FTC Moves To Block Merger, Seeing Companies In A Narrow Market
from the denied dept
The FTC says that it will file a lawsuit to block two companies from merging, after choosing to define the market they operate in very narrowly and ignoring the wider competition they face from plenty of other companies. We're not talking about the merger of satellite-radio companies XM and Sirius, but rather the grocery store companies Whole Foods and Wild Oats. Both companies focus on the "natural foods" market, with an emphasis on organic products, and back in February, Whole Foods announced a plan to buy its smaller rival for $565 million. The FTC contends that the two companies combined would dominate this narrowly defined market, even though each has less than 300 stores. That seems rather fallacious, given that they both must compete with "normal" grocers -- and many of those grocers, including the likes of Wal-Mart, are aggressively expanding their selections of organic foods. It's interesting to note the reaction to the news: after hours, neither company's stock moved much, signaling investor confidence that they can win in court and the merger will go through. It's also interesting to examine the parallels between this case and the XM-Sirius merger, since they hinge on the same question of just how widely a market should be defined. Like XM and Sirius, Whole Foods and Wild Oats face significant competition -- competition that's only going to get stronger -- apart from each other. While the FTC's stance on the grocers' merger doesn't bode well for XM and Sirius, the ease with which many observers seem to think Whole Foods and Wild Oats can win in the courts may provide some comfort.