Retail Memo - News & Analysis: Gelson's Chain Challenges Whole Foods' Subpoena For Trade Secrets; FTC Says No Like it said to New Seasons Market

FTC vs. Whole Foods Market, Inc. - and the Subpoenas

A U.S. Federal Trade Commission (FTC) Administrative Law Judge has denied a legal motion "For a protective order to quash or limit subpoena from Whole Foods Market, Inc." from the only other retail chain, Southern California-based Gelson's Market, out of the 93 natural and premium food and grocery retailing companies subpoenaed for various sorts of sales, financial and other trade secret information by Whole Foods Market in its battle against the FTC's legal case to overturn the 2007 Whole Foods-Wild Oats merger.

Basically the Gelson's legal motion/petition, like the one filed by Portland, Oregon's New Seasons Market, which also was denied by the FTC, asked the FTC to either kill the demands for proprietary information contained in the Whole Foods' subpoena completely and if not to then limit the demands, issuing a protective order which would allow the company to not submit some of the information demanded which it believes could harm it from a competitive standpoint.

Of particular concern to Gelson's are demands in the subpoena in which Whole Foods wants information from the 93 food retailing companies about their strategic growth plans in each of their respective markets. The FTC Administrative Law Judge ruled that Gelson's didn't show cause in its petition that such information would harm the company. Therefore he ruled against the grocery chain, ordering it to comply with the original terms of the subpoena.

As we've reported on previously, Portland, Oregon-based New Seasons Market, a nine-store natural foods chain was, until we recently discovered the Gelson's petition, the only one of the 93 retailers to challenge Whole Foods' subpoena with the FTC. New Seasons ultimately lost its legal challenge and was ordered by the FTC to comply with the subpoena. The Portland natural grocery chain failed to do so by the required date. However it reached a negotiated agreement with Whole Foods Market, Inc. and has now submitted the mutually agreed upon trade secret information.

Gelson's, which was one of more than half of the 93 retailers who didn't comply with Whole Foods' subpoena by its November 4, 2008 deadline, has been ordered by the FTC Administrative Law Judge to now do so post haste.

[You can read the full ruling at this link: Administrative Law Judge's Order on Non-party Gelson's Market's Motion for Protective Order or to Quash or Limit Subpoena from Whole Foods Market, Inc.]

The arguments to quash or limit the subpoenas made in the legal motions by lawyers for Gelson's and New Seasons were very similar.

What isn't similar though is that Gelson's is part of a publicly-owned and traded corporation, Arden Group, and therefore is a public supermarket chain, unlike New Seasons Market, which is a privately-held company. This means much of the information demanded in the Whole Foods Market subpoena -- sales and related financial data for example -- is already of public record by law. However, it's that non-public information such as plans to open new stores and the like, that Whole Foods' legal council says it must have, along with all the other information, from the 93 retailers. Privately-held companies like New Seasons aren't required by U.S. law to report there sales and profit information publicly like public companies are.

In addition to operating supermarkets under the Gelson's banner in Southern California, Arden Group also operates a few stores under the Arden-Mayfair banner in the region. In addition to its supermarket operations, holding company Arden Group has real estate and other related business interests.

There are 18 Gelson's supermarkets in Southern California. The stores sell a full range of food and groceries just like a regular supermarket does but put a major emphasis on selling specialty, gourmet, premium, ethnic and natural foods in an upscale store setting. [Learn more here.]

The central part of Whole Foods' argument as to why it's not a monopoly in what the FTC calls the "premium natural and organic retailing segment" in the 29 U.S. markets the regulator says it is is because the natural foods grocery chain not only competes with other natural foods class of trade retailers (like Portland's New Seasons Market) but with upscale supermarket chains such as Gelson's and numerous others across the U.S. that focus on the very same types of products Whole Foods does in its stores and are thus direct competitors.

This is an argument we've made since last summer -- long before Whole Foods' legal counsel came up with the idea of proving this by issuing subpoenas to the 93 retailers, a number of which are similar in format to Gelsons -- arguing that the FTC, in opposing the merger so strongly, has failed to understand the true nature of natural and premium food retailing in the U.S. today. That reality is that it is a multi-format, highly competitive business in which an increasingly variety of retailers are competing against Whole Foods for a share of the natural, organic and premium food category pie. [We suggest reading our January 15, 2009 analysis piece [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] for an overview of our argument.]

As we've also previously said, we completely understand and respect why New Seasons Market, and now Gelson's, challenged the subpoenas. Were we in their respective positions we likely would have done the same if unable to work out an agreement with Whole Foods.

Whole Foods' plan and strategy is to compile all of the data from these 93 retailers into a competitive analysis vis-a-vis itself in these 29 markets where the FTC says it holds a monopoly post merger in what the FTC has defined as the "premium natural and organic retailing segment." The retailer then plans to use this analysis to demonstrate at the scheduled April 6, 2009 FTC Administrative trial, where the fate of the merger will likely be decided, that it has more than enough competition -- from natural foods class of trade retailers, upscale/specialty supermarket chains and others -- in each of these markets.

The danger to Whole Foods though is that the burden of proof in the FTC Administrative trial is completely on the company. It must demonstrate to the Administrative Law Judge that the natural foods grocery chain isn't a monopoly, under FTC definitions no less, in every single one of the 29 markets. The Administrative Law Judge technically can rule against the entire merger if he believes Whole Foods has failed to prove its case in just one or two markets. That's a very difficult standard to meet.

As a result, without the proprietary information from the 93 retailers, at least two dozen of which have yet to comply with the subpoena as of early last week, according to Whole Foods' legal council Lanny Davis, the natural foods grocery chain can build a case to defend itself against the FTC's 29 market monopolist argument.

Therefore, as we've been writing about, this is why Whole Foods Market, Inc. is putting so much effort, including expensive legal talent, into obtaining the information from these 93 subpoenaed retailers. And the clock is running fast. April 6 is coming up very soon. Whole Foods still must obtain the information from these two dozen or so retailers, and must still compile all of the information into a legal brief before April 6.

On January 14, Whole Foods Market, Inc. took a number of steps designed to encourage those retailers who've yet to comply with its subpoena to do so. [Read about those measures at this link: Retail Memo: Whole Foods Offers Carrot and Stick to Retailers That Have Yet to Comply to Subpoena For Trade Secret Data and Information.]

It's our analysis that those measures, combined with the FTC's Administrative Law Judge's ruling against New Seasons' and Gelson's -- the only two of the 93 retailers we're thus far aware have challenged the subpoena -- will likely result in most of those remaining retailers' submitting the information demanded in the subpoena to Whole Foods' lawyers.

However, many of the retailers who have already submitted information, have self-edited some of the demands, those they believed were most proprietary to their respective business activity. Whole Foods Market also is attempting to get those retailers to submit the omitted information. That could be more difficult to achieve.

What is clear though is that Whole Foods wants and needs this information so badly it's willing to compromise, in the case of New Seasons market and perhaps others thus far, as well as to play hard play if needed.

The stakes are high. The unwinding of the merger could cost an already struggling Whole Foods much -- financially, in market share, and even possibly in terms of who has control of the company in the future. Stay tuned.

Reader Resource - Linkage:

Below is a bibliography of recent stories and posts published in Natural~Specialty Foods Memo (NSFM) on the FTC. v. Whole Foods Market, Inc. legal case and merger issue:

January, 2009:

January 23, 2008: Retail Memo: Three Judge Federal Appeals Court Panel Rules Against Whole Foods' FTC Lawsuit Today; What's Next?.... January 21, 2008: Retail Memo: An Argument in Favor of the FTC in FTC v. Whole Foods Market, Inc. -- Or At Least Against Whole Foods' Legal Tactics....

January 19, 2009: Retail Memo: Concerned With Fast-Looming FTC Hearing Date Whole Foods Re-Files Lawsuit Taking it Directly to Washington, D.C. Federal Appeals Court....January 19, 2009: Retail Memo - Breaking News: Portland's New Seasons Market and Whole Foods Market, Inc. Reach Agreement; New Seasons Will Provide Trade Secrets....

January 16, 2009: Read Memo: Colorado Newspaper Columnist Joins NSFM's 'Whole Foods Market Isn't A Monopoly' Bandwagon....Friday, January 16, 2009: Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors....Thursday, January 15, 2009: Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly....

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, 2008:

December 29, 2008: Retail Memo - Breaking News: New Seasons Market Doesn't Turn Over Trade Secrets to Whole Foods Market Despite Deadline to Do So Being Today....December 29, 2008: Independent Grocer Memo: Natural-Organic, Local, Fresh and Premium Keys to Pacific Northwest USA's Haggen Foods; Now Adding Value....December 28, 2008: Retail Memo: Web Site and Blog-Driven Viral Boycott of Whole Foods Market Stores in Portland, Oregon Region Going On; Could it Intensify?....December 28, 2008: Retail Memo: Tomorrow Deadline For Portland, Oregon's New Seasons Market to Turn Over Trade Secrets to Whole Foods Market's Legal Counsel....

December 24, 2008: Christmas Eve Memo 2008: 'Twas the Night Before Christmas' - FTC v. Whole Foods Market, Inc. Version....December 24, 2008: Independent Grocer Memo: From Mrs. Gooch's to the Auto Body Business, Then Back to Retail, Chris Kysar is On A Healthy Organic Foods Retailing Roll....December 24, 2008: Retail Memo: It's 'Deja Vu All Over Again' - Judge Paul Friedman to Whole Foods Market, FTC: 'What's My Role Here?'....

December 23, 2008: Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009....December 23, 2008: Independent Grocer Memo: National Grocers' Association Asks President-Elect Obama to Look Out For Independent Grocers When He takes Office in January....December 22, 2008: Retail Memo: Only Slightly More Than Half the 93 Natural Foods Retailers Issued Subpoenas By Whole Foods in its Case against the FTC Have Complied....

December 22, 2008: Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation....December 22, 2008: Retail Memo: At Hearing Today Judge Tells FTC to Provide Road Map of How Whole Foods Could Take About Merged Companies Should Ruling Go In its Favor....December 19, 2008: Retail Memo: Whole Foods' Lobbying Effort Baring More Fruit - House Committee Leaders Send Letter to FTC Chair Similar to One Sent By Senate Leaders....

December 18, 2008: Retail Memo: 'This Isn't Over Yet' - New Seasons Market CEO On Judge's Decision the Natural Gorcer Must Turn Over Trade Secrets to Whole Foods Market.... December 18, 2008: Retail Memo: The 'Whole Primary Source Scoop' -- FTC and U.S. Federal Court Documents on the FTC v. Whole Foods Market, Inc. Case....December 17, 2008: Breaking News: Judge Orders New Seasons Market to Comply With Whole Foods' Subpoena and Submit Sales Data, Financial Records and Other Trade Secrets....

December 16, 2008: Retail Memo: Whole Foods, Wild Oats and Boulder, CO...And the Rocky Mountain News' Editorial Take On FTC v. Whole Foods Market, Inc....December, 15, 2008: Retail Memo: Eight Members of U.S. Senate Judiciary Committee Send Letter to FTC Chairman Regarding FTC's Legal Case Against Wild Oats' Acquisition....December, 13, 2008: Retail Memo - Analysis & Commentary: More On FTC v. Whole Foods Market, Inc. and Whole Foods Market, Inc. v. FTC....

December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Likley With Mass Market Lift....December 9, 2008: Retail Memo: Whole Foods Markets' 'Whole Legal Paycheck:' Three Top Washington, D.C. Law Firms Teaming Up On The Natural Grocery Chain's FTC Lawsuit....December 9, 2008: Retail Memo: Whole Foods Market CEO John Mackey and Team Launch First Aggressive Attack Against the FTC's Legal Case at Press Conference This Morning....

December 8, 2008: Retail Memo: Mr. Mackey (and the Whole Foods Market Troops) Goes to Washington....December 8, 2008: Retail Memo: Breaking News - Whole Foods Market, Inc. Files Lawsuit Against the FTC; Argues the Regulator Violated the Company's Due Process Rights....December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter and Whole Foods Market Co-President Walter Robb Discuss and Debate the Subpoena Issue Online....

December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter Speaks Out Again Today on the Whole Foods Market, Inc. Subpoena of His Company's Data....December 7, 2008: Retail Memo: Whole Foods Market Retains Top Washington D.C. lawyers and Politically-Connected Lobbyists to Plead its Case Against the FTC....December 6, 2008: Retail Memo: Fast-Growing and Scrappy Sunflower Farmers Market Ventures Deep in the Heart of (Whole Foods Country) Texas....

December 3, 2008: Retail Memo: More on the Whole Foods Market-New Seasons Market Subpoena Issue; FTC Holding Firm For February, 2009 Hearing....December 2, 2008: Retail Memo: Whole Foods Market, Inc. Closes $425 Sale of Stock to Private Equity Firm; Adds Members of the Firm to its Board of Directors....December 2, 2008: Retail Memo: Portland, Oregon-Based New Seasons Market CEO Brian Rohter Responds to Whole Foods Market's Paige Brady....

December 2, 2008: Retail Memo: Whole Foods' Paige Brady Responds to Yesterday's New Seasons Market Piece; Lots of E-Mails; Issue Heats Up On the New Seasons Market Blog....December 1, 2008: Retail Memo: Whole Foods Wants A Court-Mandated Financial Records Dump from Portland-based New Seasons Market; it Says For its Battle Against the FTC.

Natural~Specialty Foods Memo (NSFM) Archives

FTC v. Whole Foods - Linkage from the NSFM archives:

Click here, here and here for stories about the FTC-Whole Foods issue from our archives, including pieces about mass market and natural foods class of trade retail competitors.

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

FTC v. Whole Foods Market, Inc.

The ongoing legal battle and saga between the U.S. Federal Trade Commission (FTC) and Whole Foods Market, Inc. took a serious turn today when the FTC filed a brief asking U.S. Federal Judge Paul Friedman to order a complete halt to the integration of Wild Oats into Whole Foods (and more), a process that after more than 18 months since the 2007 merger is nearly completed. Whole Foods-Wild Oats: Two peas in a pod no more if the FTC gets its way from the judge.

The FTC says in its motion it wants the federal judge to force Whole Foods to stop any further integration activities while the multiple disputes between the regulator and the natural grocer over its acquisition of Wild Oats is handled in court. Judge Friedman is currently preparing to rule on motions filed by the FTC regarding the acquisition/merger, along with ruling on Whole Foods' lawsuit against the FTC in which the natural grocery chain is asking that the entire issue be removed from FTC jurisdiction and settled in Judge Friedman's federal courtroom.

The FTC said in its legal filing that the request is "appropriate, and reasonable" to preserve the assets of Wild Oats until the conclusion of the hearings.

This is the trifecta of pain the FTC wants to put Whole Foods Market, Inc. through: It wants the judge to order Whole Foods to rebrand (change the signs on the stores) the about 100 Wild Oats stores it's converted to the Whole Foods banner back to Wild Oats. It's legal filing also asks the judge to order Whole Foods to stop converting any remaining Wild Oats banner stores into Whole Foods. There still are a few left to be converted. Lastly, and most ominous for the natural grocer, The FTC wants former Wild Oats stores now operating as Whole Foods locations to be put in the hands of a third party, and their original signs returned, until its challenge to the merger is resolved.

The federal regulatory agency said in its filing today that if the judge rules that it has a strong enough case, it's likely it will attempt to unwind the entire merger and force Whole Foods Market, Inc. to establish Wild Oats as a standalone company and operate it that way.

The FTC has set a trial for April before an agency-picked Administrative Law Judge in which the fate of the deal is to be determined. Whole Foods' lawsuit before U.S. Federal Judge for the District of Columbia Paul Friedman asks, among other things, for that hearing to be cancelled and the FTC to be removed from determining the legal status of the merger. Instead Whole Foods wants the judge to hear the case and decide on the deal once and for all.

It appears to Natural~Specialty Foods Memo that the dramatic legal move today is the FTC's response to Whole Foods' lawsuit, which it filed in early December, 2008, as well as the natural grocer's high-profile lobbying and public relations campaign against the FTC, which we've reported on and written about extensively.

In other words, the gloves are now completely off on both sides.

Whole Foods Market CEO John Mackey shot back at the FTC today through a spokesperson and through his legal counsel, calling the FTC's request "absurd" and saying the process of integrating Wild Oats is done.

"They want us to put the toothpaste back in the tube," lead Whole Foods Market, Inc. attorney, uber-Washington, D.C. lawyer, and friend of the (Bill and Hillary) Clinton's Lanny Davis said in a statement late today. "How can you halt something that is already done?"

If the judge rules in the FTC's favor and orders Whole Foods to change the 100 or so stores back to the Wild Oats banner, stop any further integration of the few remaining stores, and to place what was Wild Oats in the hands of a "third party" as requested in the regulator's court filing today, it's our analysis that doing so would basically be the death of Whole Foods Market as you know it, a retailer that's already near death's door in so many ways.

Those ways include: a loss of income of about 42% in its last quarter; a drop in the value of Whole Foods Market, Inc. stock of about 75% in the last year; an ongoing erosion in sales, customer counts and store customer market basket purchase sizes because in the current, severe recession shoppers are trading down; and growing competition from discount-priced natural foods retailers like Sunflower Farmers Market, Sprouts Farmers Market and others, as well as increased competition from mass merchandisers like Wal-Mart, Costco and Target and supermarket chains, all increasingly selling natural and organic foods, in most cases for less than Whole Foods Market does.

We see the FTC's demands as both unrealistic -- the merger is near completed for heavens sake -- and draconian -- the financial cost of doing what the FTC is asking in this severe recession and financial/credit crisis environment amounts to basically wishing a bankruptcy filing on Whole Foods Market, Inc., or at best forcing the company to fire hundreds or even thousands of employees as a way to conserve cash; cash it will need to do the expensive things contained in the FTC's filing.

We don't like to make predictions but we must: Judge Friedman has shown himself to be a fair and even-handed judge throughout the FTC-Whole Foods legal saga since the summer of 2007 when the case was assigned to him. Therefore, it's our belief that the judge will deny all or most of the requests being made by the FTC. However, we think he might grant one, which is that Whole Foods cease any further integration of remaining Wild Oats stores into Whole Foods. But even doing that would be difficult. Why? there's no Wild Oats entity anymore. It exists essentially only in FTC world.

Of course, we could be wrong. And if we are, and if the judge were to rule completely in favor of the FTC on its filing today, we expect a drop in Whole Foods' stock share price that will be so dramatic that it could likely render the value of the retailer so low that its new, major stockholders -- supermarket industry magnate Ron Burkle, who like Lanny Davis is a BFF of the former first family (particularly Bill Clinton), and the private equity firm Leonard Green & Partners, L.P., get together and engineer some sort of an acquisition of Whole Foods Market, Inc.

Leonard Green & Partners acquired 17% of Whole Foods Market, Inc. for $425 million on December 2, 2008.

Legendary supermarket industry investor Ron Burkle, who as a major investor (he held an 18% stake in Wild Oats at the time of Whole Foods acquisition) and board member was the driving force from the Wild Oats corporate side behind the merger with Whole Foods in 2007, revealed in a filing with the Security and Exchange Commission last Thursday that his Yuciapa Companies investment firm, which counts among its investors the once poor-as-President but now multi-millionaire (thanks in part to Burkle's efforts on his behalf) former President Clinton, bought a 7% stake in Whole Foods Market, Inc.

Burkle, a billionaire, is an activist investor. He made his fortune over a two-decade period primarily by buying supermarket chains and combining them, resulting in his ultimate deal, which was the sale of his huge supermarket holding company to Kroger Co. in the 1990's for billions of dollars.

Private Equity firms like Leonard Green & Partners and activist shareholders like Ron Burkle (his Yuciapa Cos. is essentially a private equity firm) both play the same endgame -- they acquire stakes in company's, get involved in how those companies operate, and eventually look for an exit strategy that makes them a substantial profit. This most often involves a merger or acquisition.

Mark our words, with Leonard Green & Partners and Ron Burkle now holding a combined 24% ownership stake in Whole Foods Market, Inc., the natural foods grocery chain, whatever the outcome of the FTC legal case, will not end up being the same company a couple years from now (or in less time) than it has been historically or is today. After word got out on Thursday that Burkle took a 7% stake in Whole Foods, the natural grocer's stock shot up by 23% above its previous day's share price.

Meanwhile, FTC v. Whole Foods Market, Inc. continues. Stay tuned.

Natural~Specialty Foods Memo (NSFM) Linkage:

>In this story [Retail Analysis Memo: Growth and A Tale of Two Retailers-Tesco and Whole Foods Market: Is One Ripe For Acquisition and the Other Ripe For Acquiring?] on August 16, 2008 we suggested Whole Foods Market, Inc. could (then) be ripe for an acquisition. Nearly five months later, and in much more dire straights, we think the probability is even higher that it is. The only limiting factor: Does anybody want Whole Foods in Today's economic climate? Not to mention it's little FTC problem as well.

>Linked below are a couple past stories from Natural~Specialty Foods Memo (NSFM) about billionaire supermarket industry investor Ron Burkle:

~Food & Politics Memo: Billionaire Supermarket Industry Investor Ron Burkle Makes Millions For The Clinton's Post-Presidency

~Retail Memo: [Heard on the Street]: Will SuperValu, Inc. Be Supermarket Industry Investor Ron Burkle's Next Play

>More on Ron Burkle: Click here to read a piece from August, 2007 about Burkle and the Whole Foods-Wild Oats deal. As a note: NSFM has been the only publication we found to suggest in the past that we could see Burkle making a major investment in the combined Whole Foods-Wild Oats. He did just that on Thursday, January 9, 2009.

Supermarket chains v. Whole Foods: The FTC is so "1986" when it comes to understanding the food and grocery retailing industry in the U.S.:

>Our argument regarding why the FTC is wrong in its legal case in which it is claiming that a combined Whole Foods-Wild Oats is a monopoly in what it calls the natural and organic premium retailing segment basically boils down to this: such a classification by the FTC is a fiction because it is irrelevant to the reality of the retailing of natural and organic products in the U.S. today in which retailers of all types and formats -- from Wal-Mart, Target, Costco, Safeway, Kroger Co., Trader Joe's, regional supermarket chains, independents and even Amazon.com, to fast-growing natural foods chains like Sunflower Farmers Market and Sprouts Farmers Market and many others -- all are battling it out in the category arena.

In August, 2007 we wrote this piece [Will the Big 3 Supermarket Chains Challenge Whole Foods in its Niche? Our answer today: Yes, in the 17 months since we wrote the piece the "Big 3" have increased their merchandising in the natural and organic foods categories significantly. For example, at the end of 2008 sales of Safeway Stores' "O' Organics" organic products store brand was over $500 million in its 1750 supermarket in the U.S. and Canada. Four years ago the brand didn't even exist.

Additionally, on the market for just a bit over a year, Safeway's "Eating Right" healthy foods brand has over $200 million in annual sales. Such sales doesn't come only from new customers. Rather, most of it comes from stealing other retailers' and manufacturers brand sales. A significant share of these new stomachs for the Safeway brands comes from consumers who used to buy like products at Whole Foods Market stores.

More NSFM Linkage:

Natural~Specialty Foods Memo reported extensively on, wrote about and offered analysis on the FTC v. Whole Foods issue and related topics in December, 2008. Below is a linked bibliography of all of our December stories and posts:

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 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.

[Note: Natural~Specialty Foods Memo holds no Whole Foods Market, Inc. stock at present.]

Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009

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

The U.S. Federal Trade Commission (FTC) has given Whole Foods Market, Inc. an extension on its scheduled February 16, 2009 administrative hearing/trial before an FTC Administrative Law Judge. The FTC has postponed the hearing, in which the FTC-picked judge will hear arguments for and against the deal and make a decision either way, until April 6, 2009.

Whole Foods Market had requested a postponement of the hearing until at least September of next year because it said it wants to await the rulings and outcome of the ongoing hearing in the U.S. Federal Court for the District of Columbia courtroom of Judge Paul Friedman.

At a hearing yesterday on the legal matter of the FTC's attempt to overturn Whole Foods' acquisition of Wild Oats Market, Inc. last year, Judge Friedman expressed his desire that both the FTC and Whole Foods Market, Inc. essentially freeze any actions they might take until he resolves the matter.

Judge Friedman said at the hearing yesterday he will first rule on a motion by the FTC to have Whole Foods' lawsuit against the regulatory agency dismissed. Whole Foods Market, Inc. is arguing in the lawsuit that the FTC has violated the company's due process rights with its ongoing campaign to overturn the merger with Wild Oats, a deal Whole Foods' says is essentially completed.

The FTC's postponing its administrative hearing until April 6 appears to be a nod to Judge Friedman's desires expressed yesterday at the hearing, along with a compromise with Whole Foods. Instead of waiting until September, which is the general hearing date Whole Foods' lawyers requested, the FTC opted for April 6, 2009.

An FTC spokesperson says an extension of the February 16 hearing date to April 6 was warranted because the outcome of Judge Friedman's hearings, of which yesterday's was the first, in which he is reconsidering the FTC's request for an injunction to suspend the merger, could impact the FTC's administrative hearing.

The federal court judge originally ruled in Whole Foods Market, Inc.'s favor in its friendly acquisition of Wild Oats last year, giving the natural foods grocery chain the green light to go forward with integrating Wild Oats and its stores into Whole Foods' operations and culture.

However, the FTC reopened its administrative case against the deal after that. This summer a federal appeals court ruled the FTC could go forward with its legal request to overturn the acquisition-merger. That's how the February 16, now April 6, 2009 administrative hearing/trial was set.

Meanwhile, earlier this month Whole Foods' filed a lawsuit asking that the case be removed from the FTC's jurisdiction and settled once and for all in federal court. The FTC fired back, asking Judge Friedman's court, where the matter is being heard, to dismiss Whole Foods Market, Inc.'s lawsuit.

Yesterday Judge Friedman held the first new hearing on the case. As mentioned, he said he will first rule on the Whole Foods Market lawsuit before taking up the overall case.

[You can learn more by reading our coverage and analysis from yesterday at the links here: 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 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: Only Slightly More Than Half the 93 Natural Foods Retailers Issued Subpoenas By Whole Foods in its Case against the FTC Have Complied.]

It isn't clear if Judge Friedman will have made a decision on the merger by the April 6 FTC hearing date. He said yesterday he will take up the FTC v. Whole Foods overall case only after he rules on a number of motions and on the Whole Foods Market, Inc. lawsuit against the FTC.

Up next will be Judge Friedman's ruling on various motions and on Whole Foods Market, Inc.'s lawsuit in which it argues the FTC violated its due process rights and in which it wants the federal court to take over the proceeding, which if granted would be a ruling by the judge against the FTC's holding its April 6 administrative hearing/trial.

Right now we don't see the judge stopping that hearing. However, if he rules on the overall legal issue, Whole Foods acquisition of Wild Oats, such a ruling could make the FTC administrative hearing on April 6, 2009 moot.

But there are plenty of appeal opportunities as well. If the April 6 hearing is held, and Whole Foods were to lose and is ordered to break up the combined Whole Foods-Wild Oats, it can appeal such a decision by the FTC Administrative Law Judge to the federal court.

Conversely, if Judge Friedman rules in favor of Whole, which would be the second time he did so if it happens, before the FTC April 6 administrative hearing next year, the rules allow the FTC to appeal that decision to the U.S. federal court of appeals, the same body that overturned Judge Friedman's original ruling in favor of Whole Foods Market, Inc.

There are limitations for both parties throughout this process however.

Even so, like the great New York Yankee baseball player and sidewalk philosopher Yogi Berra liked to say, we could be seeing deja vu all over again, in this case in the matter of FTC v. Whole Foods Market, Inc.