As Manfred reports over at the Antitrust Review, the judge has unsealed the FTC’s complaint against Whole Foods. This unredacted version reveals an unhealthy reliance on hot docs by the FTC’s staff. I won’t belabor the point. But when you’re looking at marketing materials and reports to the board to identify anticompetitive intent (hmmm. I didn’t know intent was relevant in merger cases . . . .) through “fighting words” and “smoking guns,” you’re barking up the wrong tree. It is little or no evidence of likely anticompetitive effect that Whole Food’s outspoken CEO claims that purchasing Wild Oats will remove “forever or almost forever” the threat to Whole Food’s market. I’m delighted that he believes so strongly in his product and in the strength of his brand. I think it’s great that he can find ways to differentiate Trader Joe’s, Safeway, Kroger, the local produce stand and Wal-Mart from his stores (He might also have pointed out that they are all found in different locations, have different names and sell a different mix of products. Some don’t even offer plastic bags to take your groceries home in. Now that’s the sort of differnetiation the FTC can make a market out of!). But this is not antitrust-relevant evidence. As I said in my last post on this topic–I’m sure there is econometric data, and I anxiously await its revelation. In the meantime, this complaint reveals the same old market definition pathologies, intent-based arguments (where they have no place), and improper reliance on meaningless hot docs. As the WSJ said, echoing my earlier post:
In other words, the FTC is again playing “pick your market” to justify a dubious antitrust action. Just as Microsoft makes 100% of operating systems called Windows, Whole Foods controls most of the market segment that consists of stores that look just like Whole Foods. The public-policy principle at work here is that if you define a market narrowly enough, you can find an industry monopolist anywhere.
The FTC argues that Whole Foods and Wild Oats compete for market share. I have no doubt that’s true. The question, left unanswered in this complaint, is whether, in a business notorious for razor thin margins, shifting market share injures anyone at all other than the losing competitor. Likewise, other than John Mackey’s belief to the contrary, the question remains what evidence supports the seemingly crazy contention that the this battle for market share is fought by these two merging companies alone, to the exlcusion of practically everyone else.