FTC Spikes Whole Foods Merger

Dow Jones reports that the Federal Trade Commission has moved to block Whole Foods Market Inc.'s purchase of its smaller competitor Wild Oats Markets Inc. The complaint that the FTC advanced is primarily concerned with the reduced competition in the natural foods grocer market as a result of the deal.

Whole Foods responds quite reasonably that the relevant market segment is really the entire supermarket industry as opposed to the natural goods niche within it. Conventional supermarkets are currently in a period of especially robust competition now that Walmart and Costco have moved into the segment to compete with traditional grocers.

The deal between Whole Foods and Wild Oats is probably sunk for good and at the very least won't be able to go forward in the near term. The larger truth revealed in this episode is the general overuse of antitrust laws in the United States. The only good case for breaking otherwise valid contracts on antitrust grounds occurs when a conglomerate can effectively dominate an enormous part of the economy. Only if every supermarket in the country was somehow acquired by Walmart would the price of food in the United States be significantly impacted by the structure of the supermarket industry.

Competition is certainly a force that lowers prices for consumers, but if it gets out of hand entire industries can become unprofitable. No particular evidence exists that the government is capable of setting "reasonable" rates of competition and profitability. The power of the market itself is the only solution that will ensure consumers are best protected. As long as the government allows anyone who follows basic standards of cleanliness to open a supermarket, no competitor will be able to overcharge consumers. There are lots of industries with much more significant barriers to entry than supermarkets, and if the government is this concerned about the natural foods niche under such a business-friendly administration we can all look forward to even more government manipulation in the future.