Whole Foods Squeezes Small Grocer

Whole Foods has a pretty good case against the Federal Trade Commission's campaign to thwart the company's 16-month-old merger with Wild Oats. So the company's insistence on obtaining highly sensitive business information from a local grocery chain in Portland, Ore., is a bit unseemly.

New Seasons Market, which operates nine stores, has taken its case public, with repeated complaints on its blog about Whole Foods' subpoena last week seeking the most proprietary kinds of information, including, according to the subpoena, "all documents discussing competition with Whole Foods or Wild Oats," "all market studies relating to competition," "all documents relating to the sales of natural or organic products," and "total weekly sales for each week since Jan. 1, 2006."

Whole Foods says its lawyers need the information to prove that the Wild Oats merger isn't hurting competition in the "natural premium organic" grocery market.
But Whole Foods' own, publicly available data more than proves its case. If the merger gave the company any kind of additional market power, would its sales and profits have nosedived as they have? Would its stock be down 70 percent, as it is?

Still, the FTC is, for whatever reason, insistent on pursuing its case, which is slated to go before an administrative court in February. Whole Foods this week sued the agency and mounted an intensive public relations campaign designed to thwart the FTC's efforts.

Whole Foods says it similarly subpoenaed several dozen other grocers, and that New Seasons is the only one that has balked. Even Mike Gilliland, the owner of Sunflower Farmers Market and the founder of Wild Oats, reportedly has responded to the subpoena, though nobody knows how much or what kinds of information he turned over. Gilliland and Whole Foods CEO John Mackey are known to dislike each other, and even to avoid each other at industry events.

Such subpoenas are fairly common in antitrust cases, and generally the parties involved negotiate over what information is ultimately turned over. But New Seasons is having none of it.

So far, Whole Foods hasn't budged much, according to New Seasons owner Brian Rohter. The chain "is still demanding almost everything and is still insisting on the files we're most concerned about," he wrote on his blog on Sunday.

He also doesn't trust that the data will be kept from Whole Foods insiders, and that, in any case "there are lots of other ways they can make their case with the FTC without putting us at such a big risk."