Whole Foods – Wild Oats: Has the FTC Been at the Nutmeg?

You know when you’re asleep, and you dream that you’re falling, and then you

wake up all startled and confused? I think the Federal Trade Commission is a

bit like that. It’s been asleep for a long time: the last deal it blocked in

the retail space was a decade ago, when Office Depot tried to buy Staples. But

today it seems to have woken up and fired

off a salvo in a most peculiar direction: at the planned merger of Whole

Foods and Wild Oats.

Neither company is particularly enormous – they have barely 300 stores

between them – and there’s hardly been much of a public outcry about the

anticompetitive implications of the United States having one less chain of overpriced

organic grocers. Jim

Mahar has more:

First of all it is saying that Natural and Organic grocers are a different

market than other grocers. Which is clearly not the case (don’t believe me?

Price an organic item too high and see everyone go to the non organic variety!).

Secondly, with the widespread adoption of "organic" products by

national producers (see Hunts, Kraft, etc.), it is unclear whether the "natural

and organic" grocers will have the market to themselves.

Mahar doesn’t even mention the big push by Wal-Mart into the organic space,

which, one might think, might force some degree of consolidation in the rest

of the industry. And in any case, I can’t remember the last time I went into

a supermarket which didn’t offer, for a premium, organic produce. The

whole thing makes very little sense: could it be, as Dana

Cimilluca suggests, that the FTC is reacting to perceived pressure from

Congress? If so, this move could destroy quite a lot of shareholder value in

the service of massaging a few political egos.

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