In shocking news, the American Antitrust Institute has come out with a white paper suggesting that the FTC’sÂ challenge of the Whole Foods/Wild OatsÂ merger is warranted (HT: Hanno):
The FTC cites to numerous factors and questions that make a highly compelling case for looking closely at whether a Whole Foods/Wild Oats combination will tend substantially to lessen competition. In our opinion, therefore, there is enough â€œsmoke to suspect a fire.â€ And rather than condemning the FTC–as some pundits have already done–the public should await the results of the hearing.Â
I guess I am among the pundits who have already condemned this merger.Â See here, here and here.Â Thom also weighed in against the FTC with a great piece here.
The AAI’s claim that a vaguely colorable case warrants the FTC having its “day in court” is problematic.Â As Diana Moss (the author of the AAI report)Â knows full well, the FTC almost never loses a preliminary injunctionÂ hearing, and as she acknowledges, if the FTC’s application for a PI “is approved, in the normal course of events, the merging parties will walk away from the merger.”Â So the practical effect is that the FTC’s “day in court” for the ostensibly-limited purpose of temporarily delaying the merger lest a full hearing yield sufficient proof to enjoin it permanently (a purportedly much harder feat post-merger) actually leads to de facto permanent injunction.Â I would think that, given the reality, the AAI might also argue that Whole Foods should have its day in court–something very diffuclt to do in the face of the impossibly low standard of proofÂ in a PI hearing.
The biggest problem with the AAI brief, however, is its ridiculous claim that empirical evidence–the elusive pricing data–is merely a “complement” to the allegedly anticompetitive intent of Whole Foods as evidenced in all those selectively-quoted hot docs the FTC relies on in its complaint.Â
In the case of Whole Foods/Wild Oats, Mr. Mackey denies that Whole Foods and Wild Oats constrain either otherâ€™s pricing. Surely, the availability of an enormous quantity of computerized (scanning) retail price data puts the analysis that Mr. Mackey claims already to have done within the realm of reason. At the same time, however, Mr. Mackey has made public statements disclosing the motives for the merger that reflect an intent to stifle competition. Although intent evidence can be based on fantasy or reflect aÂ misleading degree of aggressiveness, it can also help bring into focus the likely effects of a merger. In light of this, â€œnatural experimentsâ€ using price data to determine if existing or potential competition discipline pricing by the merging parties should be viewed as a complement to anticompetitive motives in developing record evidence that the merger would tend substantially to lessen competition.
I appreciate the disclaimer about how intent might be little more than wishful thinking.Â But I’m curious on what basis Moss rests the claim that intent evidence “can also help to bringÂ into focus the likely effects of a merger.”Â If it is impossible to determine ex anteÂ whetherÂ anticompetitive intent is just bluster, doesn’t it rather more confuse than “focus” the likely effects of a merger?Â I get the presumption that “what one intends to happen, that is what is likely to happen.”Â I just don’t get why that presumption is ever actually warranted in a situation as complex as anticipating the likely effects of a merger.