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Arlington, Virginia (July 29, 2008) -- Two judges of the U.S. Court of Appeals in Washington DC abruptly reversed an earlier decision by the same court that allowed Whole Foods Markets, Inc., to complete its acquisition of Wild Oats Markets, Inc., over the objections of the Federal Trade Commission. In a series of opinions issued today, the D.C. Circuit now said it was wrong for a district court judge to deny the FTC's demand for a preliminary injunction to prevent the now-completed merger pending an FTC-controlled administrative hearing.
In June 2007, the FTC announced it would challenge the Whole Foods-Wild Oats merger as a violation of federal antitrust law. In merger cases, the FTC conducts an internal hearing process, usually before an administrative law judge. But the FTC cannot prevent companies from merging in the interim without an injunction from a U.S. district court. The FTC sought such an injunction, but after an evidentiary hearing the district court rejected the FTC's motion, citing an unlikelihood of success on the merits. The FTC then filed an emergency motion for an injunction pending appeal of the district court's decision, which the D.C. Circuit denied last August. After a hearing on the merits, however, a divided three-judge panel today decided that the district court was wrong after all. Circuit Judge Janice Rogers Brown, writing for the Court, said the district court committed a legal error in not adopting the FTC's market definition -- the FTC argues Whole Foods and Wild Oats compete in a different market then other grocers and supermarkets -- and thus underestimated the likelihood the agency would ultimately prove the merger was illegal. Judge Brown noted, however, that "the FTC presented, at best, poorly explained evidence." Circuit Judge David S. Tatel concurred with Judge Brown's opinion, but wrote separately to suggest the Court should be even more deferential to the FTC's judgments of how the market should operate. Circuit Judge Brett Kavaunaugh, in a sharply worded dissent, chastised Brown and Tatel for trying to "unring the bell" of an already completed merger. "In my judgment, this Court got it right a year ago in refusing to enjoin the merger, and there is no basis for a changed result now," Kavanaugh wrote. "To justify the different outcome, the majority opinion suggests that the standard we applied a year ago in considering the motion for an injunction pending appeal of the denied preliminary injunction was different from the standard we apply today in reviewing the denied preliminary iinjunction. But in this context, the two standards converge." Today's decision hardly ends the case. Whole Foods can ask the entire D.C. Circuit to rehear the case, and ultimately the Supreme Court may continue its recent trend of reviewing disputes over the scope of antitrust law. Judge Kavanaugh's dissent is a strong signal that one or both forms of further appellate review will occur. If the panel decision is upheld, the case returns to the district court, which may be forced to issue a preliminary injunction -- although it's unclear how this would work given that the merger has already been completed, an issue Judge Brown largely ignored in her opinion. The FTC would then be clear to continue its administrative proceedings, where the outcome would not be in serious doubt, since in recent years the FTC has voted to uphold its own complaints 100% of the time. This would then return the case on appeal to the D.C. Circuit. Skip Oliva, president of the Voluntary Trade Council, said the D.C. Circuit's decision was "just plain wrong" and should be overturned. "Judges Brown and Tatel put the interests of the antitrust community ahead of the Constitution, private property rights and the interests of Whole Foods and its customers. The judges' decision, if allowed to stand, practically greenlights unrestricted socialist central planning by the FTC under the pretext of 'merger review.'" * * * For additional information contact Mr. Oliva at (703) 740-8309 or info-at-voluntarytrade-dot-org. You can download the D.C. Circuit's decision at this link. |
S.M. Oliva, president of the Voluntary Trade Council, authored an article for the Ludwig von Mises Institute on Mark and Marianne Hershiser's landmark First Amendment lawsuit against the Federal Trade Commission. You can read the article, "Consumer Protection or Legal Extortion?" at this link. 
Alex Epstein, an analyst at the Ayn Rand Institute, has published an op-ed explaining why antitrust regulators should not get in the way of any potential combinations of Microsoft, Google and Yahoo! Esptein notes, "What we are observing in the battle over Yahoo! is not genuine, merit-based competition, but competition based on political pull." You can read Epstein's article, "Set Yahoo! Free," at 
Bruce Kobayashi and Joshua Wright of George Mason University recently posted an article examining "restraint when applying the antitrust laws to conduct that is normally regulated by state and other federal laws," specifcially the use of antitrust "to regulate the problem of patent hold up of members of standard setting organizations." You can download their paper at 
Damien Geradin, a professor at Tilburg University and a partner at Howrey LLP, recently presented a paper entitled, "What's Wrong with Royalties in High Technology Industries?" which focuses on royalties paid by companies seeking to implement industry standards, such as those at issue in the FTC's case against Rambus. You can dowload the paper at 
