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The star witness during a pretrial court hearing on the Federal Trade Commission’s battle to block a $700 million natural-foods grocery deal was — an apple. The FTC’s lead attorney, Tom Brock, brought the fruit, purchased from a D.C.-area Whole Foods Market store, to prove that the chain has ways of tracking purchases of organic items, a point of contention as the parties prepare for a July 31 court date. The receipt said “Fuji, organic,” Brock read to the court last week, also noting that the apple itself was coded with a number nine, a clue to Whole Foods’ front office that the item is organic. It’s just that kind of information the FTC wants from Whole Foods Market Inc. and its target, Wild Oats Markets Inc., Brock said. But Alden Atkins, a partner at Vinson & Elkins who represents Whole Foods, said the FTC’s latest attempt to peer behind the counter at the grocery store chain’s inner workings comes on the heels of millions of documents provided during a merger review the FTC began in February. Atkins repeatedly said the current request was for information “we do not maintain in the ordinary course of business,” Brock’s Fuji apple notwithstanding. The July 11 hearing was called to settle disputes over parameters of the discovery process. Lawyers for both grocers and the FTC complained that they are being asked for too much information, information that doesn’t exist, or information that is superfluous. It’s unclear whether U.S. District Judge Paul Friedman was persuaded or whether he will give both sides a bite at the apple. But the hearing did highlight some issues likely to be critical to the case, which is scheduled for a scant two-day hearing at the end of this month. One of those factors includes the judge’s lack of familiarity with the nuances of antitrust law. In what might be bad news for the FTC, Friedman acknowledged that his limited familiarity with antitrust law is the opinion issue in a case the agency brought — and lost spectacularly — earlier this year when it tried to block Western Refining Inc.’s $1.4 billion bid for Giant Industries Inc. In that case, tried in a federal district courthouse in Albuquerque, N.M., the judge disagreed with the FTC’s notion of anti-competitive effects from the deal, and moreover, he ruled that the FTC was being inconsistent with its prior behavior by seeking to block the Giant acquisition in the wake of many other petroleum industry mergers. “The judge in New Mexico simply got it wrong,” FTC lawyer Marilyn Kerst tried to convince the judge. “Prior investigations don’t tell you anything about markets today.” For his part, Friedman assured the parties that he’d be far more current on antitrust law by the end of the month. Additionally, Kerst argued that the judge should throw out Whole Foods’ requests to turn over all information about supermarket mergers investigated by the FTC since 1995, including all of the analysis and opinions. While the evanescent nature of opinions and market surveys means they wouldn’t be useful in this case, Kerst also said the requested information was “burdensome and intrusive into privileged matters,” likely to conflict with confidentiality requirements of the Hart-Scott-Rodino Act, which governs merger applications and reviews. Paul Denis, a partner at Dechert who represents Whole Foods, took a shot at the FTC’s lack of clear and specific answers to fundamental questions about the case. Denis told the court that the FTC had not precisely told the parties how the agency is defining “product market” and “geographic market” for the purpose of this case. “We believe we’re entitled to know what this case is about,” Denis said. According to Brock, the FTC has identified 18 specific markets where there will be anti-competitive effects, so “any more precision is probably unnecessary.” As to product market, he said the FTC has repeatedly said it is “premium natural and organic products.” Moreover, Brock told the court that current antitrust legal opinions have allowed the agencies to forgo proving geographic and product markets when “presenting direct evidence to prove the merger would result in the creation of market power.” But Denis leapt on that assertion. Currently, Whole Foods and Wild Oats cannot merge. “How can we have direct evidence of something that is yet to happen?” Denis asked. He also said that the case law Brock referred to did not come from merger cases brought under Section 7 of the Clayton Act and that the treatment of market definition in that section of the law is murky at best.
Cecile Kohrs Lindell is a reporter for The Deal , an ALM affiliate.

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