WASHINGTON (CN) – The D.C. Circuit revived the Federal Trade Commission’s request to block the $565 million merger of Whole Foods and Wild Oats, ruling 2-1 that the lower court had improperly analyzed the market. Judge Brown said the organic grocery giants were “racing to meet a financing deadline,” and the FTC offered “at best, poorly explained evidence.”
Whole Foods operates 194 grocery stores, while Wild Oats runs 110. Most are located in the United States.
U.S. District Judge Paul Friedman had denied the FTC’s efforts to stop the merger, but Judge Brown reversed the decision “reluctantly, admiring the thoughtful opinion the district court produced under trying circumstances.”
The majority ruled that the district court erred by assuming that “market definition must depend on marginal consumers. The district court acted reasonably in focusing on the market definition, but it analyzed the product market differently.”
Friedman assumed that marginal customers should be the focus of analysis, while Brown ruled that the relevant market should be those consumers who are committed to premium, natural and organic supermarkets.
Brown agreed with the FTC that the merger would create monopolies in 18 markets in which Wild Oats and Whole Foods are the only premium, organic locations.
“We are pleased by today’s decision in the Whole Foods matter,” said Jeffrey Schmidt, director of the FTC bureau of competition, “and (we) are looking forward to future proceedings before the district court, leading to a full trial on the merits before the commission.”