Tuesday, February 17, 2009

Whole Foods’ CEO Anticipates Settlement with FTC


Last week, Whole Foods CEO John Mackey indicated that he anticipates that Whole Foods and the FTC will soon reach a settlement agreement regarding Whole Foods merger with Wild Oats.

During a visit to Yale University, Mackey stated, "Hopefully, there'll be an announcement in the next couple of weeks," reported the Hartford Courant. Whole Foods had made a settlement offer to the FTC on January 26, 2009. The FTC initially issued an order withdrawing the case from adjudicative status for five days to consider the proposal, but subsequently extended the withdrawal from adjudicative status for an additional thirty days, until March 6 – presumably because the parties are close to reaching an agreement.

Both sides will likely be relieved to settle the case, as the case has resulted in criticism for both the FTC and Mackey. The FTC's "home court advantage" – i.e., litigating the case administratively with the presiding Commissioners deciding the merits of the case after the agency had approved filing a suit in the first place – was attacked on constitutional and fairness grounds. The agency was also criticized for prosecuting the case after the merger had consummated. (While I personally view the FTC's actions as good-faith efforts to vigorously enforce the law, the procedural posture of the case is certainly unfortunate). Some have questioned the merits of the FTC's position given the competition to Whole Foods from mainstream grocers that offer a growing selection of organic or natural food products. In addition, several senators sent a letter (at the urging of Whole Foods) expressing concern that the FTC had shortened the comment period for proposed rule changes that will affect the time frame for adjudicating the Whole Foods case and other Part 3 adjudications.

Whole Foods CEO, meanwhile, has personally drawn substantial criticism for statements he has made. On a Yahoo! Finance message board, Mackey made approximately 1400 posts from 1999 to 2006, including posts stating that Wild Oats stock was overpriced and that the company would go bankrupt. In addition, Mackey told his board of directors that the merger would allow Whole Foods to "avoid nasty price wars," and would prevent a mainstream grocery chain, such as Safeway or Kroger, from using Wild Oats as a springboard to launch a rival organic food chain.

Mackey delivered two lectures last week at Yale (which is where I attended law school – Go Bulldogs!), and was asked to comment on the case. When asked about his message board postings, he indicated, "I'm actually proud of [them]," though he added that he has since "grown up." He was also asked if the messages contributed to the FTC's decision to act, to which he responded: "No. Well, I don't know. You'd have to ask the FTC."

Related posts: Whole Foods Proposes Settlement with FTC; Whole Foods Files Suit Against FTC; Whole Foods Faces Consumer Class Action; D.C. Circuit Reverses Ruling That Allowed Whole Foods Merger.



 

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