Whole Foods and Wild Oats – Could a Merger Really Eliminate Competition in the Natural Food Industry?

In February, Whole Foods Market announced its plans to buy Wild Oats, its largest natural food store competitor, for about $565 million. This is a merger that both companies have agreed upon and would like to see move forward. But, it turns out the Federal Trade Commission has other ideas. Apparently, the FTC believes the acquisition of Wild Oats by Whole Foods Market will greatly reduce market competition for Whole Foods and therefore increase food prices charged by the popular grocery store chain.

Here’s what the FTC says:

The Commission’s Complaint: The FTC’s complaint charges that Whole Foods’ acquisition of Wild Oats, as proposed, would violate Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended. Through the transaction, Whole Foods, the largest premium natural and organic supermarket chain in the United States, would acquire its closest competitor and longtime rival, Wild Oats. In each of the markets in which they overlap, Whole Foods and Wild Oats are each other’s closest substitute and compete in quality and prices, according to the Commission. After the merger, Whole Foods likely would be able to raise prices unilaterally, to the detriment of customers of premium natural and organic supermarkets.”

And further, “The complaint alleges that through the transaction, Whole Foods would acquire its closest rival in premium natural and organic supermarkets, reducing direct competition and leading to the exercise of unilateral market power, resulting in higher prices and reduced quality, service and choice for consumers. In addition, according to the complaint, entry would not be timely, likely, or sufficient to replace the competition lost in the relevant geographic markets.”

Hmmmm. Did they get the Whole Foods Market/Wild Oats deal confused with Exxon/Mobile or AT&T/Bellsouth? In an age when gas prices are skyrocketing and internet neutrality and affordable broadband access are real threats to the consumer, the FTC feels the need to come to our rescue and save us from overpriced organic rhutabaga and Västerbotten cheese. And while the average consumer is struggling to adjust to rising gas prices and is in danger of losing internet access as we know it, we can rest assured that the basic necessities of affordable dry aged beef and organic white asparagus are being vigorously protected by our government.

Somehow, the FTC’s argument that this merger will effectively remove Whole Foods’ competition just doesn’t add up. Larger grocery store chains such as Giant and Safeway are increasingly responding to consumer demands for locally grown foods as well as organic products. And the newer superstores are obviously learning from the successes of Whole Foods Market’s. Then there are stores like Wegmans and Bloom that offer a mind-boggling array of food options that Whole Foods can’t touch.

So, call me a skeptic but I find it hard to believe that THIS government 1) cares about natural, organic products and the markets that successfully deliver them to the consumer and 2) wants to protect an industry that is all about preserving the environment, supporting local farmers, and supports many of the causes (environmental or otherwise) that aren’t exactly high on the list of the ultra-conservatives that pervade our government.

But the good news for me is that the tremendous success of Whole Foods Market and the growth of the organic and natural foods industry is so powerful that it’s gotten their attention. And the terms “eating local, “carbon footprint” and “sustainable living” have become a part of the mainstream vocabulary and the consumers that are demanding more locally grown, organic, natural foods enough that business is responding. Regardless of how this buyout ends up, I feel confident that Whole Foods Market will indeed have plenty of competition in the years to come. And that’s great news for the causes of global warming and sustainable living.

1 comment

  1. Checkers2003 August 2, 2007 at 4:21 pm Reply

    I could not agree more. The government is so food backwards it is hard to believe. They can’t see how local farming and eating locally grown foods builds a strong community. Pick it, Eat it, Yummy!

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