Since 1980, the Federal Trade Commission has celebrated more victories than losses in its efforts to prevent corporate mergers it believed would create illegal monopolies.
Of the 24 merger cases the agency challenged on antitrust grounds over the past 27 years, it was successful in 16, according to FTC spokesman Mitch Katz.
Still, legal experts say, the federal agency faces an uphill battle in seeking a reversal of a U.S. District Court judge’s decision to allow Whole Foods Market Inc. to buy out its Boulder-based rival, Wild Oats Markets Inc.
The agency Friday filed an appeal of the decision and asked the courts for a temporary injunction pending the outcome of the appeal.
“It’s unlikely they’re going to prevail,” said Anthony Sabino, professor of law at the Tobin College of Business at St. John’s University in New York.
Persuading the appellate court to allow a preliminary injunction barring the merger would be difficult, said Sabino.
“Injunctions in all our courts are deemed to be extreme remedies to be used sparingly and only to prevent imminent harm,” he said. “The government has a heavy burden to prove (that) … there is going to be permanent damage to competition in the organics market.”
The FTC tried to bar the merger of Whole Foods and Wild Oats, arguing that consumers benefited from competition between the two organic- and natural-food supermarkets.
Without that competition, prices would increase, the FTC argued in its June complaint.
U.S. District Judge Paul L. Friedman rejected that argument, ruling Thursday that the $760 million merger could move forward. But the FTC appealed Friday, asking both the district court and the Circuit Court of Appeals to put the merger on hold during the appeal.
The district court Friday denied the FTC’s request for a stay. Unless the appellate court grants an injunction before 10 a.m. Monday, the two companies are free to move forward on the merger, said Sonja Tuitele, Wild Oats spokeswoman.
Completion of the merger will also hinge on whether at least 90 percent of Wild Oats’ shareholders agree to tender their shares of the stock by 3 p.m. Monday.
Of the eight cases the FTC has lost since 1980, it filed unsuccessful appeals in four, said Katz.
The FTC has had successes in appealing cases it initially lost, said Michael Cowie, a former FTC assistant director who now works as an antitrust attorney with the Washington, D.C.-based firm Howrey LLP.
Among them was the FTC’s challenge of a proposed merger between baby-food makers H.J. Heinz Co. and Beech-Nut Nutrition Co. in 2000. It argued that Heinz and Beech-Nut competed for second place, behind the Gerber brand, and that the competition kept prices from soaring.
The FTC lost in district court, but the agency appealed and won, said Cowie. However, he said, that case may have been more clear-cut because it involved just three companies.
“That was a relatively clean issue,” he said. “The issue was whether two competitors was enough, and on appeal, the appellate court said … that raises some concerns.”
The Whole Foods-Wild Oats case involves the complex issue of whether full-service supermarkets are competitors that help constrain the prices of Whole Foods or Wild Oats.
Despite the challenge, the FTC is probably moving forward with the appeal because the agency believes the merger “raises important public-policy matters,” Cowie said.
“The case could have precedent and affect other merger cases,” he said.
Staff writer Karen Rouse can be reached at 303-954-1684 or krouse@denverpost.com.
