Retail Memo: Concerned With Fast-Looming FTC Hearing Date Whole Foods Re-Files Lawsuit Taking it Directly to Washington, D.C. Federal Appeals Court

FTC v. Whole Foods Market, Inc.

Late last week Whole Foods Market, Inc. re-filed its lawsuit against the U.S. Federal Trade Commission (FTC) in the U.S. Court of Appeals for the D.C. Circuit in order to sooner reach a decision on the merits of the case, according to Jim Sud, Whole Foods' executive vice president of growth and business development.

The grocery chain's lawsuit petition charges the FTC with violating Whole Foods Market's due process and equal protection rights, as Natural~Specialty Foods Memo (NSFM) has previously reported. The petition asks the federal appeals court to remove the FTC's jurisdiction over the Whole Foods-Wild Oats merger and return the case to U.S. Federal Court where Whole Foods wants the deal to be decided once and for all.

This move by Whole Foods removes the lawsuit against the FTC from the courtroom of U.S. Federal Judge Paul Friedman, who was preparing to rule on the petition. Judge Friedman will still hear and rule on other motions and aspects of the case between the FTC and Whole Foods Market, Inc.

Whole Foods' Sud says "because the FTC's administrative trial begins on April 6, 2009, Whole Foods Market decided not to spend time arguing the case on jurisdictional grounds and voluntarily withdrew it from the federal district court, re-filing it in the court of appeals."

The FTC had already indicated that if Judge Friedman ruled in favor of Whole Foods' lawsuit, removing the regulator's jurisdiction over the matter, it planned to appeal the judge's decision to the very same U.S. Federal Court of Appeals that the grocery chain has re-filed its case in. During such an appeal the FTC would still be able to hold its planned April 6, 2009 hearing/trail in which the fate of the Whole Foods-Wild Oats merger will be determined.

Therefore it appears to us that rather than take the chance of this happening, should Judge Friedman even have ended up ruling in the natural grocer's favor and then having the FTC appeal the decision, which would have meant no final decision could be reached before the scheduled FTC Administrative trail on April 6, Whole Foods Market has decided to take its chances by going directly to the federal court of appeal in hopes of getting a ruling as soon as it can prior to the April 6 FTC hearing/trail.

This is what Whole Foods' Jim Sud says in this regard: "Whole Foods Market is interested in getting to the merits of this case as quickly as possible rather than spending everyone's valuable time and resources arguing about jurisdiction. Filing with the Court of Appeals, which the FTC concedes has jurisdiction over the case, saves time and we want to move this case forward in the most expeditious manner for all concerned."

As we've previously reported, In its petition, Whole Foods Market asks the Court to bar the FTC from conducting a trial that would violate the company's due process rights because the FTC has already publicly prejudged the case against Whole Foods Market and has refused to give the company enough time to prepare for the administrative trial.

The petition also alleges that companies under the jurisdiction of the FTC, like Whole Foods Market, are subjected to a different standard of justice than those under the U.S. Department of Justice, which does not engage in further litigation if it loses a preliminary injunction. In this case, the FTC lost a preliminary injunction but started an administrative trial 18 months later. A Congressionally-mandated commission has called for abolishing the dual system that allows the FTC to conduct its own administrative trial while the Department of Justice can only proceed in federal court.

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.

Once the federal appeals court rules, if it conversely rules in the FTC's favor, the next major step in FTC v. Whole Foods Market, Inc. will be the April 6, 2009 Administrative hearing trail. Our analysis is that this is what will happen. And as mentioned above, if the appeals court rules in favor of Whole Foods' petition, a date would then be set to begin holding hearing in U.S. Federal Court in Washington, D.C., likely back in Judge Friedman's courtroom.

Stay tuned.

Natural~Specialty Foods Memo (NSFM) Reader Resource

FTC. v. Whole Foods Market, Inc. - NSFM recent bibliography:

January 16, 2008: Retail Memo - Breaking News: Portland's New Seasons Market and Whole Foods Market, Inc. Reach Agreement; New Seasons Will Provide Trade Secrets....January 16, 2008: 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>Thursday, 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....

Monday, January 12, 2009: Retail Memo - Breaking News: Whole Foods Press Conference Tomorrow; Objective: Get Retailers to Comply With Subpoena; Need: Urgent>Monday, January 12, 2009: 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....

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.

Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation

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.

Reader Resources

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.

Retail Memo: Whole Foods' Lobbying Effort Baring More Fruit - House Committee Leaders Send Letter to FTC Chair Similar to One Sent By Senate Leaders

Lanny Davis (Aka: 'Mr. Natural') is the face for Whole Foods Market, Inc. in its lawsuit and lobbying campaign against the FTC's efforts to overturn the natural grocer's 2007 acquisition of Wild Oats. We've dubbed Lanny Davis 'Mr. Natural' for the 'natural' way in which he gravitates to controversial issues and people and for his affiliation with America's premiere 'natural grocer,' Whole Foods. [Photo credit: Fox News.]

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

On December 15 we reported in this story [Retail Memo: Eight Members of U.S. Senate Judiciary Committee Send Letter to FTC Chairman Regarding FTC's Legal Case Against Wild Oats' Acquisition] that on Friday evening, December 13, eight members of the U.S. Senate Judiciary Committee sent a letter to U.S. Federal Trade Commission (FTC) Chairman William Kovacic regarding issues of FTC enforcement that have a direct relation to its attempt to overturn Whole Foods Market, Inc.'s 2007 acquisition of Wild Oats. [The Senate Committee letter to the FTC's Kovacic.]

Now, just a week after the eight members of the Senate Judiciary Committee sent their letter, the ranking members of the House of Representatives Judiciary Committee (the Senate's sister committee in the House) have sent their own, similar, letter to the FTC Chairman.

The letter, signed by Rep. John Conyers (D-Mich.), the chairman of the House Judiciary Committee, and Rep. Lamar Smith (R-Texas), the ranking member, focuses on the disparity of the different approaches to enforcement the FTC and the Department of Justice use for reviewing mergers. The FTC uses an administrative process to evaluate the legality of mergers, and the Justice Department, as a law enforcement agency, uses the federal court system.

"We are concerned that this disparity may not be in the best interests of promoting sound antitrust enforcement and its broad support among the business community and American citizens,” the letter says. [The letter to Federal Trade Commission Chairman William Kovacic.]

The letter essentially suggests the way the Department of Justice reviews mergers through the federal courts is the most fair process.

The letter from the leaders of the House and Senate committee leaders are similar in that both argue in essence that the FTC's administrative review process may violate the due process of merging and acquiring companies. This argument is central in Whole Foods Market, Inc's lawsuit against the FTC, in which it argues the regulator has violated the natural grocery chain's due process rights in its ongoing legal case designed to break up the friendly acquisition-merger with Wild Oats.

In its lawsuit, Whole Foods wants the matter of the acquisition taken away from the FTC and moved to a U.S. federal court, where the company is asking the issue be settled once and for all.

The FTC opposes this and says the administrative hearing/trial it has set for February, 2009 with an Administrative Law Judge is fair. That Administrative Law Judge will determine at the administrative trial the status of the acquisition-merger. If the judge rules in the FTC's favor and the deal is overturned, a deal that is now essentially completed, Whole Foods Market, Inc. can appeal that decision to a federal court.

In our December 15 piece, we wrote that the letter from the top U.S. Senate Judicial Committee members to the FTC Chairman was the first sign Whole Foods' extensive legal, lobbying and public relations attack against the FTC was beginning to bare fruit.

As we've written about previously, that multi-front campaign includes: the lawsuit against the FTC, which is being conducted by three of Washington D.C.'s top law firms; a Capital Hill lobbying campaign being conducted by The Glover Park Group, one of the capital's most strongly Democratic Party-connected firms; and a media and grass roots public relations campaign being conducted by outside public relations consultants for Whole Foods as well as internally by the natural grocery chain. That campaign includes having as many as 50,000 Whole Foods Market store employees contact their local federal legislators, making them aware of the issue and asking them to advocate for "Fair Play For Whole Foods By FTC," according to Walter Robb, Whole Foods Market, Inc.'s co-president.

Former Special Counsel to President Bill Clinton and current senior advisor to Secretary- of-State-in-Waiting in the Obama Administration Senator Hillary Clinton, Lanny Davis, who is a partner at the Washington D.C. office of the law firm Orrick, Herrington & Sutcliff, is leading the charge for Whole Foods Market, Inc., managing the overall legal team and lobbying campaign.

Eileen O’Connor, a lawyer at Orrick, Herrington & Sutcliff working on the Whole Foods case under Lanny Davis, confirmed that Whole Foods' representatives spoke with both House Judiciary Committee Chairman John Conyers (Democrat) and Republican Ranking Member Lamar Smith last week, indicating the lobbying effort is indeed baring fruit.

Lanny Davis, who is now the chief spokesman for Whole Foods on the issue, said today in a statement about the letter from the House committee leaders: "Whole Foods has not asked Members of Congress to take sides in any ongoing litigation. We're not going to comment specifically on this letter except to say that we share the concerns of Chairman Conyers and Congressman Smith, as expressed in the letter."

Always on message -- a practice he honed serving as former President Bill Clinton's chief legal counsel during some rather tough times for the President, along with serving as one of the most visible advocates for Senator Hillary Clinton during her run for the Democratic party nomination for President (and when she lost for her to be Vice President, and then Secretary of State) this year, Davis made a very similar statement right after the members of the Senate Judiciary Committee sent their letter to the FTC Chairman last week, as we reported here.

Lanny Davis (who we are nicknaming "Mr. Natural" since he has become the public face of natural grocer Whole Foods Market of late) and company are among other things working very hard to try and make sure President-Elect Barack Obama appoints a new FTC Chairman who is more favorable to the arguments made in Whole Foods Market's lawsuit against the FTC, along with the sentiments expressed in the letters from the House and Senate committee leaders, than one who isn't. President-elect Obama should make that appointment soon.

This is where politics and law intersect closely in the nation's capital, which is why Whole Foods is conducting a massive (and expensive) lobbying and PR campaign along with its lawsuit against the FTC.

Reader Resources

Recent linkage: Coverage from Natural~Specialty Foods Memo of FTC v. Whole Foods Market and related issues. Just click on the story title below to read it:

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.

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.

Retail Memo: Eight Members of U.S. Senate Judiciary Committee Send Letter to FTC Chairman Regarding FTC's Legal Case Against Wild Oats' Acquisition

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

Whole Foods Market, Inc.'s Washington, D.C. lobbying blitz against the U.S. Federal Trade Commission (FTC) may be baring its first fruit.

Late Friday (December 12) afternoon eight members of the U.S. Senate Judiciary Committee, including Democratic Chairman Patrick Leahy (D-Vt) and Republican Ranking Member Arlen Spector (R-Pa), sent a letter to FTC Chairman William Kovacic in which they say the committee is concerned that the FTC has unfairly shortened the window for proposed changes to its standard Rules of Practice. This is one of the side arguments Whole Foods makes in the lawsuit it filed against the FTC last Monday.

The Senate Judiciary Committee's letter to the FTC Chairman says: "The procedure by which the Federal Trade Commission introduced proposed changes to Part 3 of its Rules of Practice was flawed, and those flaws diminish the FTC’s credibility and raise doubts about the substance of the rules themselves."

In addition to Chairman Leahy and Ranking Member Spector, the letter is signed by Sen. Tom Harkin (D-Iowa), Sen. Dianne Feinstein (D-Ca.), Sen. Charles Schumer (D-N.Y.), Sen. William Nelson (D-Fla.), Sen. John Cornyn (R-Texas), and Sen. Benjamin Cardin (D-Md.).

As we've reported, Whole Foods Market filed a lawsuit in U.S. federal court in Washington, D.C. last week to have the legal dispute removed from the FTC’s jurisdiction. The FTC argues Whole Foods' acquisition of Wild Oats Market, Inc. last summer has resulted in Whole Foods Market, Inc. having a monopolist position in about 29 U.S. markets in what the regulator calls the "premium organic retailing segment," meaning by the FTC's definition food retailers that specialize in selling premium organic food, grocery and related products. The issue comes under antitrust law.

In a related development, last Friday (December 12), the FTC filed a motion with the U.S. federal court to have Whole Foods Market's lawsuit against the regulatory agency dismissed. The court has yet to rule on the FTC's request.

A Senate Judiciary spokesperson for the chairman said today the letter from the eight committee members was not a result of lobbying efforts on behalf of Whole Foods Market, Inc.

Those efforts, as Natural~Specialty Foods Memo has reported and written about extensively, are being led by politically-connected Democratic lawyer-lobbyist Lanny Davis, former Special Counsel to President Bill Clinton. Whole Foods also has retained the well-connected (mostly Democrat) Washington, D.C. lobbying firm The Glover Park Group to plead its case with members of the U.S. Senate and U.S. House of Representatives.

The Senate committee spokesperson says: "The concerns expressed in this letter have been circulating in the antitrust community for some time, and so these members (of the Judiciary Committee) sent a letter to the FTC in order to receive some answers to those concerns."

The concerns have been around for sometime in the antitrust community. However, until lawyers and lobbyists for Whole Foods' brought them up in a big way in the lawsuit filed last Monday against the FTC, which was followed by a high profile press conference on Capital Hill the following day, and which since then has been what amounts to a massive lobbying campaign on the hill and via the media, they were essentially back burner concerns.

We doubt the chairman and members of the Judiciary Committee would have sent the letter late Friday afternoon absent the publicity Whole Foods Market's legal team and lobbyists have been able to create in the last week. That's how Washington, D.C. works after all -- the louder the noise, particularly noise made by well-connected Washington lawyers and lobbyists, the faster a response is obtained.

The letter from the committee members only expresses "concern" however. It has no legal bearing on any decisions FTC members may or may not make. And, the letter does not argue favorably for Whole Foods Market, Inc., or against the FTC's case against the natural grocery chain, or in favor of Whole Foods' lawsuit against the FTC.

The letter from the eight committee members does however mention another issue that Whole Foods Market, Inc. raised in its civil complaint lawsuit against the regulator -- that the FTC’s practice of removing jurisdiction to hear pre-trial dispositive motions from administrative law judges and giving it to the commissioners could violate due process rights. This is the central argument by Whole Foods' lawyers that the FTC has violated the natural grocery chain's due process rights.

The letter to the FTC from the eight members of the Senate Judiciary Committee says in this regard: "The opportunity for an administrative law judge to independently review Commissioners' decisions is a feature, not a flaw, of the present system.'

What the committee members are questioning is something others representing corporations and businesses, such as the U.S. Chamber of Commerce, also are questioning: proposed changes to the standards the regulator uses in reviewing mergers and acquisitions. These rule changes figure in Whole Foods' arguments in its lawsuit against the FTC.

For example, in November the U.S. Chamber of Commerce blasted the FTC for what it called unfair proposed changes to regulations.

Additionally, there's a growing coalition of U.S. companies that's gearing up to oppose these FTC rule changes as they pertain to acquisitions, mergers and antitrust issues.

While it appears to us the letter from the eight members of the Senate Judiciary Committee was prompted by the lobbying campaign for Whole Foods Market, Inc. -- a campaign that includes the natural foods grocery chain having thousands of its store-level employees throughout the U.S. contact their local elected leaders in Washington, D.C., asking for "Fair Play For Whole Foods By FTC" -- Whole Foods' lead council Lanny Davis, who is a partner in the Washington, D.C. office of the Orrick, Herrington & Sutcliffe law firm, one of three firms working on the case for the natural grocer, said today: "Whole Foods did not ever ask Congress to take sides in the FTC case to block the merger of Whole Foods and Wild Oats, but rather to express concern about the FTC's procedural unfairness toward Whole Foods."

In other words, Whole Foods, through its lawyers and lobbyists has asked the Senate Judiciary Committee to express concern to the FTC about the "procedural unfairness" to Whole Foods, according to Lanny Davis. Since this is a key strategy of Whole Foods' lawsuit against the FTC -- to legally question the procedures -- we suggest its a first win for the natural grocery chain in terms of seeing some early fruit bare from its week-old lobbying campaign.

As an old Washington hand, Lanny Davis isn't going to ask key members of the committee to address the FTC by directly focusing on the Whole Foods case. Doing so would backfire. Instead he is focusing on the "procedural unfairness" issue, which allows the members of the committee to not seem like they are directly taking a stance in favor of Whole Foods,' which they really can't so.

Additionally, since there is growing corporate community support against the FTC's proposed rule changes, the timing for the committee members to express their "concern" makes sense. We suspect this is the reason two Republicans, Sen. Spector and Sen Cornyn, signed the letter to the FTC Chairman, along with the six Democrats.

Judiciary Chairman Leahy and Ranking Member Spector, who was the Chairman with Leahy as the Ranking member for the first six years of the George W. Bush Administration when the Republicans held a senate majority, work closely together in a strong bipartisan manner. Therefore it's not surprising to see both signed the letter to the FTC Chairman.

Whole Foods' lead counsel Lanny Davis didn't elaborate any further on the specifics of the letter today. He did however say: "We (Whole Foods market, Inc.) share the senators' concern that the new rule of the FTC could be just as unfair to others as the FTC has been unfair to Whole Foods."

This offers a hint into the Whole Foods' legal strategy: don't just argue the FTC has only violated Whole Foods Market, Inc.'s due process, but that the new rules also violate those of other corporations as well. This is why the lobbying campaign is integral for Whole Foods along with its lawsuit against the FTC.

This also is why we will see Whole Foods' legal, lobbying and public relations firms ratchet up their efforts, and the noise level, on the issue in the days and weeks to come. Stay tuned.

FTC v. Whole Foods - Whole Foods v. FTC: Recent Natural-Specialty Foods Memo linkage:

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.

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

Whole Foods Market, Inc. v. U.S. Federal Trade Commission

Whole Foods Market, Inc.'s legal team (which now totals three big name law firms) from the law firms Orrick, Herrington & Sutcliffe, Dechert and the company's new addition, the Constantine Cannon firm, say they are trying something that hasn't been attempted in half a century--which is suing the FTC.

The law firms, all three outside council to Whole Foods in the case, is calling the lawsuit a "Once-in-every-50-years-lawsuit," meaning that it's been about 50 years since a company has sued the FTC over a legal challenge it has made to a merger or acquisition.

As we written about previously in detail (see the links at the end of this piece), The Whole Foods Market, Inc. lawsuit filed against the FTC on Monday says the company has already spent $16.5 million on legal fees and other costs related to winning approval of the Wild Oats merger and in fighting the FTC's legal case.

The lawsuit also argues, as did Whole Foods CEO John Mackey and Orrick law firm partner Lanny Davis this morning at a press conference in Washington, D.C., that the FTC is so biased against the merger that it should be prohibited from reviewing it. Instead, Whole Foods wants the merger to be decided for a final time by a U.S. federal court rather than at the administrative law trial the FTC has set for February 16, 2009 in Washington, D.C.

In addition, the lawsuit argues new FTC rules that call for an "expedited discovery process" put Whole Foods at an unfair disadvantage by giving the company just five months to prepare its case (Whole Foods wants an additional ten months) for the administrative trial.

The Whole Foods lawsuit filed by Orrick and the partnering firms argues the FTC has violated what is known as the Federal Administrative Procedure Act.

Antitrust lawyers can't recall another lawsuit in modern history that has argued the FTC has violated the act.

For example, well-known antitrust lawyer Steven Newborn, the co-head of the antitrust group at the Weil, Gotshal & Manges law firm says he doubts Whole Foods' lawyers will win on the violation of the Federal Administrative Procedure Act argument. Rather, he thinks Whole Foods Market CEO John Mackey and other executives expect the FTC to force the company to divest itself of some assets ( stores acquired in the merger) and hopes to delay that step as long as possible.

We think Mackey wants to win, which is why Whole Foods is spending what is going to amount to many millions for all the high-priced legal and lobbying talent it's hired over the last few months. But our argument isn't a legal one like Steven Newborn's, who knows the ins and outs of antitrust law much better than we do.

As we've reported, politically-connected Orrick firm partner Lanny Davis, who specializes in the areas of Legal Strategic and Crisis Management , Governmental Affairs and Commercial Litigation at the firm, is heading up the Whole Foods lawsuit against the FTC.

Davis, who from 1996-1998 served as Special Legal Council to former President Bill Clinton and is an advisor to Senator Secretary of State in-waiting Hillary Clinton, who Davis went to Yale Law School with, is the public legal spokesman for Whole Foods on the case, appearing for example at this morning's press conference with Whole Foods' CEO John Mackey. (Look for Lanny Davis to hit the cable news talk show circuit, Larry King Live, ect., in the coming days as well.)

Davis' focus is more on building political support for Whole Foods among the political establishment, U.S. Senators and House of Representatives members, along with overseeing and coordinating the legal work of the three law firms. Lanny Davis is the overall point man on the case.

In addition to Lanny Davis at Orrick, Paul Denis, a partner at the Dechert law firm, and W. Stephen Cannon, a name partner at the Constantine Cannon firm, are heading up the Whole Foods Market, Inc. legal work at those two respective law firms. Heavy, and expensive, hitters all.

W. Stephen Cannon is a respected antitrust lawyer and is a former special counsel to the U.S. Senate Judiciary Committee. Paul Denis, a graduate of the University of Michigan Law School, also is a well-known antitrust lawyer.

Former George W. Bush Administration U.S. Solicitor General Ted Olson, a longtime Washington D.C. attorney, also is a member of the Whole Foods Market, Inc. legal team. Olson has extensive experience with regulatory agencies like the FTC, along with the federal appeals process. His job as solicitor general was to regularly argue the government's cases before the U.S. Supreme Court, for example.

Ted Olson was nominated as U.S. Solicitor General by President Bush in February, 2001, and served in that position for a number of years before leaving. Just seven months after his nomination, Olson's wife Barbara, who was a conservative writer and commentator for cable news channel CNN, was one of the Americans killed in the September 11, 2001 terrorist attacks. She was on Flight 77, the plane that crashed into the field in Pennsylvania after passengers fought the terrorist hijackers, who it is believed were trying to use the plane to attack either the White House or U.S. Capital building in Washington, D.C.

As it deals with its legal challenge from the FTC, which has been going on in one form or another since the summer of 2007, Whole Foods is struggling as a natural foods retailer.

Whole Foods Market Inc. recently reported its consolidated earnings results for the fourth quarter and full year ended September 28, 2008.

For the quarter, the company reported net income of $1.50 million or $0.01 per share on sales of $1,788.91 million compared to net income of $33.92 million or $0.24 per share on sales of $1,743.41 million for the same period of last year. That's a dramatic reduction in net income from the year before.

For the year, the company reported net income of $114.52 million or $0.82 per share on sales of $7,953.91 million compared to net income of $182.74 million or $1.29 per share on sales of $6,591.77 million for the same period of last year, for a drop in annual income of 47-cents per share.

Whole Foods Market, Inc. stock closed today at just slightly over $10 a share. That's about 70% below the company's high last year after its friendly acquisition of Wild Oats Market, Inc.

The natural foods chain recently sold 17% of the company for $465 million to the private equity form Leonard Green & Partners in order to raise cash for ongoing operations, including legal fees, as well as for its modest growth plans for the 2009 fiscal year, which include opening only about half of the new stores (from 30-35 to about 15) it originally had planned on opening in the U.S.

Whole Foods currently operates about 280 natural foods markets in the U.S., Canada and the United Kingdom, the vast majority of which are in the U.S.

Reader Resources

Recent, related posts from Natural~Specialty Foods Memo:

>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

Additionally, we've been writing about the FTC-Whole Foods Market, Inc. issue since last year. You can read a selection of those stories here and here.