Merger mania food for thought


A district court judge who shot down the FTC’s denial of approval to merge organic food producer Wild Oats into rival Whole Foods did so despite the fact that Whole Foods CEO John Mackey was on record as desiring the merger "to eliminate competition and avert price wars." The FTC has already appealed the ruling, and the transaction is now hung up in an appeals court. The judge, Paul L. Friedman, said that if Whole Foods decides to raise its prices, there are any number of supermarkets in most locations that also sell organic items. Safeway was mentioned as one chain which has already put its own store label on the market. In mounting its appeal, the FTC said that it the judge should not have disregarded Mackey’s statements, and that the two chains are uniquely competitive and constrain each other prices in a way that competition from traditional grocery stores may not.

RBR observation: This transaction has been frequently compared to the proposed XM/Sirius merger. XM/Sirius would have everybody believe that if their single-entity price goes up (once a conditional price-capping term expires) then there are ample options available to consumers, not the least of which is traditional AM and FM radio, just like dissatisfied Whole Foods customers may go to Safeway. (As an aside, let us note that we go to Safeway, and while we have no complaints, it’s not exactly a cornucopia of organic product. We would be happy to have an option like Whole Foods or Wild Oats in our area, which sadly we don’t.) Most antitrust testimony we’ve heard so far disagrees with this assessment, however. Each satellite service is able to provide far more format options than an entire market’s worth of radio stations can in most cases, and it is irreplaceable in rural areas with little or no terrestrial service, or for subscribers who treasure its mobility. For many subscribers, there are no options. When you add in little things like they were chartered as two separate competitive entities by design, it becomes more and more difficult to believe that we’re even entertaining serious discussion of this merger.