FTC Appeals to Court to Undo Whole Foods-Wild Oats Merger - WSJ.com

FTC Appeals to Court to Undo Whole Foods-Wild Oats Merger - WSJ.com:

"In an unusual move, the Federal Trade Commission is trying to disrupt the merger of natural-foods grocers Whole Foods Market Inc. and Wild Oats Markets Inc. after the deal has already been consummated. The FTC is asking a Washington appellate court to review a federal-district court ruling in August that allowed the $565 million deal to proceed. The agency, which opposes the combination on antitrust grounds, is asking for an expedited ruling. Its appeal is considered a long shot."

I know I said it back in June, but I still do not see why this deal should not be allowed to go through despite the idiotic comments made by the CEO.

CEO's words haunt Whole Foods deal

TheDeal.com - CEO's words haunt Whole Foods deal:

"Court documents released Tuesday, June 19, capture Whole Foods Market Inc.'s CEO John Mackey urging his board to snap up rival Wild Oats Markets Inc. to eliminate any threat from a rival natural foods company.... The FTC's complaint states that 'Mackey bluntly advised his board of directors of the purpose of this acquisition: 'By buying [Wild Oats] we will … avoid nasty price wars...."

Uh, oh. This one is not going to make the deal easier to defend. But it may not be a deal breaker yet either. Of course, price wars will be eliminated (and prices will likely rise--this idea that market power reduces price competition is fairly well established (see Pragar and Hannan 1998), BUT it does not mean there is not enough competition for Whole Foods and Wild Oats to be merged. Stay tuned.

BTW speaking of horizontal mergers and the difficulty of being approved, XM and Sirius were back in the news recently. Another one that I would have let go.

FTC to try to block grocer's acquisition

FTC to try to block grocer's acquisition:

"Natural foods grocer Wild Oats Market Inc. said Tuesday that federal regulators will file a lawsuit to prevent its acquisition by competitor Whole Foods Market Inc...Whole Foods has said the FTC is considering trying to prevent the sale from being completed over concerns over anticompetitive effects."

That is sort of surprising to me. First of all it is saying that Natural and Organic grocers are a different market than other grocers. Which is clearly not the case (don't believe me? Price an organic item too high and see everyone go to the non organic variety!).

Secondly, with the widespread adoption of "organic" products by national producers (see Hunts, Kraft, etc.), it is unclear whether the "natural and organic" grocers will have the market to themselves.