Legal News - Fed Appeals court orders reconsiders Whole Foods suit
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The US Court of Appeals for the District of Columbia Circuit Tuesday ruled that a lower court had erroneously dismissed a Federal Trade Commission lawsuit seeking to prevent Whole Foods Market 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. 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, 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.

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

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