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Whole Foods Market is firing back at the Federal Trade Commission in a high-profile antitrust case, striking at the agency in court, in Congress and in the press with a three-pronged strategy led by a prominent D.C. lawyer and a lobbying firm stocked with Democratic insiders. The company says it has already spent more than $16 million since 2007 in attorney and expert fees to defend its $565 million merger with organic grocer Wild Oats. Now, it is going on the offensive with a complaint filed in U.S. District Court for the District of Columbia that accuses the FTC of bias and due process violations. In October, Whole Foods retained politically savvy lawyer Lanny Davis, an Orrick, Herrington & Sutcliffe partner and former special counsel to President Bill Clinton, to lead the effort to convince power brokers that Whole Foods is not getting a fair shake at the FTC. Davis, an outspoken surrogate of Hillary Clinton during her presidential campaign, has become the public voice of Whole Foods. In the Dec. 8 complaint, Whole Foods alleges the FTC is “now attempting to get a second bite at the apple” by challenging the merger in administrative proceedings while the dispute is still pending in the federal courts. Davis, head of Orrick’s strategic and crisis communications group, bolstered the attack when he tapped Glover Park Group — loaded with former advisers in the Clinton-Gore administration — to squeeze the FTC on Capitol Hill through the House and Senate judiciary committees. Glover Park partner Joel Johnson, a former senior adviser to President Clinton, is the lead on the lobbying effort. “We want to stay alive. When you are facing life or death, you do what you have to do,” Davis says. “We think the FTC needs to understand that when [it] violates fundamental principles of fairness, you do everything you can to vindicate yourself.” But lawyers in D.C.’s antitrust bar question whether any part of the strategy will work. Convincing a federal district judge to block an administrative trial is a long shot, the lawyers say, and a lobbying campaign that highlights alleged inequities in antitrust law is unlikely to produce quick results. FTC lawyers didn’t return requests for comment, but David Wales, acting director of the FTC’s bureau of competition, said in a statement in November that the FTC looks forward to the administrative trial proving “why this merger is unlawful and should be undone.” The FTC moved to dismiss the complaint on Dec. 12. LANNY TO THE RESCUE The Whole Foods battle with the FTC began in February 2007, when the high-end organic grocery chain announced its intent to merge with Wild Oats. FTC lawyers moved four months later to block the deal by filing a request for a preliminary injunction. But the agency initially lost in both the district court and U.S. Court of Appeals for the D.C. Circuit. At that point, Whole Foods and Wild Oats went ahead with its planned marriage, consummated in August 2007. But the FTC didn’t give up, pressing on with an appeal to the D.C. Circuit. The appeals court reversed course, throwing the case back to the trial judge for additional review. The FTC also resumed its effort to undo the merger on a second front — this one an administrative proceeding at the agency. The dual proceedings, which antitrust lawyers say is rare, infuriated Whole Foods. Antitrust lawyers say it’s common practice for the FTC to ditch a challenge after losing a bid for a preliminary injunction. Until October, Whole Foods had primarily used Dechert to defend the merger. For the new strategy, Whole Foods turned to Lanny Davis, a recognizable face who is regularly dispatched to spin on behalf of prominent Democrats — specifically the Clintons and more recently President-elect Barack Obama. Davis says Whole Foods wanted a strategy that would fight the FTC on three fronts — the courts, the media and Capitol Hill. Davis is not known as an antitrust expert, but his name received top billing on the dramatically written complaint that begins with a passage from Alice in Wonderland about verdicts not supported by evidence. “If you quote from Alice in Wonderland, you don’t need to do anymore,” says Davis. The other lawyers who signed the complaint are: Dechert’s Denis, Orrick partner Garret Rasmussen and associate Antony Kim, and antitrust expert W. Stephen Cannon and partner Todd Anderson of Constantine Cannon, which was also recently retained. Orrick says it has four other attorneys working for Whole Foods. They are: partner Josh Galper, of counsel Eileen O’Connor, and associates John Pitts and Cecelia Showalter. The lawsuit was quickly followed by a Dec. 9 press conference staged in the Cannon Office Building on Capitol Hill. Whole Foods CEO John Mackey and other company executives flew into town for the event. Davis was also there to try and explain the complexities of the case to mainstream news outlets. While 18 reporters took part via telephone conference, only three reporters and a photographer attended the briefing. Davis says it’s not too soon to declare the media campaign a success. He says there’s a buzz on the Hill and lawmakers are getting to know the issue. “Does the story have legs?” Davis asks. He answers immediately, talking briskly. Yes, the story has legs, he says. “That’s the key test in generating interest.” To push for interest on the Hill, Davis turned to a shop started by his old White House friend Joe Lockhart, Bill Clinton’s chief spokesman from 1998 to 2000. Glover Park’s Johnson, who served as President Clinton’s senior adviser for policy and communications, is leading that effort with Glover Park lobbyists Kimberly James and Ali Bonebrake. Johnson’s clients include Toys “R” Us, American Bankers Association, and Coca-Cola. “We needed a lobbying group that could easily capture complex legal arguments,” Davis says. “Joel seemed to me to be exactly who we were looking for.” The three lobbyists did not return calls seeking comment. Michael Torrey, former deputy chief of staff at the Agriculture Department under President George W. Bush, is also lobbying for Whole Foods. Torrey, who runs his own lobby shop, declined to comment. Davis and other Orrick lawyers won’t talk specifics about the lobbying strategy, but they say it is geared toward highlighting the FTC merger review and challenge process and not the merits of the Wild Oats merger itself. According to Whole Foods’ attorneys, a 109-page binder filled with highlighted court documents, position papers, and news reports is being distributed to lawmakers and their staff. “This is David and Goliath,” Davis says, “and I’m happy to be on the side of David.” WILL IT WORK? Despite the effort, antitrust lawyers are skeptical about whether any of it will prevent the FTC from moving forward with the administrative trial, which is scheduled for February. As far as convincing federal lawmakers to weigh in, Robert Pitofsky, counsel at Arnold & Porter and a former FTC chairman, says that time has likely passed. “Once a case is in litigation, people on the Hill are very reluctant to get involved,” Pitofsky says. But even if the push had been started earlier, Pitofsky says, “that kind of lobbying almost never accomplishes anything.” American Antitrust Institute President Albert Foer says Whole Foods and its lawyers want to revive the failed recommendations of the Antitrust Modernization Commission to end FTC administrative proceedings for merger challenges. The commission report failed to get traction in Congress. Cannon, a lawyer for Whole Foods and former chief antitrust counsel for the Senate Judiciary Committee, was part of the commission. “What Whole Foods is trying to do is get Congress to do the work and change the outcome. Congress doesn’t want to interfere in the middle of an antitrust dispute,” says Foer, who participated in the Whole Foods case in an amicus brief supporting the FTC. If the Hill doesn’t get involved, what about the courts? Antitrust lawyers varied in their opinions as to the merits of the complaint but most doubted it could succeed. “They really want to change the structure of how the FTC operates, and that seems like a long shot,” says McDermott Will & Emery partner Jon Dubrow, a member of the firm’s antitrust and competition practice group. Still, Dubrow says the civil case “raises interesting substantive and procedural issues that could impact the merger practice generally.” Weil, Gotshal & Manges partner Steven Newborn, who practices in the firm’s antitrust group, calls the complaint “silly” and questions whether it is the product of sound decision-making. Dickstein Shapiro partner Peter Kadzik, deputy practice leader of the firm’s antitrust and financial services group, says one of the stronger claims in the civil suit involves the five months Whole Foods was given to prepare for the administrative trial — an accelerated time frame. “That claim has more legs than the claim the FTC improperly acts as judge and jury because that’s part of their statutory makeup.” Yet even that point could backfire. “If part of their complaint is that five months is an inadequate time to prepare for trial, then why are they spending this five months churning up this additional litigation instead of preparing a case?” says Foer, former acting deputy director of the FTC’s bureau of competition. “It detracts from the sympathy they might otherwise engender.”

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