Economics

That Wild Oats Je Ne Sais Quois

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The Federal Trade Commission wants to block the merger of Wild Oats Markets with Whole Foods, predicting that it would lead to "higher prices, reduced quality and fewer choices for consumers." Never mind that three-quarters of natural and organic products are sold by conventional supermarkets and other mass-market outlets. For purposes of assessing the merger, the FTC has decided to ignore all those competitors, focusing just on stores that not only sell natural and organic foods but do so in an environment similar to what shoppers experience at Wild Oats and Whole Foods:

"Premium natural and organic supermarkets seek a different customer than do traditional grocery stores," the F.T.C. said. "Whole Foods' and Wild Oats' customers are buying something more than just the food product—they are seeking a shopping 'experience,' where environment can matter as much as price."

Market definitions this narrow, designed to exclude just about every company except those involved in the deal, make it possible to reject any merger as anticompetitive.

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  1. Yes, the FTC is lovely, isn’t it? No other regulator has so much power, so vaguely defined.

    FTC: “Gosh, what you are doing is wrong. No, there’s no black-letter support for that. Obey.”

  2. As someone who shops at Wild Oats, Whole Foods and Trader Joe’s, (along with traditional grocery stores like Dominick’s (Safeway) and Jewel (used to be Albertson’s) I can attest to the fact that the “shopping experience” rationale is complete and utter horse shit.

    These places “feel” like a fucking grocery store. An upscale (snooty) and more expensive one, but a grocery store nonetheless

    They have things like shopping carts/baskets, aisles of product, a refrigerated/dairy section and in some cases even a meat and deli department. Some of them have cafes in them too.

    This is the biggest load of crap ruling that I have ever read.

  3. So if (ignoring parent companies) Olive Garden were to merge with Tony Roma’s and since there are no other mediocre large chain Italian restaurants would the FTC prevent that merger as well?

    Wow, this is a big crock of shit.

  4. Anyone else think it’s pretty f-ed up when socialists complain that multiple companies serving the same sector is redundant and inefficient in the free market, then turn around and complain when companies try to merge in order to increase their efficiency?

  5. Kwix,

    Well… Buca Di Beppo, Maggiano’s, the Macaroni Grill, and more regionally Vinnie Testa’s and the Spaghetti Warehouse, but I appreciate your point.

    Otherwise, what a bizarre merger for the FTC to get involved in blocking. Who benefits from this getting blocked? Big Organic? Safeway? Whose pony is in this race?

  6. I’d guess traditional supermarket lobby and wal mart are againt this – on the “premium/organic food” side of business, they make a high margin, and thats also where the highest growth is. they lose a lot of ‘yuppie’ business to trader joes/whole foods/wild oats/hay day etc. who specialize in this segment. They dont want to compete with a larger, more growth minded specialist. I can’t say that they “got” to the FTC, but I can imagine there was an interest

  7. Maggiano’s is above average. Far, far better than Olive Garden or Buca di Beppo.

  8. “Premium natural and organic supermarkets seek a different customer than do traditional grocery stores,”

    The word ‘premium’ should be prima facie evidence for rejection of any antitrust claim.

    There is absolutely no excuse for government regulating competition among luxuries.

  9. The purpose of anti-trust legislation is and always has been to allow politicians to interfere with businesses that are hostile to their contributors.

    After all, the original anti-trust legislation was championed by politicians who received money from J.P Morgan, and was used exclusively to prosecute businesses that did not bank with JP Morgan (the vast majority of the initial round of targets were customer of Chase).

    It serves no economic purpose whatsoever. So long as people are not physically prevented from opening competing businesses via government regulation it is impossible to establish a monopoly. Oh yes, someone could, like Alcoa did in the 50’s become the sole operating business providing a certain class of product, but maintaining that position requires outcompeting all potential competitors by satisfying customers.

    Since all stores compete with each other, the classification of competition for the law’s purposes is inherently capricious and arbitrary.

    We would be much better off without it.

  10. Got to make an example of the one CEO who isn’t a self-dealing big govt lovin’ corporatist.

  11. Jesus H Christ sitting in a hybrid on a compost heap

  12. Maybe they blocked the merger for the sheer hell of it. If your enemies think you are unpredictable and capricious, then they will fear challenging you, knowing no just outcome will be available from a rigged system. Sort of like slapping your wife at random throughout the week so that she won’t even begin to nag, thereby eliminating the need to slap her when she’s nagging. The abusive spouse theory of government regulation.

  13. At least John Mackey is a libertarian…hopefully he’ll fight this ruling.

  14. My dear FTC
    What the fuck are you doing?
    sincerely, Reinmoose

  15. Shhhh, tarran. Avoid saying the A word, or Dave W could arrive at any moment to ruin the thread.

  16. Looks like Wild Oats will have to merge with Hooters.

  17. highnumber is correct. Though for great Italian, one must go to something family owned. It doesn’t lend itself to chaining.

  18. The FTC is basing its decision on the part of the Constitution which says “the right of the people to buy premium organic products from a variety of grocery stores owned by different people shall not be infringed.”

  19. Around here, Whole Foods faces competition from The Cupboard, several installments of the Central Market, and any number of Kroger and Tom Thumb “Signature/Flagship” stores that try to be similarly high-end, and to a limited extent, even Target.

    There might even be some Wild Oatses around here, but I don’t know of them.

  20. ProGLib,
    As a matter of fact, if you vomit after eating a Wendy’s doublestack, that will taste better than Olive Garden.

  21. As a matter of fact, if you vomit after eating a Wendy’s doublestack, that will taste better than Olive Garden.

    I must admit…as much as I don’t care for their entrees, I do really enjoy their salad (dressing) and breadsticks.

    As for Maggiano’s, I believe it’s a Lettuce Entertain You restaurant. I’ve never been disappointed with them (although getting a reservation at WildFire is a pain in the ass )

  22. Even their salad dressing is sub-food.

  23. Bhh got it in one — the political class can’t handle buying their fancy groceries there when the CEO isn’t one of them. He’ll toe the line and pay-to-play like everyone else, or they’ll break him on the regulatory wheel.

    Class enemies are worse than real enemies.

  24. Lunchstealer-

    Don’t forget about Vitamin Cottage.

  25. As I understand it, Wild Oats was losing money and in debt, and Whole Foods is taking on their debt in addition to buying their stock.

    The FTC seems to think that if it blocks the merger, it will protect “healthy” competition between the two chains. In reality, if it blocks the Whole Foods takeover, Wild Oats will probably just shut down.

    I don’t think that will serve the public interest as much as the FTC thinks it will.

  26. Anyone else think it’s pretty f-ed up when socialists complain that multiple companies serving the same sector is redundant and inefficient in the free market, then turn around and complain when companies try to merge in order to increase their efficiency?

    Yes, yes I do.

  27. Good gravy, I bought organic chickens at Costco last week, fer cryin’ out loud. Ya’ think you’ve seen it all, and these maroons demonstrate how wrong your are……

  28. SugarFree said: “Maybe they blocked the merger for the sheer hell of it. If your enemies think you are unpredictable and capricious, then they will fear challenging you, knowing no just outcome will be available from a rigged system. Sort of like slapping your wife at random throughout the week so that she won’t even begin to nag, thereby eliminating the need to slap her when she’s nagging. The abusive spouse theory of government regulation.”

    SugarFree: You seem to be astonishingly familiar with the dynamics of abusive marriage relationships. No issues being aired here, yeah? 😉

  29. “Looks like Wild Oats will have to merge with Hooters.”

    Hiring policy: nothing but 100% natural, organic tatas.

  30. The FTC is basing its decision on the part of the Constitution which says “the right of the people to buy premium organic products from a variety of grocery stores owned by different people shall not be infringed.”

    You know what we should do to stop this kind of abuse and travesty? We should sue the company that sells the FTC paperclips!

  31. What’s really interesting is what this says about the viewpoints of the people working at the FTC. I envision something granola.

  32. What Gene Berkman said at 5:37pm. BTW, click on his name to check out his interesting book store.

  33. ‘”Whole Foods’ and Wild Oats’ customers are buying something more than just the food product-they are seeking a shopping ‘experience,’ where environment can matter as much as price.”‘

    Screw that! I just go to see if there because there’s a larger selection of organic meet. I wish the Market Basket with the ripped up floor tiles had a better selection of organic meat; then I wouldn’t have to drive to Whole Foods.

  34. F.T.C. said. “Whole Foods’ and Wild Oats’ customers are buying something more than just the food product-they are seeking a shopping ‘experience,’ where environment can matter as much as price.”

    We’re in trouble when nonsense like this is coming out of the mouths of people who have power over our lives. I know, of course, that the real problem is that there are people who have power over our lives in the first place. (Excepting that which works to prevent force and fraud)

    Jacob’s right. This is so contrived. Just how in the Hell do these idiot bureaucrats know what motivates heath food store shoppers? Do they have polling data? At what percentage agreement with their dubious assumption do they feel justified in this imposition?

    I shop at Whole Foods, Wild Oats, and other health food purveyors sometimes. And when I do, my motivation is the stuff that I can buy, not the “environment”.

    BTW, tHe founder of Whole Foods is a libertarian.

  35. Jennifer:

    The FTC is basing its decision on the part of the Constitution which says “the right of the people to buy premium organic products from a variety of grocery stores owned by different people shall not be infringed.”

    Brilliant, Jennifer. Strong point and it’s hilarious!

  36. Methinks you all are shilling for Big Organic Arugula!

  37. Oops, I said: “Excepting that which works to prevent force and fraud”

    I shoulda said: Excepting that which works to prevent the initiation of force and fraud.

  38. An aspect that I’m pretty sure that hasn’t occurred to the FTC is that there very probably are some health food items that can now only be found mostly in health food stores. A merger of Whole Foods and Wild Oats might well cause the market price if these items to rise. However, this in turn will be an incentive for mass market stores to carry them as well, likely leading to a lower market price for these items. Not to mention btw, an exposure to a wider public.

  39. …of the yuppies?

  40. joe,

    You go there for organic meet? Is that what they’re calling it these days? I thought you were married!

  41. What happens in Whole Foods stays in Whole Foods.

  42. This is nonsense. I can’t help but think there’s something else going on here. Politics? Mackey is pretty out spoken. Did he piss off the wrong people

  43. Mackey will be speaking at Freedom Fest in Vegas July 5-7

    http://www.freedomfest.com/

  44. Free Minds. Monopolized Markets.

  45. Man, if Whole Foods and Wild Oats merged, that would reduce the number of organic grocery stores within 150 miles of me from zero to zero. What’s that called? No-opoly?

    But we know that a merged Whole Foods and Wild Oats could never lead to easier entry into untapped markets. Better nothing than a monopoly.

  46. Anyone else think it’s pretty f-ed up when socialists complain that multiple companies serving the same sector is redundant and inefficient in the free market, then turn around and complain when companies try to merge in order to increase their efficiency?

    I’m not a fan of socialists, but I do have to say that there is a difference between having a single supplier owned by “the people” and a single supplier owned by a few people. I’ll take a straight out government monopoly over a state supported private monopoly any day of the week. Of course, whole foods-wild oats is neither of these.

  47. I just go to see if there because there’s a larger selection of organic meet[sic]

    Yep, I prefer the organic meat myself. The inorganic meat chips my teeth and doesn’t really taste all that great.

    The FTC suffers from a complete lack of clue. It’s obvious that they feel the need to justify their existence by stacking the deck in favor of their predetermined result.

  48. F.T.C. said. “Whole Foods’ and Wild Oats’ customers are buying something more than just the food product-they are seeking a shopping ‘experience,’ where environment can matter as much as price.”

    And another thing, people can go to Whole Foods and Wild Oats and experience the environment without even buying groceries. They can just patronize em like they would any other health food restaurant. I do sometimes-have lunch or dinner-maybe just a smoothy in their caf?s.

    So for the FTC reasoning to hold, there would have to be a shortage of health food restaurants…Ha!

  49. Why block this merger? The FTC hasn’t exactly been saying “No” a lot to mergers, including some really huge ones in fields that the FTC has traditionally been a bit skeptical on — like SBC and AT&T’s merger.

    Why is the FTC suddenly really keen on competitive marketplaces when it comes to a piddily little organic foods chain (we’re talking what, a few hundred stores between both of them?) but hasn’t had a problem signing off on huge media, telecomunnications, and entertainment mergers without a blink of an eye?

  50. Slate has an article today about the merger being blocked by Bush as a way to give the finger to blue states.

    jh,

    I don’t beat my wife, I fantasize about beating my wife. Those are completely different things. Duh.

  51. “the FTC is lovely, isn’t it? No other regulator has so much power, so vaguely defined.”

    You want a contest? Just consider how much stock prices can swing on a FDA decision. How about state public service/utility commissions deciding on “public service, convenience, and necessity”?

  52. Will they rename the merged entity Wild Foods?
    Will I still be able to buy $25 chickens and $8 bottles of beer?

  53. Just consider how much stock prices can swing on a FDA decision.

    To be fair, the FDA has independent boards that make recommendations based on sound reasoning. The FDA can ignore those recommendations, to be sure, but it is obvious when it does.

    In contrast, it is quite apparent from this one example that the FTC makes its antitrust decisions with utmost caprice and entirely unsound reasoning.

  54. joe,

    I think you should register the domain, OrganicMeet.com, and have Dave W. file a trademark registration for the same. I’m picturing an adult-themed matchmaking site. With a “green” overlay.

  55. “In contrast, it is quite apparent from this one example that the FTC makes its antitrust decisions with utmost caprice and entirely unsound reasoning.”

    On the contrary, I imagine the kickbacks they’ll get from companies that would face harder competition from the combined entity make the decision a no-brainer.

  56. And this is why baseball needs it’s anti-trust status. Things get so narrowly defined that it’s insane. I wonder if Wal-Mart’s behind some of the political pressure to nit pick this deal to deal.

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