The Organization for Competitive Markets filed a “friend of the court” brief yesterday supporting the Federal Trade Commission’s decision to block Whole Foods from acquiring Wild Oats.  The two companies are the dominant natural foods retailers in the U.S.  The merger will harm farmers and consumers by quashing price competition, choice and innovation in the natural foods market sector.  OCM joined the Consumer Federation of America and the American Antitrust Institute on the brief.

“The natural foods supermarket sector has provided opportunity for farmers to produce high end products that consumers desire,” said Keith Mudd, OCM President.  “The natural and organic market has grown astoundingly in the last 10 years.  We need antitrust vigilance to prevent consolidation of this market which will harm farmer selling prices and marketing choices, as well as quash innovation and consumer choice.”

Earlier this year, Whole Foods CEO John Mackey told his board that buying Wild Oats would “eliminate forever” the possibility that anyone else could create a nationwide competitor in the natural and organic grocery business.  Mackey also wrote comments in blogs - under a false name – that were critical of Wild Oats and apparently designed to drive down the Wild Oats share price.

Mackey specifically told his board that buying Wild Oats would avoid profit-draining price wars in Portland, Ore.; Boulder, Colo.; Nashville, Tenn. and other cities, according to the FTC. It would also block a challenge from bigger chains such as Kroger Co. or Safeway Inc.

“The Mackey comments prove the general principle that most mergers are not about efficiency, but market power,” continued Mudd.  “There is a powerful added incentive which is that CEO’s often gain windfall, eight-figure payments for arranging a merger.  The facts show retail profit margins on perishable foods – such as meat, dairy, eggs and produce – trend upward most years as the farm share of the consumer dollar decreases.  This is the exact opposite of the results a competitive market would produce.”

The full brief can be viewed in PDF format by clicking here.