Whole Foods squares off against FTC

CEO answers claims Wild Oats stores will close

Joyzelle Davis, Rocky Mountain News

Published June 20, 2007 at midnight

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Whole Foods, the nation's biggest natural foods store, plans to close "numerous" Wild Oats stores and sell "several" if the $670 million deal to purchase its rival goes through, according to new information released in the Federal Trade Commission's lawsuit.

Whole Foods CEO John Mackey, in an unusual 14,000-word posting on his company's Web site, fired back that the company likely will close Wild Oats stores within a mile of Whole Foods stores but won't know for certain until the company is allowed to look at individual store financial statements.

He also said Whole Foods already has a deal in place to sell Wild Oats' farmer's market stores in California and Texas.

The FTC filed suit in U.S. District Court in Washington, D.C., on June 6, but large portions of the complaint were initially blacked out because they contained competitive information. The FTC is seeking to block the deal, claiming Whole Foods' planned purchase of Boulder- based Wild Oats would raise prices for premium natural and organic-foods shoppers.

Mackey posted his response shortly after the lawsuit was unsealed Tuesday, accusing the FTC of neglecting "to do its homework" and of selectively choosing documents out of context "that will portray Whole Foods (and especially me) as very aggressive and seeking to 'destroy' Wild Oats."

The FTC isn't going to place these documents "in their proper context of an ongoing conversation, debate, brainstorming, or in many cases 'macho posturing' by executives within the normal business flow of any competitive corporation," Mackey wrote.

The FTC quoted Mackey as telling his board that buying Wild Oats will "avoid nasty price wars in Portland (both Oregon and Maine), Boulder, Nashville and several other cities which will harm our gross margins and profitability . . .

"Furthermore, we eliminate forever the possibility of Kroger, SuperValu or Safeway using their brand equity to launch a competing national natural/organic food chain to rival us."

Addressing that quote, Mackey said that "there has never been a price war" between Whole Foods and Wild Oats in their 14 years of competition.

Mackey also countered the FTC's assertion that it plans to close "numerous" Wild Oats stores and sell others.

What both sides say

What the FTC claims Whole Foods CEO John Mackey told his board of directors in describing the purpose of the Wild Oats purchase:

"By buying (Wild Oats) we will . . . avoid nasty price wars in Portland (both Oregon and Maine), Boulder, Nashville and several other cities which will harm (Whole Foods') gross margins and profitability. . . .We eliminate forever the possibility of Kroger, Super Value or Safeway using (Wild Oats') brand equity to launch a competing national natural/organic food chain to rival us."

What Mackey said Tuesday on his blog:

"From the first day the FTC began their investigation they were very hostile and adversarial towards Whole Foods. Instead of conducting a dispassionate, impartial, and fair investigation into this merger the FTC consistently behaved in a biased, adversarial, and arrogant manner, while engaging in 'bullying tactics' again and again and again. Whole Foods was always presumed to be 'guilty' and had to try to prove our 'innocence' to the satisfaction of the FTC. However, the FTC seemed to us to be completely uninterested in Whole Foods' explanations for why we were doing the deal. From the very beginning the FTC staff began to build their case against the deal. It is Whole Foods' opinion that the FTC had already decided to try to prevent this merger before they even began their investigation!"

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davisj@RockyMountainNews.com or 303-954-2514

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