Grocer merger raises unique legal questions

Calkins said regulators may have found a similar situation with Whole Foods and Wild Oats. Still, he was somewhat surprised that the FTC’s court filing did not contain more concrete data on pricing and seemed to focus heavily on how shopping at the two stores implies a unique lifestyle choice.

"Relative to most other retailers, premium natural and organic supermarkets' products often are priced at a premium reflecting not only product quality and service, but the marketing of a lifestyle to which their customers aspire," the FTC wrote.

Calkins said that stance could leave the door open for the two grocers to argue that they have plenty of competition in the lifestyle arena, including such things as farmer’s markets and food co-ops.

Calkins said more specific details on pricing may emerge later.

In the filing, the FTC did allege that when one of the companies entered a market where the other already had a store, both companies responded by improving stores and reducing prices. The two retailers do not respond the same way when a different grocer comes into the market, the FTC found.

Whole Foods dismissed the FTC’s contentions.

“When we go out and look at pricing, we don’t look to Wild Oats as much as we look at our regional competition,” spokeswoman Kate Lowery said Friday.

She said the company also has sees conventional grocers as stiff rivals.

“The FTC’s petition has no basis in fact or law, and it seems to me that they’re ignoring the evidence that proves that we have fierce competition in the marketplace,” she said.

The FTC’s challenge comes as many traditional grocers have expanded their natural and organic offerings, buoyed by increased demand. Still, antitrust experts speculate the commission could argue that, while other grocery stores offer some organic and natural foods, they do not offer nearly as many as Whole Foods and Wild Oats.

That means that, while competition from a company like Wal-Mart or The Kroger Co. may help keep down the price of milk and a few other products, it may not stop the merged companies from charging more for hundreds of other delicacies found primarily in their stores.

At this point, it’s tough to tell which side will prevail.

Claude Wild, a former regional director for the FTC who is now of counsel with Greenberg Traurig in Denver, said it’s possible the companies will be able to work out an agreement in which they get rid of some stores or make other concessions.

The two also may be able to successfully argue that, while they don’t face as much competition from mainstream retailers now, that will change in the near future.

There are clear signs that could happen. For example, Wild had to laugh when he noticed that a story in his hometown paper on the FTC’s challenge to the Wild Oats-Whole Foods merger ran next to a Safeway ad — promoting that grocer’s natural foods line.

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