This article is part of a Chronicle. See more from this Chronicle
William Baer, Deborah Feinstein, Sep 01, 2008
Last month’s Whole Foods decision by the U.S. Court of Appeals for the D.C. Circuit can be viewed from a variety of perspectives. Our focus in this commentary is how the decision is likely to reinforce the U.S. Federal Trade Commission’s (“FTC’s”) determination to change the way it challenges mergers. Just a year ago, FTC merger enforcement efforts seemed to be making little headway. The district court’s decision in August 2007 not to enjoin the merger of Whole Foods and Wild Oats was the third time in just over three months that the FTC had seen its judgment on a merger questioned by a federal district court. The initial Whole Foods outcome in the district court was the most visible defeat for the agency. When the FTC sued last summer to block the acquisition of Wild Oats, to all appearances it was a straightforward, fact-specific merger challenge. Was there a market for premium and natural organic supermarkets and did the combination of Whole Foods and Wild Oats lessen competition in such a market? The district court opinion refusing to enjoin the transaction addressed the key questions of market definition, the likelihood of entry, and the competitive effects of the transaction. And while the district court opinion offered a lengthy and interesting discussion of these key issues, there seemed not to be any novel analysis or far-reaching ramifications. Indeed, the opinion may have been most interesting for what it did not address: the role of inflammatory CEO statements and Whole Foods™ plans to close a number of stores after the transaction. In contrast, the D.C. Circuit’s decision in July of this year, reversing the district court opinion and remanding to the district court for further proceedings, appears to have significant implications for future transactions and advances many of the FTC’s recently articulated goals in improving its merger enforcement record.
