business news in context, analysis with attitude

The Wall Street Journal this morning reports on the face-off in US District Court between Whole Foods and the federal Trade Commission (FTC) over the retailer’s proposed $565 million acquisition of Wild Oats, which the government opposes on the grounds that it would be anti-competitive.

According to the story, the judge in the case seems to be looking for an appropriate definition of what the marketplace is and what roles Whole Foods and Wild Oats play in that marketplace. Are they part of a broader grocery business? Or are they the dominant players in the natural foods business, which would suggest that their merger could dramatically consolidate the balance of power?

The Journal writes that “David Scheffman, an antitrust consultant and former FTC official, told the court the natural-foods stores don't just compete with each other, as argued by the FTC, but are part of the broader supermarket industry.” However, it also reports that University of Chicago antitrust expert Kevin Murphy told the court that he found “margin and pricing evidence indicating competition between the two companies can lead to lower prices in specific geographic areas” – the implication being that if the two companies merge, prices could go up.

A decision in the case is expected within a couple of weeks.
KC's View:
I’ve said it before, and I’ll say it again.

These days, you can buy natural and organic foods almost anywhere. I still think that Whole Foods and Wild Oats occupy one segment of a broader business, and ought to be allowed to merge.

And if the judge has ever shopped for food, he’ll understand that.