Unscrambling Organic Eggs: Will Whole Foods Lose Wild Oats?

Beware the insurmountable barriers to entry which the retailing of organic tomatoes bestows on its business owner. We mentioned this situation whereby the Whole Foods (WFMI)/Wild Oats completed M&A was under fire since the "deal would harm consumers who shop at "premium natural and organic supermarkets", treating this business as if it were impenetrably walled off from the rest of the economy.

Anyhow, it looks like Whole Foods might have to dismantle its acquisition should certain judges get their way. What a waste of time and energy if that happens.

U.S. Circuit Court Judges Janice Brown and David Tatel "agreed that this Court has the power to grant relief despite the merger having already taken place." That could mean either stopping further efforts to eliminate Wild Oats as a separate brand or possibly ordering Whole Foods to reconstitute Wild Oats, re-creating the same level of competition that would exist today if the merger had not taken place. That process, known as "unscrambling the eggs," is a rarely used remedy in antitrust law.

It would seem to make more sense just to let the merger happen, give it some time, and then see how badly luxury grocery shoppers are hurt rather than assume this will be the case - if not to allow for economic freedom to exist, then merely to set us up for the next round of hilarious opposition in say two years, whereby Whole Founds becomes accused of price gouging on life necessities such as Cornish Hens.

But why wait for future comedy, when there's more nonsense to expose in the current situation.

The U.S. Federal Trade Commission also said that if the court ruled that the agency had a strong case against Whole Foods, the government would also seek to rebrand the acquired stores with their former Wild Oats signs and create an independent management team to supervise them.

So we could be on the way to national control of the organic and premium grocery industry, as to some this business seems too important for private market forces to control. Ahem.

For a simple way to just end the discussion with any naysayers, show them Whole Foods' stock; it has been creamed, down massively from 52-week highs. Also, its all time high was in 2006, before the merger. Obviously a whole lot of people don't see some sort of invincible monopoly ahead due to Wild Oats being acquired! So why do a few judges see it this way? Someone should send them a WFMI stock chart, it's been falling for years from its 2006 peak and speaks for itself. This debacle is complete baloney and unfit for the US.

Comments

[bigmoney:]

I don't have an opinion on the merger. However, I frequent these sort of grocery stores. People complain of pricing, but I found that when a regular grocery carries foods in the "organic" genre, the prices are often similar. Even my local Walmart is charging nearly $10 for organic almond butter. Cashew butter is around $5.

Some things are priced too high, such as non-organic cherries for $6.99/pound. The same thing might be found at Randals for $2.99/pnd. Not sure what is going on there.

Regular grocery has some healthy stuff, such as dried beans and rice, but the quality to junk ratio is much lower than the Whole Foods type stores.

Jan 13 11:16 AM

[Avalanche:]

The actions of the FTC are clearly absurd! This is a case of over zealous attorneys trying to protect the public against a threat that does not exist, Whole Foods/Wild Oats is in no way close to being a monopoly. Every "mainstream" grocer in the country sells organics and there are several that have a high percentage.

Recreating Wild Oats is impossible and will ultimately result in a failure. Competition has already amplified their efforts. Sunflower Farmer's Markets sfmarkets.com/, has already stepped into Wild Oats shoes in many of the "core" Wild Oats markets, the company was even started by ex-Wild Oats management, their even based in Boulder Colorado. Trader Joe's is also strengthening it's market presence. Additionaly, Tesco Fresh & Easy has pushed into the western markets, further filling the void if any that was left by Wild Oats.

I am embarrassed that my tax dollars are being used to fuel this exercise in stupidity! Does the FTC honestly think this will benefit anyone????

Jan 13 11:53 AM

[selene:]

While I agree Wild Oats wasn't needed in the market, I don't agree that TJ's really competes head to head with WFMI. Don't get me wrong, I love TJ's, but I doubt anyone makes it their only grocery store. TJ's business model is that everything, even produce, has to be a SKU, not by weight, which means no butcher or fishmonger, their produce is pre-packaged and can't be as good as at most other stores, and they can't offer bulk staples or spices. Also WFMI is at least moving in the direction of stocking more local produce and meats, TJ can't do this for unclear reasons related to the same standardization that gives rise to the SKU's policy. Finally, hardly anything at TJ's costs anywhere near what it does at WFMI, with possible exception of high-end cheese and wine.

Jan 13 12:57 PM

[spengulick:]

The government has screwed up just about everything it touches from citizen band radio frequencies twenty five years ago to the grocery business today. Whole Foods has filled a desirable niche in the food business ethically and well. Why is the FTC crucifying them? (I cannot justify owning and do not currently own WFMI)

Jan 15 02:09 PM