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File this under "chutzpah." An antitrust lawsuit (Adobe PDF file) filed by the Federal Trade Commission this week against Whole Foods, which seeks to block the organic food giant's purchase of its closest competitor Wild Oats, revealed that anonymous postings to business and financial forums criticizing the price of Wild Oats stock were actually authored by Whole Foods CEO John Mackey.
Mackey's postings, made under the name "radoheb" from 1999 to 2006, consistently criticized the value of Wild Oats' stock, questioned why stock market players would purchase it at the prices it was trading under, and predicting that eventually Wild Oats would fall into bankruptcy and be sold after its stock fell below $5 a share. Whole Foods announced in February that it was purchasing Wild Oats for $565 million, or $18.50 a share. One of the questions raised in the FTC lawsuit is whether or not Lackey anonymous comments influenced the price of Wild Oats' stock, making it easier for Whole Foods to purchase Wild Oats at a bargain price. The FTC is also worried that one company having so much control over a specific marketplace might lead to increased prices for consumers, although why they aren't also looking at AT&T, we don't know. We have no idea why our phone, internet, and cellular bills are a combined $145 a month when we don't make any phone calls.
In response, Mackey's started using his blog (everybody has one) on the Whole Foods website to tear the FTC a new orifice. In a post from June 27th, Mackey takes the "underdog" route, leading with the bullet point, "(p)eople who love Whole Foods Market ... can't understand why the FTC is picking on us." That's more than slightly disingenuous.
They're picking on Mackey because they suspect he engaged in shady dealings to influence the deal. Some might say that Martha Stewart went to jail for less. As a cynic who'd rather grow our own vegetables and herbs and shop locally at farmers markets, we understand the FTC's stance. For many people who embrace the concept of sustainable food, Whole Foods has earned the derisive nickname "whole paycheck" for a reason. The company has done wonders to promote the concept of natural and organic foods, but the potential merger with Wild Oats should put fear in the hearts of consumers, or at least their pocketbooks.
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I think it is pretty funny that the CEO, of all people, was the one doing this. I mean, really, the CEO? Can't he hire people to do this for him so he doesn't end up in a situation like this?
Some might say that Martha Stewart went to jail for less.
Martha was convicted of insider trading because she traded stock based on information that the public did not know at the time.
Trolling is not a crime, as far as I know. OMG, IBM iz teh suxx0rs! Will that get me in trouble with the FTC if IBM's stock happens to drop 1/8 point right after I hit enter?
Show me a company that doesn't criticize their competition.
re Wes Sabi:
You trolling against IBM wouldn't get any notice from the FTC. If Steve Ballmer (MS CEO) spent 7 YEARS posting stuff like that and then, after 7 years of trolling, Microsoft was trying to buy IBM, then maybe.
Your trolling MIGHT get SEC attention if, after your trolling, you bought or sold IBM stock or options or had options outstanding. Especially if you work for IBM or a competitor or cover the industry as an equity analyst.
If you are just some dude in Chicago, working in a restaurant and playing in a band or whatever, and you just like to goof around on message boards trying to make investors and day traders nuts, then nobody cares.
You ask why AT&T doesn't get the same treatment. I think this article has a pretty good answer http://www.slate.com/id/2167984/. Whole Foods is being targeted here for political reasons. An extremely conservative administration controls the justice department and they don't like liberal hippy corporations like Whole Foods, so they squeeze them. Look, Im no lover of Whole Foods, but this antitrust suit is absurd. They (FTC) are defining the market so narrowly in this instance (high-end organic produce) that its patently obvious they are intentionally targeting Whole Foods. This becomes even more obvious when you consider all the other big time mergers the FTC has approved over the last few years (such as AT&T, various oil companies, etc...). Whole Foods' prices are already ridiculous, and it would be difficult for them to raise them much more. This is not a pro-consumer move by the FTC, it is purely political.
re "whole paycheck":
We shop at WF and at least 3 other stores on a semi-regular basis. We don't keep close track of the relative prices of occassional purchases (e.g. french cheese), and rarely buy prepared foods at WF, but, generally, WF is less expensive on somethings and more expensive on others.
That said, I have NO sympathy for anyone who does all of their grocery shopping at WF and complains about the expense (i.e. the "whole paycheck" crowd). If one does it because it's saves time and travel costs (i.e. gas), then calculate that savings. If you do it because shopping multiple places to get your organic/natural foods is too much hassle, that's savings, too. If you have a problem with WF, here's a tip--DON'T SHOP THERE.
By continuing to shop at WF, you are a participant in enabling them to continue to charge prices that you deem to be too much. Food in America, especially discretionary food, like organics and most of what WF stocks, costs what the market will bear. You want the price to come down? Decrease demand until it comes down. Food is not oil--it has an expiration date.
Re: Rod
When I read the linked article I immediately thought of Walmart and their likely organic future. Perhaps this was drummed up partially by the Walton empire frightened by what a super Whole Foods counter empire could offer in terms of lower prices. It may be that Walmart has the ear of the administration while WF's ceo is anonymously blogging to do his dirty work.
That being said, this blogging was a stupid, nasty and unethical thing to do and is probably indicative of what WF corporate culture is really like.
Ok, what the hell does this have to do with Chicago?
re: Rod
I don't disagree with the general point, but the FTC has had for some time looked much harder at grocery mergers than other similarly-sized transactions. All of the slice and dice in the Albertson's deal, including the closing of the Cub stores in and around Chicago, was a result of either FTC comment or preemptice moves to avoid FTC concerns.
The FTC frequently looks at local market dominance in a very narrow way. They justify this because (1) there is plenty of evidence that when a food seller has market power, it raises prices (cf. the attention to urban "food deserts"); (2) food is a non-discretionary item; (3) the fact that groceries are one of the most local markets and (4) it's a pretty hot button issue. I don't really agree with all of their premise, but there is a genuine basis for the FTC's rationale (unlike so many other gov't things).
The FTC also always gives additional scrutiny to a merger b/t numbers 1 and 2 in any definable market.
So, looking at the WF/WO situation where there are essentially 2 semi-national chains in the organic/natural foods area, you have 1 and 2, in a market that has some barriers to entry--at least in perception (cf. all the doubts about Walmart "organics"), and it will give WF near complete dominance in many (most?) of its markets--only communities with strong co-ops and/or farmers markets (e.g. Pac NW, Minneapolis) will have a real, current alternative.
So, the FTC attention may not be politically motivated, but this administration has lost all benefit of the doubt.
This FTC suit is just plain ridiculous.
RE: guest.
I think my main problem is the way market definition is being manipulated in this case. Yes it is true that food stores are a local market and food itself is non-discretionary. But high-end organics are discretionary. Whole Foods is more or less a luxury brand. They are selling a lifestyle as much as they are selling food. Thus does it make sense in this case to define the market so narrowly? I think a larger problem in this area arises when you start talking about verticle integration, ie if Whole Foods uses its clout to begin buying up all the organic supply. This seems unlikely nor does it seem to be a motivating factor in the suit.
Rod:
No doubt the market definition is being manipulated, at least as compared to other industries. My point, muddled as it was, was that the FTC has a history of doing weird things with market definition in the retail gorcery business. Weird even when compared to the wholesale grocery business.
So, I think that, while the FTC is, once again, making bad judgments in market definition with a grocer, these bad judgments may or may not have something to do with the current administration.
Also, I completely agree that WF is a discretionary destination, so the typical rationale of protecting consumers from a merger that creates pricing power for non-discretionary items doesn't make sense to me (not that I've heard it specifically made, just that it's a typical point for the FTC). Worrying about pricing power at the WF level of groceries is like worrying about pricing power at Mercedes/BMW/Audi level of cars--everyone still has alternatives.
So, another long way of saying I agree with you, except that I am not convinced that the challenge is necessarily political. And if it is political, there could also be pressure coming from the left, trying to prevent a non-/anti-union shop from getting bigger.
guest 2:35
Whole Foods is one of the companies that is very good to its workers, so I guess it's true that paying people a living wage and giving them benefits does drive up costs to the consumer. So what? Whole Foods delivers a lot of value to people who shop there.
Yes, I'll buy my fish at Isaacson & Stein's instead because WF is way too expensive on most items. On the other hand, they've got some really great deals, too, and items I can't find anywhere else. Customer services is way better at WF than at Wild Oats, too. Maybe that's the reason WF can buy WO, not the alleged trolling and its unsubstantiated effect on stock prices.
@Chuck, Wes Sabi
Martha Stewart was not convicted of insider trading. Rather, she was found guilty of obstruction of justice and lying to investigators.
I can't for the life of me understand the argument that the FTC should have prevented the aquisitions involving AT&T of the last few years. The mergers did not even involve companies that directly competed against each other, unless you count the Cingular, AT&T Wireless (which was not even owned by AT&T at the time) merger. There is tons of competition in the phone and communications industry. Unlike a few decades ago people can get their regular local phone service from another provider, Comcast for example. If you don't like the price of the phone calls you could always just use a cell phone(there are around five major cell phone companies companies and there is even a new one, Virgin), use voice internet calling, send an e-mail or an instant message, and many other options that were not available several decades ago. I am truly mystified what the argument for preventing AT&T's mergers would have been.
I think it is also pretty difficult to make the case that the Whole Foods-Wild Oats merger should be stopped. I think there is more competition in the grocery store business than the overwhelming majority of industries. Right now, by my count, there are five large supermarket chains that operate in Chicago and there are numerous independants as well. Compare that, for example, to bookstores or drug stores where essentually two chains have more than 80% of these stores(although obviously there is competition elsewhere and pretty much everything in drug stores can be found in grocery stores as well as Target and Wal-Mart). And it certainly is not the case that Whole Foods and Wild Oats are selling something significantelly different than other supermarkets. Everybody has been following their lead for the past decade and offering more of the type of products they sell. And Whole Foods and Wild Oats has been selling more ordinary non-organic type stuff than they used to. That said, it seems to me that posting those internet comments to drive the stock price down is very serious and I would guess that the merger will not go through because of that. I will also be surprised if the guy is not forced to resign pretty quickly. Other CEO's have had to step down for much, much less serious things than this.
Part of the problem is that the FTC is viewing Whole Foods as a natural foods store and not as a grocery store. I don't see Chuck bitching about Kroger Co. and CVS Corp and Wal-Mart, which are the true threats to anyone who cares about natural and organic foods. They're all jumping on the organic bandwagon, thanks to Whole Foods (and of course they're blatantly stealing WFM's logos and designs) and trying desperately to water down organic standards, so they can keep making the junk they make and call it "organic."
Griff: "so they can keep making the junk they make and call it 'organic.'"
Have made for them. Kroger, CVS and Wal-Mart aren't in the business of manufacturing food.