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In Once-Every-Fifty-Years Case, Whole Foods Sues FTC
The American Lawyer
December 10, 2008
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The $565 million merger struck between Whole Foods Market and Wild Oats Marketplace in mid-2007 is becoming one of those legal battles that's so protracted it's hard to keep up with.
The Federal Trade Commission has opposed the deal from the start, claiming the two grocers account for too much of the coveted organic goods market. But two federal courts -- ruling that both companies actually compete with larger supermarket chains in addition to gourmet shops -- have allowed the merger to go forward over the FTC's request for a preliminary injunction.
But one of those courts (the U.S. Court of Appeals for the D.C. Circuit) reversed itself over the summer and ruled that the FTC might actually have a point, and, according to reports from Bloomberg and The Associated Press, the agency's administrative review is continuing.
Now, the Whole Foods legal team from Orrick, Herrington & Sutcliffe, Dechert and new addition Constantine Cannon is trying something it says hasn't been attempted in half a century -- suing the FTC.
The Whole Foods team, which says the company has already spent $16.5 million on legal fees and other costs related to winning approval of the deal, says the FTC is so biased against the merger that it should be prohibited from reviewing it.
Additionally, the grocer's lawyers say, new FTC rules that call for an expedited discovery process put Whole Foods at an unfair disadvantage by giving the company just five months to prepare its case (Whole Foods wants an additional ten months).
In legal terms, the suit, filed Monday in U.S. District Court for the District of Columbia, accuses the FTC of violating the federal Administrative Procedure Act. Leading antitrust experts are not optimistic about Whole Foods' chances of winning that argument.
"It's laughable," says Steven Newborn co-chair of the antitrust group at Weil, Gotshal & Manges. Newborn says Whole Foods CEO John Mackey probably expects the FTC to force his company to divest itself of some assets and aims to delay that step as long as possible.
Orrick's Lanny Davis is leading the team of lawyers on the deal. He was unavailable for comment; he and Mackey are meeting with several senators and members of the House of Representatives about the case today, according to a company statement.
Dechert partner Paul Denis and Constantine Cannon name partner W. Stephen Cannon are also on the case; Cannon is former antitrust counsel to the Senate Judiciary Committee.
The FTC has so far declined to comment.
One interesting highlight from the Wall Street Journal story on the case Tuesday: It shows how powerful the FTC's extra-judicial administrative review process makes the agency when compared to its partner in antitrust prosecution, the U.S. Department of Justice. The DOJ is limited to a quick court battle in antitrust cases, the paper says.
The Am Law Daily gives the Whole Foods team bonus points leading its complaint with a quote the Queen of Hearts delivers in a major scene in "Alice in Wonderland."
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
