Whole Foods is cleared to buy rival
A federal appeals court on Thursday cleared the way for Whole Foods Market Inc. to buy rival organic grocer Wild Oats Markets Inc.
The three-judge panel of the U.S. Court of Appeals for the Federal Circuit denied a request by the Federal Trade Commission to delay the $565-million sale pending an appeal’s outcome. Whole Foods lawyers argued that such a ruling would have killed the deal.
Last week, U.S. District Judge Paul L. Friedman refused to block the transaction, a decision that federal regulators quickly appealed. They claimed that if the two companies combined, it would mean less competition and higher prices for premium and organic food.
The appeals court, in a brief ruling, agreed that the FTC “raised some questions” about the deal, but the judges said the agency had not proven that Friedman’s decision was flawed.
Representatives from the FTC did not immediately return calls seeking comment.
In his 93-page ruling, Friedman rejected the FTC’s argument that the two stores competed in a narrow market of “premium, natural and organic supermarkets.” He said chains such as those of Vons parent Safeway Inc. and Ralphs parent Kroger Co. sold more fresh and organic produce and had redesigned many of their stores to compete with Whole Foods.
About 60% of natural and organic food sold come from conventional stores, he said.
Whole Foods officials have said they would move quickly to close the deal. Its offer to purchase all outstanding Wild Oats shares expires Monday.
Keith Hylton, an antitrust law professor at Boston University, said courts in antitrust cases are putting more weight on objective evidence and less on statements by company executives.
“In the end, courts have to look at what the firm did -- not what it said -- and try to determine whether the firm’s actions really harmed competition,” Hylton said.
The ruling was released after markets closed. Whole Foods shares fell 19 cents to $43.34, then rose as high as $43.96 cents in after-hours trading. Wild Oats rose to $18.49 in after-hours trading after falling 2 cents to $18.07.