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Federal appeals court orders reconsideration of Whole Foods antitrust suit

[JURIST] The US Court of Appeals for the District of Columbia Circuit [official website] Tuesday ruled [opinion, PDF] that a lower court had erroneously dismissed a Federal Trade Commission (FTC) lawsuit seeking to prevent Whole Foods Market [corporate website] from buying out competitor Wild Oats Markets. The FTC had been seeking a temporary injunction against the merger while it conducted an investigation into whether the deal would violate antitrust laws [15 USC s. 18 text]. The FTC argued that the merger could give Whole Foods a monopoly on a specific high-end grocery market in some areas, but the lower court found that this could not qualify as a "market" under the law and dismissed the claim. Over objections from Whole Foods that the deal had effectively already gone through [corporate website], the circuit court ordered the lower court to more fully consider whether the kind of "market" the groceries control is one that is protected from monopolies under the law:

The FTC contended Whole Foods and Wild Oats are the two largest operators of what it called premium, natural, and organic supermarkets (“PNOS”). Such stores “focus on high- quality perishables, specialty and natural organic produce, prepared foods, meat, fish and bakery goods; generally have high levels of customer services; generally target affluent and well educated customers [and] . . . are mission driven with an emphasis on social and environmental responsibility. ...

The FTC described the core PNOS customers, explained how PNOS cater to these customers, and showed these customers provided the bulk of PNOS’s business. The FTC put forward economic evidence—which the district court ignored—showing directly how PNOS discriminate on price between their core and marginal customers, thus treating the former as a distinct market. Therefore, we cannot agree with the district court that the FTC would never be able to prove a PNOS submarket.
Reuters has more.

The decision comes after the court initially refused to block the merger [JURIST report] over US District Judge Paul Friedman's refusal to issue an injunction blocking the acquisition [opinion, PDF] in 2007, which the FTC had appealed [JURIST report] to the circuit court. The court initially issued an administrative injunction [JURIST report] putting the takeover on hold while it considered the case, but later refused the FTC request for a stay pending appeal [WF press release].

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