Froeb on Economics in Whole Foods

Cite this Article
Joshua D. Wright, Froeb on Economics in Whole Foods, Truth on the Market (August 30, 2007),

Here’s a taste of the reaction of former FTC Bureau of Economics Director Luke Froeb to some of the economic analysis in the recent Whole Foods merger case:

The heavily redacted court documents refer to entry “experiments” to determine the degree of substitution between the two merging stores. We found the following on the Whole Foods website,

If we [close the Wild Oats Store right across the street], we believe approximately 50% of the volume their store does will transfer to our store, with the other 50% migrating to our other competitors (these estimates are based on our past experience with similar situations).

It is hard to believe that the diversion ratio could be this big. But if it is, then simple models of competition would predict a big enough post-merger price increase to put the two stores into a relevant market by themselves.

Go read the whole thing here. There are links there to the relevant public (redacted) versions of the expert reports.