Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?

FTC. v. Whole Foods Market, Inc. - Settlement Negotiations

A source close to the settlement negotiations between the U.S. Federal Trade Commission (FTC) and Whole Foods Market, Inc. over the FTC's attempt to overturn Whole Foods' 2007 friendly $565 million acquisition of Wild Oats Market, Inc. on anti-trust grounds tells Natural~Specialty Foods Memo (NSFM) that the two parties are possibly getting close to an agreement that could end the legal battle over the merger.

As we reported in this January 29 story [Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement], Whole Foods Market, Inc. made a settlement offer to the FTC that if excepted by the regulator would end the near-18 month legal battle over the merger. In return, the FTC called a five day halt of action in its administrative process designed to overturn the deal.

That five day "cooling off period" ends on Thursday, February 5, just two days from today.

Here is what we've learned thus far: Our source tells us the FTC has reviewed Whole Foods' initial settlement offer but wasn't completely satisfied by what it contained. We are told one element of the offer involves a willingness on Whole Foods' part to sell a number of the former Wild Oats stores, now rebranded under the Whole Foods Market banner, in some of the 29 U.S. markets where the FTC says a combined Whole Foods-Wild Oats is a monopoly in what the regulator calls the "premium natural and organic retailing segment (PNOS).

After reviewing the Whole Foods' settlement offer, we're told the FTC sent the natural grocery chain's outside legal counsel back to company CEO John Mackey and his top executives, suggesting the grocer needs to sharpen its pencil a bit more regarding its settlement offer. We were unable thus far to find out if the FTC has made any specific suggestions to Whole Foods' lawyers regarding in what specific ways Whole Foods Market, Inc. needs to sharpen the settlement offer.

But it appears to be positive news that the FTC's first review of the offer is such that it wants to continue the negotiations. Although the five day FTC halt ends on Thursday, February 5, the regulator has the power if it desires to extend it if it believes negotiations are moving along in a positive direction.

Judge Friedman cancels upcoming hearings

In another development today that tends to reinforce what we're being told by our source -- that Whole Foods Market and the FTC could be near a settlement -- U.S. Federal Judge Paul Friedman has canceled a two day hearing he had previously scheduled on his court calendar for February 17-18, in which he had planned to hear arguments from the FTC and Whole Foods on a motion filed by the FTC, asking the judge to order the natural grocery chain to: (1) stop rebranding all remaining former Wild Oats stores to the Whole Foods banner, (2) have Whole Foods rebrand about 100 of the former Wild Oats stores its already rebranded to Whole Foods Market back to the Wild Oats name, and (3) put the operations of those about 100 stores in the hands of a third party entity, so that they would remain separate from Whole Foods Market, Inc.'s corporate ownership until the merger is resolved. [Read our January 25 story on the hearings here: 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]

Judge Friedman's decision to cancel (not postpone) the February 17-18 hearings was the result of a joint request by the FTC and lawyers for Whole Foods Market, Inc. he said today in his announcement.

The fact that the FTC and Whole Foods jointly made this request of Judge Friedman, who has been hearing most aspects of FTC. v. Whole Foods Market, Inc. case since the regulator first opposed the deal in the summer of 2007 (and ruled in favor of Whole Foods before the FTC got that decision reversed by a federal appeals court), suggests to us strongly that the two parties are progressing in the settlement talks.

Additionally, although Judge Friedman offered no public explanation today about his decision to postpone the upcoming February 17-18 hearings other than to announce it, based on our close observation of the judge's behavior and his rulings in the case, we doubt he would have postponed the hearings had he not been given information from the FTC and Whole Foods Market that solid progress is being made in terms of negotiating a settlement of the merger case. Judge Friedman's canceling the hearings is a major indicator to us that a negotiated settlement could be forthcoming very soon.

Rumblings on Capital Hill & Whole Foods' D.C. team leader

Natural~Specialty Foods Memo (NSFM) also talked today to a Congressional staff member who works on a Congressional committee on Capital Hill in Washington, D.C. that deals regularly with the FTC. The senior staffer, who has been following our coverage in the Blog of FTC v. Whole Foods Market, Inc. since early December, 2008, said that although the merger case isn't a "hot button issue" at present on Capital Hill because of the "big hot button" issues of passing an economic stimulus package, solving the ongoing financial crisis, and the hearings on President Obama's various cabinet nominees, that there is a feeling among many members of the U.S. House and Senate that overturning the Whole Foods-Wild Oats merger has become far too significant of a priority for the FTC.

These members, Democrats and Republicans, have been lobbied on the issue by Whole Foods' Washington, D.C. lobbying firm, the Glover Park Group, which is connected heavily with Democrats on the Hill, as well as in some cases been talked to personally by Whole Foods Market's lead outside legal counsel on the case, former Clinton Administration special counsel Lanny Davis, who is a partner in the Washington, D.C. office of the Orrick Law Firm, where he specializes in the political aspects of legal issues like FTC. v. Whole Foods Market, Inc.

Lanny Davis is very well connected in Washington, D.C. political circles, most strongly with Democrats but also with many Republicans. Davis is sort of a "Political Zelig (Woody Allen's movie) or the political version of " Chance the Gardner" from the book and movie "Being There," in that he seems to have "been everywhere" and connected closely with powerful political figures throughout his life. Like 'Zelig" and "Chance," Lanny Davis appears to always be in the picture.

For example, Davis was a fraternity brother of former President George W. Bush when both were undergraduates many decades ago at Yale College at Yale University, where the two shared the same fraternity house. Later, as a law student at Yale Law School, Davis met and became best friends (to this day) with Hillary Rodham Clinton (then just Hillary Rodham). As a result of his close friendship with now Secretary of State Hillary Clinton, Davis became a close friend many decades ago of her husband, the former two-term President of the United States. (Perhaps there's something to that notion about making important connections at Ivy League schools after all?)

And it was to Lanny Davis that in the mid-to-late 1990's then President Clinton and former First Lady and now U.S. Secretary of State Hillary Clinton turned to as White House Special Counsel when they were neck-deep in a series of White House legal messes and scandals that to this day can be identified by single words -- "Whitewater," "Travelgate," "Troopergate" (brought back from the dead from when President Clinton was Governor of Arkansas), "Monica" and eventually the biggest Kuhuna of all: "Impeachment."

The Clintons' survived these legal scandals, including in the case of President Clinton not being impeached, with the help of Lanny Davis.

President Clinton has since gone on to be a widely respected and very popular former President, both at home and internationally, and former First Lady Hillary Clinton nearly won her party's nomination for President and is now President Obama's chief foreign policy voice as Secretary of State. Whole Foods Market, Inc. hired Lanny Davis to head up its legal and lobbying team in hopes that he can work some of that same magic in the case of FTC v. Whole Foods Market, Inc.

Davis also played a key role in Hillary Clinton's run for the Democratic party nomination for President. And as soon as she dropped out of the race and supported President Barack Obama, it was Lanny Davis who fast became the most vocal advocate in private to the Obama camp and in public on the cable news programs, for then Senator Clinton's being the Vice Presidential nominee. And when President Obama named then Senator from Delaware Joe Biden as his Vice Presidential nominee rather than Senator Clinton, it was Lanny Davis who behind the scenes and publicly started advocating Hillary Clinton for Secretary of State, a post she was officially sworn into today by Vice President Joe Biden.

The Congressional senior staffer told us today numerous members of Congress have made their feelings known to the FTC in one way or another that they would like to see a settlement of the merger rather than seeing it drag on and go to trial. The FTC has an administrative trial set on the merger for April 6, 2009. Of course, nobody will publicly confirm such messages being sent because of the potential political land mines associated with saying so in public. We should add that we have no information or evidence that any messages sent by members of Congress are or might influence FTC Commissioners, who once appointed hold their positions for a set term.

What we do feel confident in reporting is, based on our sources, it appears that progress is being made in the settlement talks between the FTC and Whole Foods Market, Inc. We asked our key source today (the one initially sighted in the lead paragraph of the story) to handicap the odds of the FTC and Whole Foods Market, Inc. reaching a settlement by Thursday, February 5, when the five day FTC halt ends. He initially said that was impossible for him to do. However with some gentle encouragement (we explained since he was talking to us on the condition we wouldn't print his name it was fine to handicap it) he gave it a 60%-40% as of this afternoon in favor of the two parties reaching a settlement by Thursday.

Of course there's no way to determine right now if those 60-40 odds are indeed real. But whether its a 60%-40% or a 50%-50% proposition (or even if there's a mere 10% chance of settlement), the state of negotiations between the FTC and Whole Foods is 100% beyond where it was just one week ago when there were no negotiations going on, and for that matter far beyond what the promise of a negotiated settlement has been since the FTC first opposed the merger in the summer of 2007.

In our analysis, a settlement, and thus the negotiated end-game to the long-running case of FTC v. Whole Foods Market, Inc., could well be near. Stay tuned.

Retail Memo: Web Site and Blog-Driven Viral Boycott of Whole Foods Market Stores in Portland, Oregon Region Going On; Could it Intensify?

The Portland, Oregon USA region offers lots of fresh air, green grass, public transportation and one of the highest per-capita natural foods shopping consumer population segments in the United States. Portland-area consumers love -- and buy -- natural and organic. Portland is a key market for any natural products retailer, and Portland market region consumers are people those retailers want (and need) on their side.

An informal, primarily Web site and Blog-driven, viral boycott of Whole Foods Market stores in the Portland, Oregon USA region is being conducted by an intere,sting decentralized collection of consumers -- political progressives, libertarian types, local business advocates, and others who just plain dislike Whole Foods' issuing of a subpoena earlier this year to Portland-based New Seasons Market.

The subpoena, which also was issued to 92 other natural foods retailers throughout the U.S., demands that the local, nine-store natural foods grocer turn over its sales and financial information, strategic marketing plan (including plans to open new stores), e-mails and other proprietary information to Whole Foods Market, Inc.'s legal council as part of the Austin, Texas-based natural grocery chain's battle against the U.S. Federal Trade Commission's attempt to overturn its friendly acquisition last year of Wild Oats Market, Inc.

As we've reported, Whole Foods Market, Inc. issued subpoenas to 93 natural products retailers in the U.S., including Portland's New Seasons Market. The subpoenas demand the information detailed above from the retailers because Whole Foods' says it must have the data to fight the FTC's legal claim that a combined Whole Foods-Wild Oats is a monopoly in what the regulator calls the "Premium Natural and Organic Retailing Segment" in some near-30 markets in the U.S. Whole Foods says this claim is folly, and that the information from its competitor natural foods grocers will help it prove in court that the FTC is wrong.

The informal boycott, which is using the Internet -- Blogs and Web sites -- as its organizing point (organizing from a viral standpoint that is), is based on the simple premise that New Seasons Market is a local business and natural foods retailer (David), while Whole Foods is a mega-chain (Goliath), which by its subpoena is attempting to put unfair and onerous demands on the local New Seasons Market, along with engaging in "big brother" tactics by legally demanding the smaller natural grocer's trade secrets, which New Seasons Market CEO Brian Rohter believes could be used by Whole Foods Market, Inc. against his company, despite assurances by Whole Foods Market, Inc. and the FTC that only Whole Foods' lawyers FTC commission members and others related to the court proceedings will be able to view the data and related information.

Suggestions of such a boycott of Whole Foods' Portland stores first started appearing in the comments section of a post by New Seasons Market CEO Brian Rohter on the company's Blog in early December in which he talked about the subpoena against his company and how he planned to fight it. The comments to his posting were spontaneous, individual comments by local Portland area consumers saying they would no longer be shopping at Whole Foods stores because of the subpoena.

Many of these commentors took to e-mail, sending messages to friends in the region, asking them to boycott Portland-area Whole Foods stores. [Natural~Specialty Foods Memo has been sent copies of those e-mails because many Portland region residents have been following our coverage of the issue.]

At one point, the comments on the natural grocer's Blog got so hot and numerous about boycotting the Portland-region Whole Foods stores, that New Seasons' CEO Rochter made a brief post, reminding his readers that they shouldn't take out their anger on the Portland-area Whole Foods Market store-level employees, who he called "our friends and neighbors."

Additionally, in early December, Leslie Carlson, a contributor to the popular and politically progressive-oriented Blue Oregon.com Web site, wrote a post in which she said she would no longer shop at any Portland-region Whole Foods Market stores because of the supoena of New Seasons trade secrets.

Below is the leed paragraph from her stinging post in early December, in which she announces she will boycott Whole Foods Market stores in the region:

"I'm spitting mad about Whole Foods' latest, thuggish attempt to mess with Portland food retailer New Seasons. You may have read the Oregonian story or New Seasons' CEO Brian Rohter's post about the subpoena asking for proprietary and confidential business information. The subpoena sent to New Seasons is part of a screwed-up merger that Whole Foods has been trying to execute with rival Wild Oats for the past 18 months."

And, the closing paragraph of Ms. Carlson's post:

"In the past, I have occasionally stopped into Whole Foods. That ends today. Threaten my favorite locallly-owned grocery store, and I promise to never darken your door again."

You can read her complete post here.

In the post, Ms. Carlson also called for readers of the progressive Web site to join her in boycotting Oregon's Whole Foods stores because of the subpoena issue. There are currently 43 reader comments on her post. You can view the comments here.

BlueOregon.com has a substantial readership among political progressives -- not just in Oregon but throughout the Pacific Northwest and in California -- who just happen to be a significant portion of Whole Foods Market's customer base.

Since Ms. Carlson's post came out in early December, it has been e-mailed to people all over Oregon (and throughout the U.S. for that matter), with notes attached asking them to boycott Whole Foods stores in the Portland region and throughout the state, because of the subpoena issue.

Patrick Alan Coleman, a Blogger at the popular Portland Mercury alternative newspaper Web Site, also has come out in favor of boycotting Whole Foods Market stores in the region because of the natural foods grocery chain's subpoena for local guy New Seasons Market's proprietary information. You can read him here.

Portland Food & Drink, a local Web site that covers all things consumable in the Portland region, also received numerous responses to a post it made about the issue in early December. Not all of the comments were advocating a boycott of the local Whole Foods stores. But a considerable number of them do -- such as these three examples below:

>lauhal63 says:
December 3, 2008 at 9:45 pm
Bullies! Whole Foods will not get another dime from me. Ever.

>Jessica Roberts says:
December 8, 2008 at 1:52 pm
Just sent WF management a message:
I was disgusted to read of your attempt to subpoena New Seasons’ sensitive corporate information. What, you are afraid that big bad 9-store chain New Seasons might offer better customer service and better products compared to poor little Whole Foods, with only 270 stores around the nation?You’re not fooling anyone. While I understand why it would benefit you to know exactly what next move your competition will take, I don’t see that it’s worth creating an image of yourself as an anticompetitive corporate bully. I used to shop at Whole Foods several times a month, because my work is right near one of your shops. No more. I’ll make sure to boycott your business for as long as you’re bullying local businesses in my back yard.

>Heather says:
December 16, 2008 at 11:36 am
I, too, will continue to shop at New Seasons, but now it will be exclusively. Furthermore, I will Twitter my “boycott Whole Foods” message, blog it, and take any opportunity to slam them verbally. I always knew there was something I didn’t like about WF. They really shoulda known better than to screw with Portland.
You can read the post, and the reader comments, at Portland Food & Drink here.

It isn't clear if the Portland region Whole Foods Market stores are overall experiencing a significant drop in sales because of this informal, primarily Web site and Blog-promoted boycott. However, this is what we do know, based on our reporting and research:

> Customer counts are down at some Portland-region Whole Foods Market stores. A Natural~Specialty Foods Memo (NSFM) correspondent was in Portland two weeks ago. While there he visited a number of Whole Foods stores. While in the stores he talked with employees, asking if they had noticed any drop-off in sales because of the New Seasons subpoena issue. First off, almost every single store employee he asked was aware of the issue. Second, a number of them told the correspondent they did believe there was a slight drop in business because some customers were boycotting the stores over the issue.

>During the two days in Portland, the NSFM correspondent also taked to four different sales representatives who call on Whole Foods stores. Two of the sales reps said they couldn't tell if there was any drop in customer counts since early December. However, the other two said in at least a couple of Whole Foods stores they call on, employees have been talking openly about a drop in business, which the store workers attribute primarily to the subpoena issue.

>The NSFM correspondent also visited a number of New Seasons Market stores. Employees at two stores in Portland said they've seen a significant increase in customers coming into the stores, both saying they thought it has lots to do with Portland residents not shopping at Whole Foods over the subpeona issue. In fact, one of the New Seasons store employees pointed out the post on the BlueOregon.com Web site to the NSFM correspondent. Additionally, the manager of one of the two New Seasons stores told the NSFM correspondent that numerous customers had mentioned they are doing all of there shopping at the store and Boycotting Whole Foods over the subpoena issue.

>NSFM talked to two vendors in the Portland market today. They commented that it appeared to them a number of the New Seasons stores had higher Christmas holiday shopping customer counts they they could recall seeing last year. One of the vendor represenatives also said he saw a man handing out flyers on day about two weeks ago in tee parking lot of a Portland Whole Foods Market store. He says the flyers asked consumers not to shop at Whole Foods because of its demands in the subpoena to New Seasons. We haven't been able to track down any of those flyers to date. It appears it was a "one-man effort" rather than part of a mass anti-Portland region Whole Foods mass-flyer distribution campaign.

>Lastly, it is without a doubt that Whole Foods Market is being hurt from a reputational and public relations standpoint in the Portland Metro region over the New Seasons subpoena issue. It appears there is very little support for Whole Foods' side of the issue, and lots of support for local guy New Seasons Market, as evidenced by the posts and comments on the local Blogs and Web Sites, along with all of the other observable activity regarding the issue.

Whole Foods Market and New Seasons Market essentially share the same customer base in the Portland regional market -- well educated consumers who buy primarily natural and organic foods, groceries and related products, but also desire and buy specialty, premium and ethnic foods. This shared customer base also consists of consumers who are "greener" than the average shopper, believe and practice sustainability more than the average consumer, and care more about local foods and ethical retailing than the general shopper does. In fact, the FTC sites New Seasons as one of its examples of "Natural and Organic Premium Segment" key competitive retailers to Whole Foods Market in its legal case against the Wild Oats acquisition.

In other words, this is Whole Foods' key customer base, as it is News Seasons,' and in Portland, as is the case elsewhere, it can't afford to lose very many of the consumers that comprise the segment because they are core Whole Foods Market customers.

However, although we have no quantification on the matter, we do know many of these consumers are being lost to New Seasons over the subpoena issue, and probably to other grocers, right now. This isn't good news for Whole Foods, particularly in Oregon, which is one of the top per-capita states in sales for natural products retailing. It will be even worse news if this informal, primarily Internet-driven boycott picks up steam and takes on more formal organizational characteristics in the days and weeks to come.

Since, as we reported earlier today, tomorrow is the deadline given to New Seasons Market by the FTC Administrative Law Judge to comply with Whole Foods' subpoena, the issue isn't going away, particularly in Portland, Oregon, anytime soon.

Based on our extension reporting and research on the issue, we wouldn't be surprised to see the boycott of Whole Foods stores in the Portland, Oregon region -- as well as seeing it spread throughout the state and maybe into other parts of the Pacific Northwest -- grow and intensify over the coming weeks, both via the Internet and in other more formal, person-to-person ways.

The power of using the Internet alone to spread such campaigns virally (social media) today is significant and real. Thus far the efforts to convince Portland-area consumers to boycott Whole Foods stores in the region have been mostly individual and spontaneous. However, that could easily change -- and change rapidly because of the speed of "Internet time."

Reader Resources

Most recent, related posts from Natural~Specialty Foods Memo (NSFM):

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

~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

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

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 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.

Retail Memo: New Seasons Market CEO Brian Rohter and Whole Foods Market Co-President Walter Robb Discuss and Debate the Subpoena Issue Online

Rohter & Robb: The FTC, Whole Foods Market, Inc., 96 natural products' retailers and the subpoenas

Brian Rohter, the CEO of nine-store Portland, Oregon-based New Seasons Market, which is one of the 96 natural products' retailers that received subpoenas from Whole Foods Market, Inc.'s lawyers in relation to the U.S. Federal Trade Commission's (FTC) ongoing challenge of the Whole Foods-Wild Oats merger, and Walter Robb, Whole Foods' co-president and co-chief operating officer, engaged in a bit of written debate this afternoon in the comments section of a story (which both men are quoted in) published yesterday on the Portland Oregonian newspaper Web site, about the Whole Foods- New Seasons Market subpoena issue. Robb and Rohter, who have known each other for many years, talked on the phone about the subpoena last week.

Read the story from yesterday, "New Seasons balks at Whole Foods' subpoena," oublished yesterday on the Oregonian Web site here.

Rohter and Robb's comments made this afternoon

Today at 1: 33pm, [Posted by WalterRobb on 12/07/08 at 1:33PM] Whole Foods' Walter Robb offered his comments on the story and the issue. Robb also provided additional information about the subpoena, including a link to the entire text of the subpoena to New Seasons here:[http://www.wholefoodsmarket.com/company/pdfs/2008-10-13_WFM_Subpoena_to_New_Seasons_Market.pdf.]

Robb also has a link to what the FTC instructed Whole Foods Market, Inc. to provide the government agency following the Wild Oats merger last year: [http://www.wholefoodsmarket.com/company/pdfs/2008-10-13_WFM_Subpoena_to_New_Seasons_Market.pdf.]

Robb also provides links to other related information in his comment, which we suggest you read if you are interested in the FTC-Whole Foods issue because it is well-written and reasonable. Robb has always been the voice of reason at Whole Foods, so it makes sense to us he is taking the lead on this issue. It's also a good idea.

At 4:34pm today, New Seasons Market CEO Brian Rohter replied to Walter Robb's comments with some of his own [Posted by brohter on 12/07/08 at 4:34PM]. Rohter adds to his argument in the comments post, pointing out some additional concerns and clarifying that it isn't Robb he is worried about but "Whole Foods Market" as a corporate entity.

Brian Rohter's additional points and arguments, which are equally reasoned, also are worth reading if you are interested in this issue.

Click here to view the article and comments. They are linked individually above as well.

Reader Resources

Natural~Specialty Foods Memo's coverage of the issue over the last week:

>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.

Retail Memo: Some Midwest USA Region Consumers Want Their Former Wild Oats Markets to Get More of A 'Whole Foods-Style Treatment'

As our readers know, we've been covering, writing about and analyzing the Whole Foods Market, Inc. acquisition of its once rival Wild Oats Markets, Inc. since the buyout first occurred late last Summer. (2007). [You can read a selection of some of those pieces here. Also, type Whole Foods in the search box at the top of the blog.]

Shortly after Whole Foods announced its intention to acquire Wild Oats--with Wild Oats Markets, Inc.'s blessing (both calling it a merger in fact)--the U.S. Federal Trade Commission (FTC) announced it would oppose the acquisition/merger on the grounds it was anti competitive and would give Whole Foods a monopoly in the supernatural grocery retailing category, allowing the Austin, Texas-based chain to raise prices to consumers at will.

The U.S. Federal Court in Washington, D.C. denied the FTC claim, ruling the merger would neither result in category monopolization or anti-competitiveness primarily because it viewed Whole Foods Market, Inc.'s primary competitors as being higher-end supermarket chains like Safeway Stores, Inc.'s Lifestyle format, Wegmans, Publix, H.E. Butt, Fresh Market and many others with thousands of stores throughout the U.S. in regions where there are both Whole Foods and Wild Oats' banner stores. (This is an argument Whole Foods lawyers made in court, by the way.)

However, the FTC appealed the decision in the late fall, putting a hold on Whole Foods' ability to start integrating the Wild Oats stores into the Whole Foods Market, Inc. operations and retailing system.

Once again, towards the end of 2007, the Federal Appeals Court in Washington, D.C. denied the FTC's anti-competitive and monopolistic claims, upholding the previous U.S. Federal Court's ruling in favor of Whole Foods.

Since the appeal ruling in Whole Foods Market, Inc.'s favor came down at the end of last year, the supernatural grocery chain was only able to really start integrating and re-branding (from the Wild Oats to the Whole Foods banner) the former Wild Oats stores beginning in January of this year.

It's been a big job; some say even bigger than Whole Foods anticipated. The integration process also has been compounded by the fact the FTC filed a second appeal in U.S. Federal Court in late January, attempting to halt the integration process despite the fact Whole Foods was well into the process, having been given the green light by the U.S. Federal Appeals Court.

In fact, when it filed its now third lawsuit regarding the merger and second appeal in less than nine months, the FTC asked the U.S. Federal Court for an immediate halt of the Whole Foods-Wild Oats integration until the court agreed to hear the FTC brief. The court denied the FTC's request. Further, it hasn't heard the second appeal yet, nor set a date for a hearing thus far.

The filing of the FTC's second appeal didn't stop Whole Foods from continuing the Wild Oats store integration process it began in earnest in January. In fact, the chain reports its making progress in its efforts to eventually re-brand all of the the Wild Oats stores (except two or three in Boulder, Colorado, which will carry the Alfalfa's and another local banner) to the Whole Foods banner.

There is some trouble in paradise however. We've heard comments of disappointment from a few readers about the treatment some of the former Wild Oats stores are getting. It seems many shoppers, and perhaps rightly so, expect that when Whole Foods comes in and converts a former Wild Oats grocery market, which have generally always been much more "bare bones" than a typical Whole Foods superstore, that the supernatural grocer is going to give that store the "Whole Foods treatment."

What's the "Whole Foods treatment?" That would include adding a wider-variety of natural and organic grocery products, more specialty and gourmet fresh foods and grocery products, additional premium food items which Whole Foods is famous for, and a general up-scaling of the store's product selection.

We've talked to consumers in some areas of the U.S. where Whole Foods Market has made these additions to Wild Oats stores it's already converted. However, people in other parts of the country say it isn't, or hasn't yet happened. One region where we've particularly heard this complaint is in the Midwestern U.S.--specifically in the Chicago, Illinois Metro region--and now in Indiana.

Indianapolis, Indiana is the home of the food blogger Braingirl, who writes a popular food and drink blog called: "Feed Me/Drink Me: Indianapolis food, wine and commentary." Food blogger Braingirl is an advocate and promoter of quality food and drink in Indianapolis and the surrounding region, including writing about food and grocery stores, restaurants and much more.

Indy-based gourmet Braingirl shopped at the Wild Oats market in Indianapolis before the chain was acquired last year by Whole Foods Market, Inc., despite the fact she says it offered a rather poor selection of specialty foods and specialty ingredient items. Therefore, she was rather pleased when she heard the natural foods' grocery chain would be converting the store from a "Wild Oats" into a "Whole Foods" store.

However, in a piece in her blog today, she reports the "assimilation" of the former Wild Oats market is near-complete--and the store essentially hasn't up-scaled and added specialty, gourmet and premium items, which the chain is famous for, as of yet.

As you can imagine, food blogger Braingirl isn't pleased at this development. Read her essay in today's edition of Feed Me/Drink Me to get her report on what's happening at the former Wild Oats' store, what she is being told about the conversion and integration process regarding that store, and how she feels about the natural foods' market's not getting the "Whole Foods treatment" as it relates to enhanced specialty product selection.

Since we've heard comments from more than one other person about their hoping that a former Wild Oats store in their area would become more like a Whole Foods store in terms of expanded specialty and premium product selections once that store was converted to the Whole Foods system and banner, we think Whole Foods Market, Inc. executives might want to listen to what Braingirl has to say.

Perhaps there are near-future plans to make the former Wild Oats grocery markets like the one in Indianapolis described by food blogger Braingirl more specialty and premium product-inclusive like existing Whole Foods banner stores. (If so, somebody might want to shoot her an email to that effect.) If such current plans don't exist, it's something the grocer should consider, as it appears there's added sales potential for such former Wild Oats stores in Whole Foods' doing so.