(Recasts, adds comment from Whole Foods)
By Diane Bartz
WASHINGTON Jan 12 U.S. antitrust enforcers
asked a court to halt premium grocer Whole Foods' integration
of its former Wild Oats rival and said they may ask for its
revival as a separate brand under independent management.
The Federal Trade Commission continues to fight Whole Foods
Market Inc's WFMI.O 2007 acquisition of Wild Oats, saying it
was still examining the $565 million deal when it was
consummated following the agency's failure to get a preliminary
injunction against it.
The FTC said that if the U.S. District Court for the
District of Columbia ruled it had a strong case against Whole
Foods, the government would seek to rebrand the acquired stores
with their former Wild Oats signs and have an independent
management team supervise them.
Whole Foods called the proposed move an "extreme remedy to
break up our company." It added that "no final court decision
has found our already-complete merger with Wild Oats to violate
Most Wild Oats stores have already been absorbed into Whole
Whole Foods said that since the merger was completed,
competition from other supermarkets has increased and Whole
Foods Market has reduced the price of many of its products.
"Competition among all supermarkets for shoppers of natural
and organic foods has increased, not decreased," Whole Foods
said in a statement.
The FTC also has an internal judicial process under way to
determine whether the the deal Whole Foods' deal violated
FTC attorney Matthew Reilly, who submitted the court
filing, raised the possibility that the FTC assessment of the
merger could lead the agency to require Whole Foods to divest
"When it gets to the commission and it gets to their final
opinion, who knows what the commission will do to fully restore
competition," he told Reuters.
The FTC has previously said that a significant chunk of the
Wild Oats stores acquired by Whole Foods could end up being
sought as part of a remedy, perhaps requiring divestiture of 40
to 50 stores in 29 markets as well as their distribution
channels. Wild Oats had 109 stores at the time of the merger.
The FTC's battle against Whole Foods was revived last July,
when the U.S. Court of Appeals for the District of Columbia
said a lower court underestimated the FTC's likelihood of
success in denying the request for a preliminary injunction.
Whole Foods has fought back, challenging the review process
at the FTC, one of two agencies that assess mergers.
The FTC votes on whether or not to probe a merger and then,
after an investigation, whether it came to the correct
conclusion. When a company disagrees with the FTC, it can take
the agency to court.
In contrast, the Justice Department takes all merger
challenges to court.
Whole Foods' legal fight has already cost the organic
grocery chain $16.5 million dollars, Chief Executive John
Mackey has said, and the company faces another $15 million to
$20 million in legal bills as the case proceeds through the
FTC's judicial system.
Whole Foods and the FTC held unsuccessful settlement talks
in September, according to Mackey.
Shares of Whole Foods closed Monday up 10 cents, or 0.8
percent, at $12.67 on Nasdaq.
Federal Trade Commission vs Whole Foods Market, U.S.
District Court, District of Columbia, No. 07-01021.
(Reporting by Diane Bartz; Editing by Lisa Von Ahn, Gerald E.
McCormick and Tim Dobbyn)