FTC presses on with Whole Foods, Wild Oats case

The sign for the Whole Foods grocery store is seen in Lakewood, Colorado September 11, 2007. REUTERS/Rick Wilking

WASHINGTON (Reuters) - Whole Foods Market Inc WFMI.O and the Federal Trade Commission will argue in an appeals court on Wednesday over whether the organic gourmet grocer should have been allowed to buy its rival, Wild Oats, last year.

The FTC is expected to argue that the U.S. District Court for the District of Columbia erred last August in failing to temporarily stop the merger while the FTC determined whether the deal violated antitrust law.

The commission has said the $565 million deal raised antitrust concerns in 21 geographical areas where the two chains were each other’s closest competitors, and will be asking for a permanent injunction stopping the deal.

Whole Foods has argued that its stores compete against all supermarkets, not just organic grocery stores.

“We believe the District Court drew the correct conclusion: the combination of Whole Foods Market and Wild Oats Markets would have no negative effect on consumers,” said Whole Foods spokeswoman Kate Lowery.

The commission has an administrative proceeding filed against Whole Foods but has stayed it pending the court’s decision.

Whole Foods first announced its plan to buy smaller rival Wild Oats in February 2007. But the FTC sued to block the deal in June, saying it would hobble competition in the market for natural and organic groceries.

The U.S. Court of Appeals for the District of Columbia on August 23 denied the FTC’s request to overturn the lower court and temporarily block the deal, which then closed just days later. A three-judge panel of the same appeals court will hear Wednesday’s arguments over a permanent injunction.

Reporting by Diane Bartz; Editing by Tim Dobbyn