste anytime in rejecting today the legal petition filed late last week by Whole Foods Market, Inc. in which the natural grocery chain asked the court to block the U.S Federal Trade Commission (FTC) from holding its planned April 6, 2008 Administrative trial on the Whole Foods-Wild Oats merger. [The FTC's Bureau of Competition is the agency department responsible for contesting the merger.

In a brief, one page ruling released by the court this afternoon, it denied Whole Foods' request to remove the FTC from jurisdiction over deciding the legality and status of its 2007 friendly acquisition of then Wild Oats Market, Inc. and refused to bar the regulatory agency from holding its April 6 Administrative trial. In short, the appeals court dismissed Whole Foods' lawsuit against the FTC.

As we reported and wrote about in this January 19, 2009 piece [Retail Memo: Concerned With Fast-Looming FTC Hearing Date Whole Foods Re-Files Lawsuit Taking it Directly to Washington, D.C. Federal Appeals Court], late last week Whole Foods Market, Inc. filed an emergency petition with the federal court of appeals, asking it to decide on its lawsuit to remove the FTC from the case and stop the April 6 Administrative trial. Whole Foods said it filed the petition with the appeals court rather than let the motion remain to be decided in the court of U.S. Federal Judge Paul Friedman, where it was pending, because with the April 6 FTC trial date looming it needed to get a decision on the petition as fast as possible.

The federal appeals court did just that -- ruling in favor of the FTC just one week after Whole Foods filed the petition with the court.

In its lasuit Whole Foods argued that the FTC already has prejudged the merger case and can't possibly give the company a fair hearing. And that in doing so the FTC has deprived the retailer of its due process rights, the lawsuit argued. [Read our December 8, 2008 on the filing: Retail Memo: Breaking News - Whole Foods Market, Inc. Files Lawsuit Against the FTC; Argues the Regulator Violated the Company's Due Process Rights.]

Natural~Specialty Foods Memo (NSFM) predicted in our January 19 story that the three-judge federal appeals court panel would do just what it did do today, which is to rule against Whole Foods' petition and in favor of the FTC. Below (in italics) is what we wrote in our January 19 story:

"It's our analysis that Whole Foods' outside legal council, led by Washington, D.C.-based lawyers Lanny Davis and Paul Denis -- the attorney who will be arguing the natural grocery chain's case at the April 6 FTC hearing/trial -- believe the petition won't be granted and that the hearing will go forward. We suggest this because all indications are that will be the case, based on our extensive research on FTC v. Whole Foods Market, Inc. at this point in time. This is our independent analysis. None of the members of Whole Foods' outside legal council has suggested to us it's their opinion.

Whole Foods' outside legal council has about two months to prepare for the FTC Administrative hearing/trial. Obviously the natural grocery chain's lawyers would like to have a ruling on the lawsuit petition as soon as possible because if, for example, they were to get a ruling in the company's favor by the appeals court that means instead of preparing for the FTC Administrative hearing they would need to rapidly shift gears and prepare for a hearing back in the courtroom of Federal Judge Paul Friedman, which is where the case would most likely go if the federal appeals court removes the FTC's jurisdiction. That's why it makes logical sense to us that Whole Foods Market re-filed the case in the federal appeals court."

Whole Foods' lead lawyer in the case, Lanny Davis of the Orrick law firm, said today in a statement that the natural grocery chain is studying the appeals court ruling and might refile its lawsuit against the FTC. As mentioned above, the lawsuit was first filed in Judge Friedman's courtroom and then refiled with the court of appeals late last week.

"There is no question our due (Whole Foods market, Inc.) process and equal protection rights have been violated and we intend to pursue this case until we can get a hearing in a federal court about those violations," Davis said in a statement today after the appeals court ruling.

We tried to get hold of a spokesperson at the FTC this afternoon, interested in the agency's take on the decision today, but were told it had no immediate comment on the decision.

At this point Whole Foods might be able to refile a lawsuit against the FTC. But its unlikely a court would hear and rule on it before the scheduled April 6, 2009 FTC trial, which is just a bit over two months away. After all, now that the appeals court has ruled, Judge Friedman won't likely entertain the lawsuit since the reason Whole Foods' took it out of his court in the first place was because the company wanted a rapid decision, which they got today. Also the FTC had already said that if Judge Friedman ruled in favor of Whole Foods, the regulator would have appealed it to the federal appeals court anyway.

Additionally, since it is the U.S. Federal Appeals Court that ruled today, it appears unlikely that same court would hear and rule on the same, or a similar, lawsuit once again.

As a result, it seems Whole Foods most likely will have to resign itself to face the April 6 FTC Administrative trial, even if it does refile the lawsuit.

We talked to an experienced antitrust lawyer today who basically agreed with our analysis, saying he couldn't see any quick alternatives for Whole Foods Market, Inc. in terms of beating the April 6 deadline considering the appeals court's ruling today, particularly because Whole Foods has asked for a speedy decision.

We suspect Whole Foods' outside legal council will attempt to find a way to refile the lawsuit however. But its our analysis that unless something dramatic happens between now and April, that April 6 FTC Administrative trial is going to happen. Stay tuned.

Retail Memo: It's 'Deja Vu All Over Again' - Judge Paul Friedman to Whole Foods Market, FTC: 'What's My Role Here?'

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

In this December 22 story [Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation] about the FTC v. Whole Foods Market, Inc. antitrust case and the related Whole Foods Market, Inc. v. FTC counter lawsuit hearing this week in the U.S. Federal Court for the District of Columbia courtroom of Judge Paul Friedman (pictured at top), we commented:

"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."

This comment has to do with the fact that Judge Friedman is the federal jurist who heard the original FTC v. Whole Foods Market, Inc. case last year in which the federal regulatory agency filed a legal claim opposing Whole Foods' acquisition of Wild Oats on antitrust grounds, claiming (as it still is) that a combined Whole Foods-Wild Oats is a monopoly in numerous U.S. markets in what the FTC calls the 'premium natural and organic retailing segment."

After numerous back-and-forth legal motions and hearings, Judge Friedman ended up ruling in Whole Foods' favor and against the FTC, giving the natural foods grocery chain the green light to go forward with the merger and integrate Wild Oats into its operations and culture, including changing the Wild Oats' banner stores over to the Whole Foods brand.

The FTC reopened its administrative case against the deal this year though, as federal regulations allow it to do. It then appealed Judge Friedman's ruling in favor of the merger to a federal appeals court, which ended up ruling in favor of the FTC and sending the 'whole matter' back to Judge Friedman.

As we've reported, the FTC also has set an administrative trial before an FTC Administrative Law Judge, first for February, 2009 and now postponing it until April 6 of next year. At that hearing or administrative trial, the Administrative Law Judge will make a ruling on the merger, either that it can remain a done deal or that it should be overturned. If the ruling goes against it, Whole Foods can appeal to a federal court.

Meanwhile, since the matter is now back before Judge Friedman, he also will rule on the deal -- once again.

For the judge it's, as we wrote yesterday in this piece [Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009], in the words of Yogi Berra, deja vu all over again.

The fact is, Judge Friedman thought he had obtained a couple of legal careers' worth of premium organic category and segment talk, whole grain and oats' (wild or otherwise) debates, and whole rather than partially-whole foods' retailing written and oral arguments as it all pertains to natural and healthy foods retailing in America. But like baseball great and sidewalk philosopher Yogi Berra also has said: "It's not over until it's over."

The Legal Times legal publication appears to agree with Natural~Specialty Foods Memo's analysis of Judge Friedman and his return to the world of natural and organic food retailing merger and acquisition debate in the form of FTC v. Whole Foods Market, Inc. 2.0 and now Whole Foods Market, Inc. v. FTC, "The Lawsuit."

In a piece in its Blog published yesterday titled: "Judge to Whole Foods, FTC: What's My Role Here?, written by Mike Scarcella, the writer describes a scene in Judge Friedman's courtroom at the first status hearing on Monday, December 22. Below (in italics) is the writer's post from the BLT (Blog of the Legal Times):

Judge to Whole Foods, FTC: What's My Role Here?
Blog of the Legal Times (BLT)
By Mike Scarcella
December 23, 2008

There was a homecoming of sorts in the D.C. courtroom of U.S. District Judge Paul Friedman this week when lawyers for Whole Foods and the Federal Trade Commission gathered together for the first time in court in a long time. The BLT did not note any hugs.

The saga of the Whole Foods antitrust dispute with the FTC is long and complicated, and somewhere in the middle—or perhaps on one side—is Friedman (pictured at left). Friedman ruled against the FTC effort to block the merger between Whole Foods and Wild Oats. The companies merged in a $565 million deal in August 2007.

But Friedman’s decision was reversed on appeal this year in a rare 1-1-1 vote by Judges Janice Rogers Brown, David Tatel, and Brett Kavanaugh of the U.S. Court of Appeals for the D.C. Circuit. Brown and Tatel voted for remand. And so the lawyers met again before Friedman.

“It is truly a pleasure to see you again,” Matthew Reilly of the FTC’s Bureau of Competition told Friedman. “I’m much happier to see you than Judge Brown or Judge Tatel,” responded Friedman, drawing laughter from the more than two dozen people at the hearing.

Dechert partners Paul Denis and Paul Friedman (not the judge) were among the lawyers representing Whole Foods, which is now defending the merger in federal court and at the FTC. An FTC administrative trial is set for next year.

Lanny Davis of Orrick, Herrington & Sutcliffe was there, too. Davis, also representing Whole Foods, is fighting the FTC in court in a suit that alleges the FTC is biased and should be barred from holding the administrative trial. In the suit filed this month, Davis says the FTC has prejudged the merits of the merger and that Whole Foods won’t find impartiality at the FTC. The complaint is also before Judge Friedman; government lawyers have filed a motion to dismiss.

At the status conference Monday, Judge Friedman said he would hold a subsequent hearing on the government's motion to dismiss. Simple enough. The more complex issue discussed at the hearing was the scope of the remand proceedings. Friedman and the lawyers struggled over what is expected from the judge.
Judge Friedman compared the D.C. Circuit split opinion to the Supreme Court’s decision in 2000 in Bush v. Gore. The appellate court opinion, Friedman said, “doesn’t stand for anything” because there is no clear majority.

Friedman asked Whole Foods’ lawyers and the FTC to write up briefs—no more than eight pages—telling him how he should interpret the D.C. Circuit opinion. “My gut reaction is that it requires me to read these two opinions a couple more times,” Friedman said. Friedman will issue an opinion articulating his role in the remand proceedings.

Not to take the quoting business too far (we hope readers will allow us just one more) but Natural~Specialty Foods Memo is reminded of just one more quote. This one is from the late comedian Flip Wilson, and it is his signature line, which is -- "Here Come Da Judge."

Stay tuned.

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

The U.S. District Judge, Paul Friedman, who previously ruled in favor of Whole Foods Market, Inc.'s friendly acquisition of Wild Oats Market, Inc. last year, today directed the U.S. Federal Trade Commission (FTC) to detail in writing how Whole Foods could stop its essentially completed merger with Wild Oats, including offering ways it could take apart the merged chains if a ruling were to overturn the 2007 deal. In legal terms Judge Friedman is asking the FTC to detail the proposed remedy were a ruling to go in its favor.

This is a partial win for Whole Foods in its battle with the FTC because it's the first time the U.S. Federal Court has stepped into the matter since the natural foods grocery chain filed its lawsuit against the FTC two weeks ago. The FTC's having to reveal a proposed remedy in writing also will allow Whole Foods Market, Inc. to see what the regulator has in mind for the combined Whole Foods-Wild Oats combined company should it win in court.

But the judge's order to the FTC also is a partial win for the FTC because the federal judge hearing the case signaled he is open to a close re-examination of his previously ruling on the deal; a ruling that was in favor of Whole Foods.

At a "status hearing" today (the first on the matter) on the FTC v. Whole Foods Market, Inc. case, Judge Friedman also said he will make a determination as to weather the acquisition is anti-competitive, which is something Whole Foods Market, Inc. is asking the U.S. Federal Court to do.

Judge Friedman's previous decision that the acqusition-merger is not anti-competitive -- the legal decision which prompted Whole Foods to go forward with integrating the Wild Oats stores into its operations -- was overturned by a three-judge federal appeals court panel, which then sent the case back to the judge for another examination.

At today's hearing, the first hearing since the appeals court's ruling in favor of the FTC, Judge Friedman said his desire is for Whole Foods Market, Inc. and the FTC to come to a "possible agreement to keep things frozen in place or semi-frozen in place while I tee up the remand proceeding." In other words, he wants nothing to change until he makes a ruling once again on the acquisition-merger, and determines if it is or isn't anti-competitive.

This suggestion by the judge poses a conflict for the FTC (and thus Whole Foods as well) because it plans to hold an administrative trial before an FTC-named Administrative Law Judge in February, 2009, as we've reported, in which that judge will offer a ruling on whether or not the acquisition-merger should be overturned.

Judge Friedman was clear in his words today that he wants nothing to occur until he makes a legal decision on the case. He could make such a decision before or after February of next year.

Judge Friedman's instruction to the FTC at today's hearing to provide a roadmap of how Whole Foods could take apart the now essentially completed merger was influenced strongly by arguments made by one of the lawyers from Whole Foods Market, Inc.'s outside law firms, antitrust attorney Paul Denis.

Denis, who is with Dechert LLP., one of the three Washington, D.C.-based law firms representing Whole Foods in the case, argued at the hearing today that Whole Foods and Wild Oats stores "already operate as one unit." "We have one human resources system...We have one purchasing system," he told Judge Friedman. Denis is a partner with Dechert LLP.

In an interesting development following Denis' remarks at the hearing, FTC attorney Matthew Reilly said it would be difficult, but not impossible, for Whole Foods to stop the integration with Wild Oats that has been occurring for the past 16 months. He told the judge 19 Wild Oats stores have closed since the merger. Another 70 Wild Oats stores are in the process of "rebranding" to operate under the Whole Foods banner.

He left out the near-40 Henry's and Sun Harvest banner stores Whole Foods Market, Inc. sold off to Smart & Final, Inc, shortly after the deal was done last year. Additionally, most of the 70 Wild oats banner stores mentioned are either already rebranded or almost so, including some that have been remodeled or are in the process of being remodeled.

Judge Friedman agreed on both the difficulty but the not impossible nature of Whole Foods' taking apart the merged companies saying in response to the FTC lawyer's remarks that "a higher court wouldn't have sent the case back to me if they thought nothing could be done (in terms of stopping the integration)."

Therefore the judge instructed the FTC to provide him with a written, detailed overview of how it believes Whole Foods Market, Inc. could achieve a break up at this point in time.

This is positive news for the FTC in that the judge is saying there was cause for the federal appeals court to return the anti-competitive case back to his court, and in asking for the new information from the agency he is signaling that he's not closing the door on further analysis of the deal post-appeals court, despite earlier ruling in Whole Foods' favor. As we mentioned earlier, it also will give Whole Foods a look at what the FTC plans regarding a break up, which is something the natural grocer has no idea of at present.

The FTC has argued for the last 16 months that a combined Whole Foods-Wild Oats presents a anti-competitive monopoly in what it calls the "premium natural and organic retailing segment" in numerous U.S. Markets. Whole Foods says this is false -- that a combined Whole Foods-Wild Oats actually offers a benefit to consumers, and that the natural foods chain has more than enough competition in all U.S. markets.

Whole Foods' lawyer Paul Denis told Judge Friedman at the hearing today that the FTC has failed to take into account the evolution of the natural and organic foods retailing industry in which there are numerous retailers of all formats selling the category products today, suggesting to the judge he should take this into account, including the increased number of players that have come on the scene in the 16 months since the friendly acquisition of Wild Oats by Whole Foods was completed.

As Natural~Specialty Foods Memo readers are aware (and others can read about in our past posts linked at the end of this piece), we have been arguing since last summer that the FTC's argument that a combined Whole Foods-Wild Oats presents a monopoly is unfounded for two primary reasons.

First, that its definition of the "premium natural and organic retailing segment" (which is the central basis or fulcrum of its entire anti-competitive argument) is irrelavent today because natural and organic products retailing in the U.S. today (and last summer as well) is a multi-format, competitive industry in which consumers no longer need rely on a single retailer like Whole Foods for a complete selection of category products.

Extensive selections of fresh and shelf-stable natural and organic foods can be purchased today at supermarkets -- stores owned by Safeway Stores, Inc., Kroger Co. and Supervalu, Inc., for example (all three of these big national chains even have their own store brands of organics); at scores of regional chains (think Publix in the south, Wegmans in the east, Raley's in the west for just three major examples) and at hundreds of independents; at major mass merchandisers such as Wal-Mart, Target, Costco, BJ's Wholesale Club and others; at specialty chains like Trader Joe's and others; as well as at fast-growing natural foods chains like Sunflower Farmers Market, Sprouts Farmers Markets, Earth Fare and many others across the country, including hundreds more independent and co-op natural foods markets.

Additionally, we've argued that demonstrative evidence in the form of Whole Foods Market, Inc.'s performance over the last 16 months since it acquired Wild Oats shows anything but a monopolistic natural foods chain in action.

For example:

>Whole Foods net income was off by a whopping 40% in its last quarter.

>Whole Foods stock share value is off by 70% from its high following the Wild Oats acquisition.

>Whole Foods fired over 100 headquarters employees a few months ago because of its dramatic drop in income and sinking value as a company.

>Whole Foods has cut in half its growth plans for fiscal year 2009, reducing by more than half from about 35 to about 15 the number of new stores it had previously planned to open, along with cutting back on store remodeling programs.

>Whole Foods had instituted an across the board, at its headquarters and in its stores, cost-cutting program, instructing employees to better rationalize all expenses in what are tough times for the natural grocery chain.

>Whole Foods just sold 17% of the company in order to raise $465 million, which is needs not only to help pay off the about $150 million in debt it acquired as part of the Wild Oats merger, but also needs for funding its basic operations expenses, as well as to fund its scaled-down growth plan for fiscal 2009.

If it walks tall like a "natural and organic premium retailing segment" duck and talks loudly like a "premium natural and organic retailing segment" duck -- then it is one. But Whole Foods Market, Inc. neither looks like a category retailing monopolist based on its performance over the last 16 months nor is it walking and talking like one. The fact is it's far from it on all counts.

In fact, the FTC is about the only entity, or person, that thinks Whole Foods Market, Inc. presently holds a monopolist position of any kind in any market. Those in the natural and organics product industry, including most of Whole Foods' retail competitors and its suppliers, currently are viewing the natural foods chain as a struggling retailer, wondering what it will do next to improve its performance.

At the hearing today Judge Friedman also commented on Whole Foods' lawsuit against the FTC, in which the natural grocer asks the federal court to dismiss the regulator's administrative case against it and rule once and for all on the Wild Oats' acquisition. The lawsuit is before Judge Friedman.

In countering, the FTC has asked the Judge Friedman to dismiss Whole Foods' lawsuit against its case.

Judge Friedman said today he would rule on the government's (FTC) dismissal motion of Whole Foods Market, Inc.'s lawsuit before he takes up whether Whole Foods' purchase of Wild Oats was anti-competitive.

This means we will first see a ruling on the lawsuit from the judge before he begins hearing the FTC v. Whole Foods case (the overall case against the deal) that was returned to him by the federal appeals court.

Stay tuned.

Reader Resources

FTC v. Whole Foods Market - Whole Foods Market v. FTC: Recent coverage and analysis in Natural~Specialty Foods Memo:

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 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.