Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-07-05276/USCOURTS-caDC-07-05276-2/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 23, 2008 Decided July 29, 2008 

 Amended and Reissued November 21, 2008 

No. 07-5276 

FEDERAL TRADE COMMISSION, 

APPELLANT

v. 

WHOLE FOODS MARKET, INC., ET AL., 

APPELLEES

Appeal from the United States District Court 

for the District of Columbia 

(No. 07cv01021) 

 Marilyn E. Kerst, Attorney, Federal Trade Commission, 

argued the cause for appellant. With her on the briefs were 

John F. Daly, Deputy General Counsel, and Richard B. 

Dagen and Thomas H. Brock, Attorneys. 

Paul T. Denis argued the cause for appellees. With him 

on the brief were Paul H. Friedman, Nory Miller, and 

Rebecca Dick. Clifford H. Aronson and Alden L. Atkins

entered appearances. 

David A. Balto was on the brief for amici curiae

American Antitrust Institute, et al. in support of appellant. 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 1 of 65
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 Albert A. Foer was on the brief for amicus curiae

American Antitrust Institute in support of appellant. 

 Before: TATEL, BROWN, and KAVANAUGH, Circuit 

Judges. 

 Judgment of the Court filed by Circuit Judge BROWN. 

 Opinion filed by Circuit Judge BROWN. 

 Opinion concurring in the judgment filed by Circuit 

Judge TATEL. 

 

 Dissenting opinion filed by Circuit Judge KAVANAUGH. 

 BROWN, Circuit Judge: The FTC sought a preliminary 

injunction, under 15 U.S.C. § 53(b), to block the merger of 

Whole Foods and Wild Oats. It appeals the district court’s 

denial of the injunction. I conclude the district court should 

be reversed, though I do so reluctantly, admiring the 

thoughtful opinion the district court produced under trying 

circumstances in which the defendants were rushing to a 

financing deadline and the FTC presented, at best, poorly 

explained evidence. Nevertheless, the district court 

committed legal error in assuming market definition must 

depend on marginal consumers; consequently, it 

underestimated the FTC’s likelihood of success on the merits. 

I 

 Whole Foods Market, Inc. (“Whole Foods”) and Wild 

Oats Markets, Inc. (“Wild Oats”) operate 194 and 110 grocery 

stores, respectively, primarily in the United States. In 

February 2007, they announced that Whole Foods would 

acquire Wild Oats in a transaction closing before August 31, 

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2007. They notified the FTC, as the Hart-Scott-Rodino Act 

required for the $565 million merger, and the FTC 

investigated the merger through a series of hearings and 

document requests. On June 6, 2007, the FTC sought a 

temporary restraining order and preliminary injunction to 

block the merger temporarily while the FTC conducted an 

administrative proceeding to decide whether to block it 

permanently under § 7 of the Clayton Act. The parties 

conducted expedited discovery, and the district court held a 

hearing on July 31 and August 1, 2007. 

 The FTC contended Whole Foods and Wild Oats are the 

two largest operators of what it called premium, natural, and 

organic supermarkets (“PNOS”). Such stores “focus on highquality perishables, specialty and natural organic produce, 

prepared foods, meat, fish[,] and bakery goods; generally 

have high levels of customer services; generally target 

affluent and well educated customers [and] . . . are mission 

driven with an emphasis on social and environmental 

responsibility.” FTC v. Whole Foods Market, Inc., 502 F. 

Supp. 2d 1, 28 (D.D.C. 2007). In eighteen cities, asserted the 

FTC, the merger would create monopolies because Whole 

Foods and Wild Oats are the only PNOS. To support this 

claim, the FTC relied on emails Whole Foods’s CEO John 

Mackey sent to other Whole Foods executives and directors, 

suggesting the purpose of the merger was to eliminate a 

competitor. In addition the FTC produced pseudonymous 

blog postings in which Mr. Mackey touted Whole Foods and 

denigrated other supermarkets as unable to compete. The 

FTC’s expert economist, Dr. Kevin Murphy, analyzed sales 

data from the companies to show how entry by various 

supermarkets into a local market affected sales at a Whole 

Foods or Wild Oats store. 

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 On the other hand, the defendants’ expert, Dr. David 

Scheffman, focused on whether a hypothetical monopolist 

owning both Whole Foods and Wild Oats would actually have 

power over a distinct market. He used various third-party 

market studies to predict that such an owner could not raise 

prices without driving customers to other supermarkets. In 

addition, deposition testimony from other supermarkets 

indicated they regarded Whole Foods and Wild Oats as 

critical competition. Internal documents from the two 

defendants reflected their extensive monitoring of other 

supermarkets’ prices as well as each other’s. 

 The district court concluded that PNOS was not a distinct 

market and that Whole Foods and Wild Oats compete within 

the broader market of grocery stores and supermarkets. 

Believing such a basic failure doomed any chance of the 

FTC’s success, the court denied the preliminary injunction 

without considering the balance of the equities. 

 On August 17, the FTC filed an emergency motion for an 

injunction pending appeal, which this court denied on August 

23. FTC v. Whole Foods Market, Inc., No. 07-5276 (D.C. 

Cir. Aug. 23, 2007). Freed to proceed, Whole Foods and 

Wild Oats consummated their merger on August 28. The 

dissent argues that a reversal today contradicts this earlier 

decision, but our standard of review then was very different, 

requiring the FTC to show “such a substantial indication of 

probable success” that there would be “justification for the 

court’s intrusion into the ordinary processes of . . . judicial 

review.” Wash. Metro. Area Transit Comm’n v. Holiday 

Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977). It is hardly 

remarkable that the FTC could fail to meet such a stringent 

standard and yet persuasively show the district court erred in 

applying the much less demanding § 53(b) preliminary 

injunction standard. 

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II 

 At the threshold, Whole Foods questions our jurisdiction 

to hear this appeal. The merger is a fait accompli, and Whole 

Foods has already closed some Wild Oats stores and sold 

others. In addition, Whole Foods has sold two complete lines 

of stores, Sun Harvest and Harvey’s, as well as some 

unspecified distribution facilities. Therefore, argues Whole 

Foods, the transaction is irreversible and the FTC’s request 

for an injunction blocking it is moot. 

 Only in a rare case would we agree a transaction is truly 

irreversible, for the courts are “clothed with large discretion” 

to create remedies “effective to redress [antitrust] violations 

and to restore competition.” Ford Motor Co. v. United States, 

405 U.S. 562, 573 (1972). Indeed, “divestiture is a common 

form of relief” from unlawful mergers. United States v. 

Microsoft Corp., 253 F.3d 34, 105 (D.C. Cir. 2001) (en banc). 

Further, an antitrust violator “may . . . be required to do more 

than return the market to the status quo ante.” Ford Motor, 

405 U.S. at 573 n.8. Courts may not only order divestiture 

but may also order relief “designed to give the divested [firm] 

an opportunity to establish its competitive position.” Id. at 

575. Even remedies which “entail harsh consequences” 

would be appropriate to ameliorate the harm to competition 

from an antitrust violation. United States v. E.I. du Pont de 

Nemours & Co., 366 U.S. 316, 327 (1961). 

 Of course, neither court nor agency has found Whole 

Foods’s acquisition of Wild Oats to be unlawful. Therefore, 

the FTC may not yet claim the right to have any remedy 

necessary to undo the effects of the merger, as it could after 

such a determination, du Pont, 366 U.S. at 334. But the 

whole point of a preliminary injunction is to avoid the need 

for intrusive relief later, since even with the considerable 

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flexibility of equitable relief, the difficulty of “unscrambl[ing] 

merged assets” often precludes “an effective order of 

divestiture,” FTC v. Dean Foods Co., 384 U.S. 597, 607 n.5 

(1966). Section 53(b), codifying the ability of the FTC to 

obtain preliminary relief, FTC v. Weyerhaeuser Co., 665 F.2d 

1072, 1082 (D.C. Cir. 1981), preserves the “flexibility” of 

traditional “equity practice,” id. at 1084. At a minimum, the 

courts retain the power to preserve the status quo nunc, for 

example by means of a hold separate order, id., and perhaps 

also to restore the status quo ante. 

 Thus, the courts have the power to grant relief on the 

FTC’s complaint, despite the merger’s having taken place, 

and this case is therefore not moot. See Byrd v. EPA, 174 

F.3d 239, 244 (D.C. Cir. 1999) (“The availability of a partial 

remedy is sufficient to prevent [a] case from being moot.”). 

The fact that Whole Foods has sold some of Wild Oats’s 

assets does not change our conclusion. To be sure, we have 

no “authority to command return to the status quo,”

Weyerhaeuser, 665 F.2d at 1077, in a literal way by forcing 

absent parties to sell those assets back to Whole Foods, but 

there is no reason to think that inability prevents us from 

mitigating the merger’s alleged harm to competition. The 

stores Whole Foods has sold are only those under the 

Harvey’s and Sun Harvest labels, which were never relevant 

to the anticompetitive harm the FTC fears. Our inability to 

command their return does not limit the relief available to the 

FTC. As to the distribution facilities, neither party has 

described what they are, suggested Wild Oats would not be a 

viable competitor without them, or explained why the district 

court could not order some provisional substitute. Moreover, 

the FTC is concerned about eighteen different local markets. 

If, as appears to be the situation, it remains possible to reopen 

or preserve a Wild Oats store in just one of those markets, 

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such a result would at least give the FTC a chance to prevent 

a § 7 violation in that market. 

III 

 “We review a district court order denying preliminary 

injunctive relief for abuse of discretion.” FTC v. H.J. Heinz 

Co., 246 F.3d 708, 713 (D.C. Cir. 2001). However, if the 

district court’s decision “rests on an erroneous premise as to 

the pertinent law,” we will review the denial de novo “in light 

of the legal principles we believe proper and sound.” Id. 

 Despite some ambiguity, the district court applied the 

correct legal standard to the FTC’s request for a preliminary 

injunction. The FTC sought relief under 15 U.S.C. § 53(b), 

which allows a district court to grant preliminary relief 

“[u]pon a proper showing that, weighing the equities and 

considering the Commission’s likelihood of ultimate success, 

such action would be in the public interest.” The relief is 

temporary and must dissolve if more than twenty days pass 

without an FTC complaint. Id. Congress recognized the 

traditional four-part equity standard for obtaining an 

injunction was “not appropriate for the implementation of a 

Federal statute by an independent regulatory agency.” Heinz, 

246 F.3d at 714. Therefore, to obtain a § 53(b) preliminary 

injunction, the FTC need not show any irreparable harm, and 

the “private equities” alone cannot override the FTC’s 

showing of likelihood of success. Weyerhaeuser, 665 F.2d at 

1082–83. 

 In deciding the FTC’s request for a preliminary 

injunction blocking a merger under § 53(b), a district court 

must balance the likelihood of the FTC’s success against the 

equities, under a sliding scale. See Heinz, 246 F.3d at 727; 

FTC v. Elders Grain, Inc., 868 F.2d 901, 903 (7th Cir. 1989). 

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The equities will often weigh in favor of the FTC, since “the 

public interest in effective enforcement of the antitrust laws” 

was Congress’s specific “public equity consideration” in 

enacting the provision. Heinz, 246 F.3d at 726. Therefore, 

the FTC will usually be able to obtain a preliminary 

injunction blocking a merger by “rais[ing] questions going to 

the merits so serious, substantial, difficult[,] and doubtful as 

to make them fair ground for thorough investigation.” Heinz, 

246 F.3d at 714–15. By meeting this standard, the FTC 

“creates a presumption in favor of preliminary injunctive 

relief,” id. at 726; but the merging parties may rebut that 

presumption, requiring the FTC to demonstrate a greater 

likelihood of success, by showing equities weighing in favor 

of the merger, Weyerhaeuser, 665 F.2d at 1087. Conversely, 

a greater likelihood of the FTC’s success will militate for a 

preliminary injunction unless particularly strong equities 

favor the merging parties. See Heinz, 246 F.3d at 727; Elders 

Grain, 868 F.2d at 903. 

 In any case, a district court must not require the FTC to 

prove the merits, because, in a § 53(b) preliminary injunction 

proceeding, a court “is not authorized to determine whether 

the antitrust laws . . . are about to be violated.” FTC v. Food 

Town Stores, Inc., 539 F.2d 1339, 1342 (4th Cir. 1976). That 

responsibility lies with the FTC. Id. Not that the court may 

simply rubber-stamp an injunction whenever the FTC 

provides some threshold evidence; it must “exercise 

independent judgment” about the questions § 53(b) commits 

to it. Weyerhaeuser, 665 F.2d at 1082. Thus, the district 

court must evaluate the FTC’s chance of success on the basis 

of all the evidence before it, from the defendants as well as 

from the FTC. See FTC v. Beatrice Foods Co., 587 F.2d 

1225, 1229–30 (D.C. Cir. 1978) (App’x to Stmt. of 

MacKinnon & Robb, JJ.) (“[W]e are also required to consider 

the inroads that the appellees’ extensive showing has made 

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. . . [S]everal basic contentions of the FTC are called into 

serious question.”). The district court should bear in mind the 

FTC will be entitled to a presumption against the merger on 

the merits, see Elders Grain, 868 F.2d at 906, and therefore 

does not need detailed evidence of anticompetitive effect at 

this preliminary phase. Nevertheless, the merging parties are 

entitled to oppose a § 53(b) preliminary injunction with their 

own evidence, and that evidence may force the FTC to 

respond with a more substantial showing. 

 The district court did not apply the sliding scale, instead 

declining to consider the equities. To be consistent with the 

§ 53(b) standard, this decision must have rested on a 

conviction the FTC entirely failed to show a likelihood of 

success. Indeed, the court concluded “the relevant product 

market in this case is not premium natural and organic 

supermarkets . . . as argued by the FTC but . . . at least all 

supermarkets.” Whole Foods, 502 F. Supp. 2d at 34. It also 

observed that several supermarkets “have already repositioned 

themselves to compete vigorously with Whole Foods and 

Wild Oats for the consumers’ premium natural and organic 

food business.” Id. at 48. Thus, considering the defendants’ 

evidence as well as the FTC’s, as it was obligated to do, the 

court was in no doubt that this merger would not substantially 

lessen competition, because it found the evidence proved 

Whole Foods and Wild Oats compete among supermarkets 

generally. If, and only if, the district court’s certainty was 

justified, it was appropriate for the court not to balance the 

likelihood of the FTC’s success against the equities. 

 

IV 

 However, the court’s conclusion was in error. The FTC 

contends the district court abused its discretion in two ways: 

first, by treating market definition as a threshold issue; and 

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second, by ignoring the FTC’s main evidence. The district 

court acted reasonably in focusing on the market definition, 

but it analyzed the product market incorrectly. 

A 

 First, the FTC complains the district court improperly 

focused on whether Whole Foods and Wild Oats operate 

within a PNOS market. However, this was not an abuse of 

discretion given that the district court was simply following 

the FTC’s outline of the case. 

 Inexplicably, the FTC now asserts a market definition is 

not necessary in a § 7 case, Appellant’s Br. 37–38, in 

contravention of the statute itself, see 15 U.S.C. § 18 (barring 

an acquisition “where in any line of commerce . . . the effect 

of such acquisition may be substantially to lessen 

competition”); see also Brown Shoe Co. v. United States, 370 

U.S. 294, 324 (1962) (interpreting “any line of commerce” to 

require a “determination of the relevant market” to find “a 

violation of the Clayton Act”); Elders Grain, 868 F.2d at 906 

(“[A]ll this assumes a properly defined market.”). The FTC 

suggests “market definition . . . is a means to an end—to 

enable some measurement of market power—not an end in 

itself.” Appellant’s Br. 38 n.26. But measuring market power 

is not the only purpose of a market definition; only 

“examination of the particular market—its structure, history[,] 

and probable future—can provide the appropriate setting for 

judging the probable anticompetitive effect of the merger.” 

Brown Shoe, 370 U.S. at 322 n.38. 

 That is not to say market definition will always be crucial 

to the FTC’s likelihood of success on the merits. Nor does 

the FTC necessarily need to settle on a market defintion at 

this preliminary stage. Although the framework we have 

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developed for a prima facie § 7 case rests on defining a 

market and showing undue concentration in that market, 

United States v. Baker Hughes Inc., 908 F.2d 981, 982–83 

(D.C. Cir. 1990), this analytical structure does not exhaust the 

possible ways to prove a § 7 violation on the merits, see, e.g., 

United States v. El Paso Natural Gas Co., 376 U.S. 651, 660 

(1964), much less the ways to demonstrate a likelihood of 

success on the merits in a preliminary proceeding. 

Section 53(b) preliminary injunctions are meant to be readily 

available to preserve the status quo while the FTC develops 

its ultimate case, and it is quite conceivable that the FTC 

might need to seek such relief before it has settled on the 

scope of the product or geographic markets implicated by a 

merger. For example, the FTC may have alternate theories of 

the merger’s anticompetitive harm, depending on inconsistent 

market definitions. While on the merits, the FTC would have 

to proceed with only one of those theories, at this preliminary 

phase it just has to raise substantial doubts about a 

transaction. One may have such doubts without knowing 

exactly what arguments will eventually prevail.1

 Therefore, a 

district court’s assessment of the FTC’s chances will not 

depend, in every case, on a threshold matter of market 

definition. 

 

1

 For example, a merger between two close competitors can 

sometimes raise antitrust concerns due to unilateral effects in highly 

differentiated markets. See generally Horizontal Merger 

Guidelines, 57 Fed. Reg. 41,552, 41,560–61, § 2.2 (1992). In such 

a situation, it might not be necessary to understand the market 

definition to conclude a preliminary injunction should issue. The 

FTC alludes to this theory on appeal, but to the district court it 

argued simply that the merger would result in a highly concentrated 

PNOS market. 

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 In this case, however, the FTC itself made market 

definition key. It claimed “[t]he operation of premium natural 

and organic supermarkets is a distinct ‘line of commerce’ 

within the meaning of Section 7,” and its theory of 

anticompetitive effect was that the merger would 

“substantially increase concentration in the operation of 

[PNOS].” Compl. ¶¶ 34, 43. Throughout its briefs, the FTC 

presented a straightforward § 7 case in which “whether the 

transaction creates an appreciable danger of anticompetitive 

effects . . . depends upon . . . [the] relevant product . . . [and] 

geographic market . . . and the transaction’s probable effect 

on competition in the product and geographic markets.” 

FTC’s Br. Mot. Prelim. Inj. 11–12. It purported to show 

“undue concentration in the relevant market,” as the mainstay 

of its case. Id. at 12. Because of the concentration in the 

supposed PNOS market, the FTC urged the district court to 

hold the merger “presumptively unlawful,” and this was its 

sole reason for blocking the merger. FTC’s Proposed 

Conclusions of Law ¶¶ 57–63, 99–108. At oral argument, the 

FTC’s counsel suggested it had other ideas about the 

anticompetitive effect of the merger even if its PNOS market 

definition is wrong; but the FTC never offered those ideas to 

the district court. It is incumbent on the parties to shape a 

case, and it was hardly an abuse of discretion for the district 

court to focus on the questions as the FTC presented them. 

B 

 Thus, the FTC assumed the burden of raising some 

question of whether PNOS is a well-defined market. As the 

FTC presented its case, success turned on whether there exist 

core customers, committed to PNOS, for whom one should 

consider PNOS a relevant market. The district court assumed 

“the ‘marginal’ consumer, not the so-called ‘core’ or 

‘committed’ consumer, must be the focus of any antitrust 

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analysis.” Whole Foods, 502 F. Supp. 2d at 17 (citing 

Horizontal Merger Guidelines, 57 Fed. Reg. 41,552 (1992)). 

To the contrary, core consumers can, in appropriate 

circumstances, be worthy of antitrust protection. See 

Horizontal Merger Guidelines § 1.12, 57 Fed. Reg. at 41,555 

(explaining the possibility of price discrimination for 

“targeted buyers”). The district court’s error of law led it to 

ignore FTC evidence that strongly suggested Whole Foods 

and Wild Oats compete for core consumers within a PNOS 

market, even if they also compete on individual products for 

marginal consumers in the broader market. See, e.g.,

Appellant’s Br. 50, 53. 

 A market “must include all products reasonably 

interchangeable by consumers for the same purposes.” 

Microsoft, 253 F.3d at 52. Whether one product is reasonably 

interchangeable for another depends not only on the ease and 

speed with which customers can substitute it and the 

desirability of doing so, see id. at 53–54, but also on the cost 

of substitution, which depends most sensitively on the price of 

the products. A broad market may also contain relevant 

submarkets which themselves “constitute product markets for 

antitrust purposes.” Brown Shoe, 370 U.S. at 325. “The 

boundaries of such a submarket may be determined by 

examining such practical indicia as industry or public 

recognition of the submarket as a separate economic entity, 

the product’s peculiar characteristics and uses, unique 

production facilities, distinct customers, distinct prices, 

sensitivity to price changes, and specialized vendors.” Id. 

 To facilitate this analysis, the Department of Justice and 

the FTC developed a technique called the SSNIP (“small but 

significant non-transitory increase in price”) test, which both 

Dr. Murphy and Dr. Scheffman used. In the SSNIP method, 

one asks whether a hypothetical monopolist controlling all 

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suppliers in the proposed market could profit from a small 

price increase. Horizontal Merger Guidelines § 1.11, 57 Fed. 

Reg. at 41,560–61. If a small price increase would drive 

consumers to an alternative product, then that product must be 

reasonably substitutable for those in the proposed market and 

must therefore be part of the market, properly defined. Id. 

 Experts for the two sides disagreed about how to do the 

SSNIP of the proposed PNOS market. Dr. Scheffman used a 

method called critical loss analysis, in which he predicted the 

loss that would result when marginal customers shifted 

purchases to conventional supermarkets in response to a 

SSNIP.2

 Whole Foods, 502 F. Supp. 2d at 18. He concluded 

a hypothetical monopolist could not profit from a SSNIP, so 

that conventional supermarkets must be within the same 

market as PNOS. In contrast, Dr. Murphy disapproved of 

critical loss analysis generally, preferring a method called 

critical diversion that asked how many customers would be 

diverted to Whole Foods and how many to conventional 

supermarkets if a nearby Wild Oats closed. Whole Foods’s 

internal planning documents indicated at least a majority of 

these customers would switch to Whole Foods, thus making 

the closure profitable for a hypothetical PNOS monopolist. 

One crucial difference between these approaches was that Dr. 

Scheffman’s analysis depended only on the marginal loss of 

sales, while Dr. Murphy’s used the average loss of customers. 

Dr. Murphy explained that focusing on the average behavior 

of customers was appropriate because a core of committed 

customers would continue to shop at PNOS stores despite a 

SSNIP. 

 

2

 Dr. Scheffman did not actually calculate the amount of this loss. 

He simply predicted that because many Whole Foods and Wild 

Oats customers also shop at conventional supermarkets, the loss 

would at any rate be too large. 

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 In appropriate circumstances, core customers can be a 

proper subject of antitrust concern. In particular, when one or 

a few firms differentiate themselves by offering a particular 

package of goods or services, it is quite possible for there to 

be a central group of customers for whom “only [that 

package] will do.” United States v. Grinnell Corp., 384 U.S. 

563, 574 (1966); see also United States v. Phillipsburg Nat’l 

Bank & Trust Co., 399 U.S. 350, 360 (1970) (“[I]t is the 

cluster of products and services . . . that as a matter of trade 

reality makes commercial banking a distinct” market.). What 

motivates antitrust concern for such customers is the 

possibility that “fringe competition” for individual products 

within a package may not protect customers who need the 

whole package from market power exercised by a sole 

supplier of the package. Grinnell, 384 U.S. at 574. 

 Such customers may be captive to the sole supplier, 

which can then, by means of price discrimination, extract 

monopoly profits from them while competing for the business 

of marginal customers. Cf. Md. People’s Counsel v. FERC, 

761 F.2d 780, 786–87 (D.C. Cir. 1985) (allowing natural gas 

pipelines to charge higher prices to captive customers would 

be anticompetitive). Not that prices that segregate core from 

marginal consumers are in themselves anticompetitive; such 

pricing simply indicates the existence of a submarket of core 

customers, operating in parallel with the broader market but 

featuring a different demand curve. See United States v. 

Rockford Mem’l Corp., 898 F.2d 1278, 1284 (7th Cir. 1990). 

Sometimes, for some customers a package provides “access to 

certain products or services that would otherwise be 

unavailable to them.” Phillipsburg Nat’l Bank & Trust, 399 

U.S. at 360. Because the core customers require the whole 

package, they respond differently to price increases from 

marginal customers who may obtain portions of the package 

elsewhere. Of course, core customers may constitute a 

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submarket even without such an extreme difference in 

demand elasticity. After all, market definition focuses on 

what products are reasonably substitutable; what is 

reasonable must ultimately be determined by “settled 

consumer preference.” United States v. Phila. Nat’l Bank, 

374 U.S. 321, 357 (1963). 

 In short, a core group of particularly dedicated, “distinct 

customers,” paying “distinct prices,” may constitute a 

recognizable submarket, Brown Shoe, 370 U.S. at 325, 

whether they are dedicated because they need a complete 

“cluster of products,” Phila. Nat’l Bank, 374 U.S. at 356, 

because their particular circumstances dictate that a product 

“is the only realistic choice,” SuperTurf, Inc. v. Monsanto 

Co., 660 F.2d 1275, 1278 (8th Cir. 1981), or because they 

find a particular product “uniquely attractive,” Nat’l 

Collegiate Athletic Ass’n v. Bd. of Regents of the Univ. of 

Okla., 468 U.S. 85, 112 (1984). For example, the existence of 

core customers dedicated to office supply superstores, with 

their “unique combination of size, selection, depth[,] and 

breadth of inventory,” was an important factor distinguishing 

that submarket. FTC v. Staples, Inc., 970 F. Supp. 1066, 

1078–79 (D.D.C. 1997). As always in defining a market, we 

must “take into account the realities of competition.” Weiss v. 

York Hosp., 745 F.2d 786, 826 (3d Cir. 1984). We look to the 

Brown Shoe indicia, among which the economic criteria are 

primary, see Rothery Storage & Van Co. v. Atlas Van Lines, 

Inc., 792 F.2d 210, 219 n.4 (D.C. Cir. 1986). 

 The FTC’s evidence delineated a PNOS submarket 

catering to a core group of customers who “have decided that 

natural and organic is important, lifestyle of health and 

ecological sustainability is important.” Whole Foods, 502 F. 

Supp. at 223 (citing Hr’g Tr. 43–44, Aug. 1, 2007). It was 

undisputed that Whole Foods and Wild Oats provide higher 

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levels of customer service than conventional supermarkets, a 

“unique environment,” and a particular focus on the “core 

values” these customers espoused. Id. The FTC connected 

these intangible properties with concrete aspects of the PNOS 

model, such as a much larger selection of natural and organic 

products, FTC’s Proposed Findings of Fact 13–14 & ¶ 66 

(noting Earth Fare, a PNOS, carries “more than 45,000 natural 

and organic SKUs”) and a much greater concentration of 

perishables than conventional supermarkets, id. 14–15 & ¶ 

69–70 (“Over 60% of Wild Oats’ revenues” and “[n]early 

70% of Whole Foods sales are natural or organic 

perishables.”). See also Whole Foods, 502 F. Supp. 2d at 22–

23 (citing defendants’ depositions as evidence of Whole 

Foods’s and Wild Oats’s focus on “high-quality perishables” 

and a large variety of products). 

 Further, the FTC documented exactly the kind of price 

discrimination that enables a firm to profit from core 

customers for whom it is the sole supplier. Dr. Murphy 

compared the margins of Whole Foods stores in cities where 

they competed with Wild Oats. He found the presence of a 

Wild Oats depressed Whole Foods’s margins significantly. 

Notably, while there was no effect on Whole Foods’s margins 

in the product category of “groceries,” where Whole Foods 

and Wild Oats compete on the margins with conventional 

supermarkets, the effect on margins for perishables was 

substantial. Confirming this price discrimination, Whole 

Foods’s documents indicated that when it price-checked 

conventional supermarkets, the focus was overwhelmingly on 

“dry grocery,” rather than on the perishables that were 70% of 

Whole Foods’s business. Thus, in the high-quality 

perishables on which both Whole Foods and Wild Oats made 

most of their money, they competed directly with each other, 

and they competed with supermarkets only on the dry grocery 

items that were the fringes of their business. 

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18

 Additionally, the FTC provided direct evidence that 

PNOS competition had a greater effect than conventional 

supermarkets on PNOS prices. Dr. Murphy showed the 

opening of a new Whole Foods in the vicinity of a Wild Oats 

caused Wild Oats’s prices to drop, while entry by non-PNOS 

stores had no such effect. Similarly, the opening of Earth 

Fare stores (another PNOS) near Whole Foods stores caused 

Whole Foods’s prices to drop immediately. The price effect 

continued, while decreasing, until the Earth Fare stores were 

forced to close. 

 Finally, evidence of consumer behavior supported the 

conclusion that PNOS serve a core consumer base. Whole 

Foods’s internal projections, based on market experience, 

suggested that if a Wild Oats near a Whole Foods were to 

close, the majority (in some cases nearly all) of its customers 

would switch to the Whole Foods rather than to conventional 

supermarkets. Since Whole Foods’s prices for perishables are 

higher than those of conventional supermarkets, such 

customers must not find shopping at the latter interchangeable 

with PNOS shopping. They are the core customers. 

Moreover, market research, including Dr. Scheffman’s own 

studies, indicated 68% of Whole Foods customers are core 

customers who share the Whole Foods “core values.” FTC 

Proposed Findings of Fact ¶ 135. 

 Against this conclusion the defendants posed evidence 

that customers “cross-shop” between PNOS and other stores 

and that Whole Foods and Wild Oats check the prices of 

conventional supermarkets. Whole Foods, 502 F. Supp. 2d at 

30–32. But the fact that PNOS and ordinary supermarkets 

“are direct competitors in some submarkets . . . is not the end 

of the inquiry,” United States v. Conn. Nat’l Bank, 418 U.S. 

656, 664 n.3 (1974). Of course customers cross-shop; PNOS 

carry comprehensive inventories. The fact that a customer 

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19

might buy a stick of gum at a supermarket or at a convenience 

store does not mean there is no definable groceries market. 

Here, cross-shopping is entirely consistent with the existence 

of a core group of PNOS customers. Indeed, Dr. Murphy 

explained that Whole Foods competes actively with 

conventional supermarkets for dry groceries sales, even 

though it ignores their prices for high-quality perishables. 

 In addition, the defendants relied on Dr. Scheffman’s 

conclusion that there is no “clearly definable” core customer. 

Whole Foods, 502 F. Supp. 2d at 28. However, this 

conclusion was inconsistent with Dr. Scheffman’s own report 

and testimony. Market research had found that customers 

who shop at Whole Foods because they share the core values 

it champions constituted at least a majority of its customers. 

Scheffman Expert Report 56–57. Moreover, Dr. Scheffman 

acknowledged “there are core shoppers [who] will only buy 

organic and natural” and for that reason go to Whole Foods or 

Wild Oats. Hr’g Tr. 31, July 31, 2007. He contended they 

could be ignored because the numbers are not “substantial.” 

Id. Again, Dr. Scheffman’s own market data undermined this 

assertion. 

 In sum, the district court believed the antitrust laws are 

addressed only to marginal consumers. This was an error of 

law, because in some situations core consumers, demanding 

exclusively a particular product or package of products, 

distinguish a submarket. The FTC described the core PNOS 

customers, explained how PNOS cater to these customers, and 

showed these customers provided the bulk of PNOS’s 

business. The FTC put forward economic evidence—which 

the district court ignored—showing directly how PNOS 

discriminate on price between their core and marginal 

customers, thus treating the former as a distinct market. 

Therefore, I cannot agree with the district court that the FTC 

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20

would never be able to prove a PNOS submarket. This is not 

to say the FTC has in fact proved such a market, which is not 

necessary at this point. To obtain a preliminary injunction 

under § 53(b), the FTC need only show a likelihood of 

success sufficient, using the sliding scale, to balance any 

equities that might weigh against the injunction. 

V 

 It remains to address the equities, which the district court 

did not reach, and see whether for some reason there is a 

balance against the FTC that would require a greater 

likelihood of success. The FTC urges us to carry out the rest 

of this determination, but “[w]e believe the proper course of 

action at this point is to remand to the district court, 

Chaplaincy of Full Gospel Churches v. England, 454 F.3d 

290, 304 (D.C. Cir. 2006). Since the district court “expressly 

withheld consideration,” id. at 305, of the equities, we have 

not had the benefit of its findings. Although the equities in a 

§ 53(b) preliminary injunction proceeding will usually favor 

the FTC, Heinz, 246 F.3d at 726, the district court must 

independently exercise its discretion considering the 

circumstances of this case, including the fact that the merger 

has taken place. The district court should remember that a 

“risk that the transaction will not occur at all,” by itself, is a 

private consideration that cannot alone defeat the preliminary 

injunction. See id.; Weyerhaeuser, 665 F.2d at 1082–83. 

 I appreciate that the district court expedited the 

proceeding as a courtesy to the defendants, who wanted to 

consummate their merger just thirty days after the hearing, 

Whole Foods, 502 F. Supp. 2d at 4, but the court should have 

taken whatever time it needed to consider the FTC’s evidence 

fully. For the reasons stated above, the district court’s 

conclusion that the FTC showed no likelihood of success in 

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21

an eventual § 7 case must be reversed and remanded for 

proceedings consistent with this opinion. 

So ordered.

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TATEL, Circuit Judge, concurring in the judgment: I 

agree with my colleagues that the district court produced a 

thoughtful opinion under incredibly difficult circumstances, 

that this case presents a live controversy, and that the district 

court generally applied the correct standard in reviewing the 

Federal Trade Commission’s request for a preliminary 

injunction. I also agree with Judge Brown that the district 

court nonetheless erred in concluding that the FTC failed to 

“raise[] questions going to the merits so serious, substantial, 

difficult and doubtful as to make them fair ground for 

thorough investigation, study, deliberation and determination 

by the FTC in the first instance and ultimately by the Court of 

Appeals.” FTC v. H.J. Heinz Co., 246 F.3d 708, 714-15 

(D.C. Cir. 2001). Specifically, I believe the district court 

overlooked or mistakenly rejected evidence supporting the 

FTC’s view that Whole Foods and Wild Oats occupy a 

separate market of “premium natural and organic 

supermarkets.” 

I 

“Section 7 of the Clayton Act prohibits acquisitions, 

including mergers, ‘where in any line of commerce or in any 

activity affecting commerce in any section of the country, the 

effect of such acquisition may be substantially to lessen 

competition, or to tend to create a monopoly.’” Id. at 713 

(quoting 15 U.S.C. § 18). “Congress used the words ‘may be

substantially to lessen competition,’ to indicate that its 

concern was with probabilities, not certainties.” Brown Shoe 

Co. v. United States, 370 U.S. 294, 323 (1962). 

When the FTC believes an acquisition violates section 7 

and that enjoining the acquisition pending an investigation 

“would be in the interest of the public,” section 13(b) of the 

Federal Trade Commission Act authorizes the Commission to 

ask a federal district court to block the acquisition. 15 U.S.C. 

§ 53(b); Heinz, 246 F.3d at 714. Because Congress concluded 

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2

that the FTC—an expert agency acting on the public’s 

behalf—should be able to obtain injunctive relief more readily 

than private parties, it “incorporat[ed] a unique ‘public 

interest’ standard in 15 U.S.C. § 53(b), rather than the more 

stringent, traditional ‘equity’ standard for injunctive relief.” 

FTC v. Exxon Corp., 636 F.2d 1336, 1343 (D.C. Cir. 1980) 

(citing H.R. REP. NO. 93-624, at 31 (1973)). Under this more 

lenient rule, a district court may grant the FTC’s requested 

injunction “[u]pon a proper showing that, weighing the 

equities and considering the Commission’s likelihood of 

ultimate success, such action would be in the public interest.” 

15 U.S.C. § 53(b). In this circuit, “the standard for likelihood 

of success on the merits is met if the FTC ‘has raised 

questions going to the merits so serious, substantial, difficult 

and doubtful as to make them fair ground for thorough 

investigation, study, deliberation and determination by the 

FTC in the first instance and ultimately by the Court of 

Appeals.’” Heinz, 246 F.3d at 714-15 (quoting FTC v. 

Beatrice Foods Co., 587 F.2d 1225, 1229 (D.C. Cir. 1978) 

(Appendix to Joint Statement of Judges MacKinnon & 

Robb)); accord FTC v. Freeman Hosp., 69 F.3d 260, 267 (8th 

Cir. 1995); FTC v. Warner Commc’ns Inc., 742 F.2d 1156, 

1162 (9th Cir. 1984). 

Critically, the district court’s task is not “to determine 

whether the antitrust laws have been or are about to be 

violated. That adjudicatory function is vested in the FTC in 

the first instance.” Heinz, 246 F.3d at 714 (quoting FTC v. 

Food Town Stores, Inc., 539 F.2d 1339, 1342 (4th Cir. 1976)). 

As Judge Posner has explained: 

One of the main reasons for creating the 

Federal Trade Commission and giving it 

concurrent jurisdiction to enforce the Clayton 

Act was that Congress distrusted judicial 

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3

determination of antitrust questions. It thought 

the assistance of an administrative body would 

be helpful in resolving such questions and 

indeed expected the FTC to take the leading 

role in enforcing the Clayton Act . . . . 

Hosp. Corp. of Am. v. FTC, 807 F.2d 1381, 1386 (7th Cir. 

1986). 

The dissent accuses Judge Brown and me of “dilut[ing] 

the standard for preliminary injunction relief in antitrust 

merger cases, such that the FTC . . . need not establish a 

likelihood of success on the merits.” Dissenting Op. at 17-18 

(internal quotation marks omitted). This is baffling given that 

our opinions scrupulously follow Heinz’s articulation of the 

likelihood-of-success standard, which even Whole Foods 

insists we apply, see Appellee’s Br. 32 (urging that “the 

district court performed the role Congress delegated” to it by 

“applying the standard of review this Court prescribed in 

Heinz”). The Supreme Court’s recent decision in Munaf v. 

Geren, 128 S. Ct. 2207 (2008), does nothing to undermine 

this precedent: it concerns the common law standard for 

preliminary injunctions, not section 13(b)’s “unique ‘public 

interest’ standard,” Exxon Corp., 636 F.2d at 1343. Cf. 

Dissenting Op. at 20-21. In his zeal to reach the merits and 

preempt the FTC, it is in fact our dissenting colleague who 

ignores both circuit precedent and section 13(b). 

II 

In this case the district court concluded that the FTC had 

failed to raise the “serious, substantial” questions necessary to 

show a likelihood of success on the merits. FTC v. Whole 

Foods Market, Inc., 502 F. Supp. 2d 1, 49 (D.D.C. 2007). 

Following the FTC’s lead, the court focused on defining the 

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4

product market in which Whole Foods and Wild Oats operate, 

saying: 

[I]f the relevant product market is, as the FTC 

alleges, a product market of “premium natural 

and organic supermarkets” . . . , there can be 

little doubt that the acquisition of the second 

largest firm in the market by the largest firm in 

the market will tend to harm competition in 

that market. If, on the other hand, the 

defendants are merely differentiated firms 

operating within the larger relevant product 

market of “supermarkets,” the proposed 

merger will not tend to harm competition. 

Whole Foods, 502 F. Supp. 2d at 8. Thus, the “‘case 

hinge[d]’—almost entirely—‘on the proper definition of the 

relevant product market.’” Id. (quoting FTC v. Staples, Inc., 

970 F. Supp. 1066, 1073 (D.D.C. 1997)). And after 

reviewing the evidence, the district court concluded that 

“[t]here is no substantial likelihood that the FTC can prove its 

asserted product market and thus no likelihood that it can 

prove that the proposed merger may substantially lessen 

competition or tend to create a monopoly.” Id. at 49-50. 

I agree with the district court that this “‘case hinges’—

almost entirely—‘on the proper definition of the relevant 

product market,’” for if a separate natural and organic market 

exists, “there can be little doubt that the acquisition of the 

second largest firm in the market by the largest firm in the 

market will tend to harm competition in that market.” Id. at 8 

(quoting Staples, 970 F. Supp. at 1073). But I respectfully 

part ways with the district court when it comes to assessing 

the FTC’s evidence in support of its contention that Whole 

Foods and Wild Oats occupy a distinct market. As the 

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5

Supreme Court explained in Brown Shoe Co. v. United States: 

“The outer boundaries of a product market are determined by 

the reasonable interchangeability of use or the cross-elasticity 

of demand between the product itself and substitutes for it.” 

370 U.S. at 325. In this case the FTC presented a great deal 

of credible evidence—either unmentioned or rejected by the 

district court—suggesting that Whole Foods and Wild Oats 

are not “reasonabl[y] interchangeab[le]” with conventional 

supermarkets and do not compete directly with them. 

 To begin with, the FTC’s expert prepared a study 

showing that when a Whole Foods opened near an existing 

Wild Oats, it reduced sales at the Wild Oats store 

dramatically. See Expert Report of Kevin M. Murphy ¶¶ 48-

49 & exhibit 3 (July 9, 2007) (“Murphy Report”). By 

contrast, when a conventional supermarket opened near a 

Wild Oats store, Wild Oats’s sales were virtually unaffected. 

See id. This strongly suggests that although Wild Oats 

customers consider Whole Foods an adequate substitute, they 

do not feel the same way about conventional supermarkets. 

Rejecting this study, the district court explained that it was 

“unwilling to accept the assumption that the effects on Wild 

Oats from Whole Foods’ entries provide a mirror from which 

predictions can reliably be made about the effects on Whole 

Foods from Wild Oats’ future exits if this transaction occurs.” 

Whole Foods, 502 F. Supp. 2d at 21. But even if exit and 

entry events differ, this evidence suggests that consumers do 

not consider Whole Foods and Wild Oats “reasonabl[y] 

interchangeab[le]” with conventional supermarkets. Brown 

Shoe, 370 U.S. at 325. 

The FTC also highlighted Whole Foods’s own study—

called “Project Goldmine”—showing what Wild Oats 

customers would likely do after the proposed merger in cities 

where Whole Foods planned to close Wild Oats stores. 

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6

According to the study, the average Whole Foods store would 

capture most of the revenue from the closed Wild Oats store, 

even though virtually every city contained multiple 

conventional retailers closer to the shuttered Wild Oats store. 

See Murphy Report ¶ 70 & app. C; Rebuttal Expert Report of 

Kevin M. Murphy ¶¶ 31-32 (July 13, 2007) (“Murphy 

Rebuttal”). This high diversion ratio further suggests that 

many consumers consider conventional supermarkets 

inadequate substitutes for Wild Oats and Whole Foods. The 

district court cited the Project Goldmine study for the 

opposite conclusion, pointing only to cities in which Whole 

Foods expected to receive a low percentage of Wild Oats’s 

business. Whole Foods, 502 F. Supp. 2d at 34. These 

examples, however, do not undermine the study’s broader 

conclusion that Whole Foods would capture most of the 

revenue from the closed Wild Oats, and the district court 

never mentioned the FTC expert’s testimony that the 

diversion ratio estimated here “is at least four times the 

diversion ratio[] needed to make a price increase of 5% 

profitable for a joint owner of the two stores.” Murphy 

Rebuttal ¶ 32. The dissent also ignores this testimony, saying 

incorrectly that the Project Goldmine study “says nothing 

about whether Whole Foods could impose a five percent or 

more price increase.” Dissenting Op. at 11. 

Several industry studies predating the merger also 

suggest that Whole Foods and Wild Oats never truly 

competed with conventional supermarkets. For example, a 

study prepared for Whole Foods by an outside consultant 

concludes that “[Whole Foods] will not encounter significant, 

if any, competition from leading mainstream retailers[’] 

(Safeway, Wal-Mart, Costco, etc.) entry into organics.” 

Tinderbox Consulting, Exploring Private Label Organic 

Brands 4. Another study concludes that “[w]hile th[e] same 

consumer shops” at both “mainstream grocers such as 

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7

Safeway” and “large-format natural foods store[s] such as 

Wild Oats or Whole Foods Market,” “they tend to shop at 

each for different things (e.g., Wild Oats for fresh and 

specialty items, Safeway for canned and packaged goods).” 

THE HARTMAN GROUP, ORGANIC 2006, at ch. 8, p. 1 (May 1, 

2006). In addition, Wild Oats’s former CEO, Perry Odak, 

explained in a deposition why conventional stores have 

difficulty competing with Whole Foods and Wild Oats: if 

conventional stores offer a lot of organic products, they don’t 

sell enough to their existing customer base, leaving the stores 

with spoiled products and reduced profits. But if 

conventional stores offer only a narrow range of organic 

products, customers with a high demand for organic items 

refuse to shop there. Thus, “the conventionals have a very 

difficult time getting into this business.” Investigational 

Hearing of Perry Odak 77-78 (quoted in Murphy Report ¶ 77) 

(“Odak Hearing”). The district court mentioned none of this. 

 In addition to all this direct evidence that Whole Foods 

and Wild Oats occupy a separate market from conventional 

supermarkets, the FTC presented an enormous amount of 

evidence of “industry or public recognition” of the natural and 

organic market “as a separate economic entity”—one of the 

“practical indicia” the Supreme Court has said can be used to 

determine the boundaries of a distinct market. Brown Shoe, 

370 U.S. at 325. For example, dozens of record studies about 

the grocery store industry—including many prepared for 

Whole Foods or Wild Oats—distinguish between “traditional” 

or “conventional” grocery stores on the one hand and “natural 

food” or “organic” stores on the other. See, e.g., FOOD MKTG.

INST., U.S. GROCERY SHOPPER TRENDS 2007, at 20-22 (2007). 

Moreover, record evidence indicates that the Whole Foods 

and Wild Oats CEOs both believed that their companies 

occupied a market separate from the conventional grocery 

store industry. In an email to his company’s board, Whole 

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8

Foods CEO John Mackey explained that “[Wild Oats] is the 

only existing company that has the brand and number of 

stores to be a meaningful springboard for another player to get 

into this space. Eliminating them means eliminating this 

threat forever, or almost forever.” Email from John Mackey 

to John Elstrott et al. (Feb. 15, 2007). Echoing this point, 

former Wild Oats CEO Perry Odak said that “there’s really 

only two players of any substance in the organic and all 

natural [market], and that’s Whole Foods and Wild Oats. . . . 

[T]here’s really nobody else in that particular space.” Odak 

Hearing 58. Executives from several conventional retailers 

agreed, explaining that Whole Foods and Wild Oats are not 

“conventional supermarkets” because “they focus on a 

premium organic-type customer” and “don’t sell a lot of the 

things that . . . a lot of people buy.” Dep. of Rojon Diane 

Hasker 128-29 (July 10, 2007) (“Hasker Dep.”). As Judge 

Bork explained, this evidence of “‘industry or public 

recognition of the submarket as a separate economic’ unit 

matters because we assume that economic actors usually have 

accurate perceptions of economic realities.” Rothery Storage 

& Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 218 n.4 

(D.C. Cir. 1986). 

The FTC also presented strong evidence that Whole 

Foods and Wild Oats have “peculiar characteristics” 

distinguishing them from traditional supermarkets, another of 

the “practical indicia” the Supreme Court has said can be used 

to determine the boundaries of a distinct market. Brown Shoe, 

370 U.S. at 325. Most important, unlike traditional grocery 

stores, both Whole Foods and Wild Oats carry only natural or 

organic products. See http://www.wholefoodsmarket.com/pr 

oducts/index.html (“We carry natural and organic products . . . 

unadulterated by artificial additives, sweeteners, colorings, 

and preservatives . . . .”). Glossing over this distinction, the 

dissent says “the dividing line between ‘organic’ and 

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9

conventional supermarkets has been blurred” because “[m]ost 

products that Whole Foods sells are not organic” while 

“conventional supermarkets” have begun selling more organic 

products. Dissenting Op. at 8. But the FTC never defined its 

proposed market as “organic supermarkets,” it defined it as 

“premium natural and organic supermarkets.” And everything 

Whole Foods sells is natural and/or organic, while many of 

the things sold by traditional grocery stores are not. See, e.g., 

Hasker Dep. 130-34; http://www.wholefoodsmarket.com/prod 

ucts/unacceptablefoodingredients.html (explaining that Whole 

Foods refuses to carry any food item containing one of dozens 

of “unacceptable food ingredients,” ingredients that can be 

found in countless products at traditional grocery stores). 

Insisting that all this evidence of a separate market is 

irrelevant, Whole Foods and the dissent argue that the FTC’s 

case must fail because the record contains no evidence that 

Whole Foods or Wild Oats charged higher prices in cities 

where the other was absent—i.e., where one had a local 

monopoly on the asserted natural and organic market—than 

they did in cities where the other was present. This argument 

is both legally and factually incorrect. 

As a legal matter, although evidence that a company 

charges more when other companies in the alleged market are 

absent certainly indicates that the companies operate in a 

distinct market, see, e.g., Staples, 970 F. Supp. at 1075-77, 

that is not the only way to prove a separate market. Indeed, 

Brown Shoe lists “distinct prices” as only one of a nonexhaustive list of seven “practical indicia” that may be 

examined to determine whether a separate market exists. 370 

U.S. at 325. Furthermore, even if the FTC could prove a 

section 7 violation only by showing evidence of higher prices 

in areas where a company had a local monopoly in an alleged 

market, the FTC need not prove a section 7 violation to obtain 

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10

a preliminary injunction; rather, it need only raise “serious, 

substantial” questions as to the merger’s legality. Heinz, 246 

F.3d at 714. Thus, the dissent misses the mark when it cites 

the FTC’s Horizontal Merger Guidelines to suggest that the 

Commission may obtain a preliminary injunction only by 

“mak[ing] a sufficient showing that the merged company 

could . . . profitably impose a significant and nontransitory 

increase in price” of 5% or more. Dissenting Op. at 2 

(internal quotation marks omitted). Such evidence in a case 

like this, which turns entirely on market definition, would be 

enough to prove a section 7 violation in the FTC’s 

administrative proceeding. See Hosp. Corp., 807 F.2d at 1389 

(stating that “[a]ll that is necessary” to prove a section 7 case 

“is that the merger create an appreciable danger of [higher 

prices] in the future”). Yet our precedent clearly holds that to 

obtain a preliminary injunction “[t]he FTC is not required to 

establish that the proposed merger would in fact violate 

section 7 of the Clayton Act.” Heinz, 246 F.3d at 714. 

Moreover, the Merger Guidelines—which “are by no means 

to be considered binding on the court,” FTC v. PPG Indus., 

Inc., 798 F.2d 1500, 1503 n.4 (D.C. Cir. 1986)—specify how 

the FTC decides which cases to bring, “not . . . how the 

Agency will conduct the litigation of cases that it decides to 

bring,” Horizontal Merger Guidelines § 0.1 (emphasis added); 

see also id. (“[T]he Guidelines do not attempt to assign the 

burden of proof, or the burden of coming forward with 

evidence, on any particular issue.”). 

In any event, the FTC did present evidence indicating 

that Whole Foods and Wild Oats charged more when they 

were the only natural and organic supermarket present. The 

FTC’s expert looked at prices Whole Foods charged in 

several of its North Carolina stores before and after entry of a 

regional natural food chain called Earth Fare. Before any 

Earth Fare stores opened, Whole Foods charged essentially 

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11

the same prices at its five North Carolina stores, but when an 

Earth Fare opened near the Whole Foods in Chapel Hill, that 

store’s prices dropped 5% below those at the other North 

Carolina Whole Foods. See Tr. of Mots. Hr’g, Morning 

Session 125-30 (July 31, 2007); Supplemental Rebuttal 

Expert Report of Kevin M. Murphy ¶¶ 2-6 (July 16, 2007) 

(“Murphy Supp.”). Prices at that store remained lower than at 

the other Whole Foods in North Carolina for nearly a year, 

until just before the Earth Fare closed. See Murphy Supp. ¶¶ 

4-5. Whole Foods followed essentially the same pattern when 

an Earth Fare opened near its stores in Raleigh and Durham—

the company dropped prices at those stores but nowhere else 

in North Carolina. See id.; Tr. of Mots. Hr’g, Morning 

Session 127 (July 31, 2007). The FTC’s expert presented 

similar evidence regarding Whole Foods’s impact on Wild 

Oats’s prices, showing that a new Whole Foods store opening 

near a Wild Oats caused immediate and lasting reductions in 

prices at that Wild Oats store compared to prices at other 

Wild Oats stores. See Tr. of Mots. Hr’g, Morning Session 

132 (July 31, 2007); Murphy Report ¶¶ 57-59 & exhibit 5. In 

addition to this quantitative evidence, the FTC pointed to 

Whole Foods CEO John Mackey’s statement explaining to the 

company’s board why the merger made sense: “By buying 

[Wild Oats] we will . . . avoid nasty price wars in [several 

cities where both companies have stores].” Email from John 

Mackey to John Elstrott et al. (Feb. 15, 2007).

The dissent raises two primary arguments against this 

pricing evidence. First, it relies on a study by Whole Foods’s 

expert to conclude that Whole Foods’s prices remain steady 

regardless of the presence or absence of a nearby Wild Oats, 

Dissenting Op. at 5-6, calling this “all-but-dispositive price 

evidence,” id. at 7. In fact, this study is all-but-meaningless 

price evidence because it examined Whole Foods’s pricing on 

a single day several months after the company announced its 

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12

intent to acquire Wild Oats; this gave the company every 

incentive to eliminate any price differences that may have 

previously existed between its stores based on the presence of 

a nearby Wild Oats, not only to avoid antitrust liability, but 

also because the company was no longer competing with 

Wild Oats. See Hosp. Corp., 807 F.2d at 1384 (“[E]vidence 

that is subject to manipulation by the party seeking to use it is 

entitled to little or no weight.”). Second, the dissent asserts 

that all Mackey’s statements are irrelevant because—it 

claims—anticompetitive “intent is not an element of a § 7 

claim.” Dissenting Op. at 12. But the Supreme Court has 

clearly said that “evidence indicating the purpose of the 

merging parties, where available, is an aid in predicting the 

probable future conduct of the parties and thus the probable 

effects of the merger.” Brown Shoe, 370 U.S. at 329 n.48 

(emphasis added); see also 4A PHILLIP E. AREEDA ET AL., 

ANTITRUST LAW ¶ 964a (2d ed. 2006) (“[E]vidence of 

anticompetitive intent cannot be disregarded.”). 

To be sure, the pricing evidence here is unquestionably 

less compelling than the pricing evidence in some other cases, 

and perhaps this will make a difference in the Commission’s 

ultimate evaluation of this merger. Cf. Staples, 970 F. Supp. 

at 1075-77 (showing price differences of up to 13% where 

competitors were absent). But at this preliminary, pre-hearing 

stage, the pricing evidence here, together with the other 

evidence described above, is certainly enough to raise 

“serious, substantial” questions that are “fair ground for 

thorough investigation, study, deliberation, and determination 

by the FTC.” Heinz, 246 F.3d at 714-15. 

Attempting to make these serious questions disappear, 

Whole Foods points to evidence the district court cited in 

concluding that the FTC could never prove a separate natural 

and organic market. That evidence, however, fails to 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 33 of 65
13

overcome the “serious, substantial” questions the FTC’s 

evidence raises. 

To begin with, the district court relied on a study by a 

Whole Foods expert concluding that the post-merger 

company would be unable to impose a statistically significant 

non-transitory increase in price because the “actual loss” from 

such an increase would exceed the “critical loss”—the point 

at which the revenue gained from raising prices equals the 

revenue lost from reduced sales. The FTC’s expert, however, 

reached the exact opposite conclusion, finding that the 

combined company could impose a statistically significant 

non-transitory increase in price. Murphy Report ¶ 147. He 

also raised a number of criticisms of the Whole Foods 

expert’s study. Most important, he pointed out that the Whole 

Foods expert “provide[d] literally no quantitative evidence for 

the magnitude of the Actual Loss . . . and no methodology for 

calculating the Actual Loss.” Murphy Rebuttal ¶ 11. He 

further argued that the Whole Foods expert’s study embodied 

a widely recognized flaw in critical loss analysis, namely that 

such analysis often overestimates actual loss when a company 

has high margins—which Whole Foods does. See id. ¶¶ 6-16 

(explaining that when a company has high margins the critical 

loss is small, so one might predict an “Actual Loss greater 

than the Critical Loss,” but “this story is very incomplete 

because a high margin tends to imply a small Actual Loss” 

given that high margins suggest customers are price 

insensitive (quoting Michael L. Katz & Carl Shapiro, Further 

Thoughts on Critical Loss, ANTITRUST SOURCE, March 2004, 

at 1, 2)); see also Daniel P. O’Brien & Abraham L. 

Wickelgren, A Critical Analysis of Critical Loss Analysis, 71 

ANTITRUST L.J. 161, 162 (2003). In light of these cogent 

criticisms—which neither Whole Foods’s expert nor the 

district court ever addressed—this study cannot eliminate the 

“serious, substantial” questions the FTC’s evidence raises. 

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14

Although courts certainly must evaluate the evidence in 

section 13(b) proceedings and may safely reject expert 

testimony they find unsupported, they trench on the FTC’s 

role when they choose between plausible, well-supported 

expert studies. 

 

The district court next emphasized that when a new 

Whole Foods store opens, it takes business from conventional 

grocery stores, and even when an existing Wild Oats is 

nearby, most of the new Whole Foods store’s revenue comes 

from customers who previously shopped at conventional 

stores. According to the district court, this led “to the 

inevitable conclusion that Whole Foods’ and Wild Oats’ main 

competitors are other supermarkets, not just each other.” 

Whole Foods, 502 F. Supp. 2d at 21. As the FTC points out, 

however, “an innovative [product] can create a new product 

market for antitrust purposes” by “satisfy[ing] a previouslyunsatisfied consumer demand.” Appellant’s Opening Br. 50. 

To use the Commission’s example, when the automobile was 

first invented, competing auto manufacturers obviously took 

customers primarily from companies selling horses and 

buggies, not from other auto manufacturers, but that hardly 

shows that cars and horse-drawn carriages should be treated 

as the same product market. That Whole Foods and Wild 

Oats have attracted many customers away from conventional 

grocery stores by offering extensive selections of natural and 

organic products thus tells us nothing about whether Whole 

Foods and Wild Oats should be treated as operating in the 

same market as conventional grocery stores. Indeed, courts 

have often found that sufficiently innovative retailers can 

constitute a distinct product market even when they take 

customers from existing retailers. See, e.g., Photovest Corp. 

v. Fotomat Corp., 606 F.2d 704, 712-14 (7th Cir. 1979) 

(finding a distinct market of drive-up photo-processing 

companies even though such companies took photoUSCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 35 of 65
15

processing customers from drugstores, camera stores, and 

supermarkets); Staples, 970 F. Supp. at 1077 (finding a 

distinct market of office supply superstores even though such 

stores took sales primarily from mail-order catalogues and 

stores carrying a broader range of merchandise). 

The district court also cited evidence that Whole Foods 

compares its prices to those at conventional stores, not just 

natural foods stores. But nearly all of the items on which 

Whole Foods checks prices are dry grocery items, even 

though nearly 70% of Whole Foods’s revenue comes from 

perishables. Murphy Report ¶ 77. As Judge Brown’s opinion 

explains, this suggests that any competition between Whole 

Foods and conventional retailers may be limited to a narrow 

range of products that play a minor role in Whole Foods’s 

profitability. Op. at 17. 

Finally, the district court observed that more and more 

conventional stores are carrying natural and organic products, 

and that consumers who shop at Whole Foods and Wild Oats 

also shop at conventional stores. But as noted above, other 

record evidence suggests that although some conventional 

retailers are beginning to offer a limited range of popular 

organic products, they have difficulty competing with Whole 

Foods and Wild Oats. See Murphy Report ¶ 77. As Whole 

Foods CEO John Mackey put it: “[Wild Oats] is the only 

existing company that has the brand and number of stores to 

be a meaningful springboard for another player to get into this 

space. Eliminating them means eliminating this threat 

forever, or almost forever.” Email from John Mackey to John 

Elstrott et al. (Feb. 15, 2007) (emphasis added). Other studies 

show that “[w]hile th[e] same consumer shops” at both 

“mainstream grocers such as Safeway” and “large-format 

natural foods store[s] such as Wild Oats or Whole Foods,” 

“they tend to shop at each for different things.” THE 

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16

HARTMAN GROUP, ORGANIC 2006, at ch. 8, p. 1 (May 1, 

2006); see also Photovest, 606 F.2d at 714 (“The law does not 

require an exclusive class of customers for each relevant 

submarket.”). 

 

 In sum, much of the evidence Whole Foods points to is 

either entirely unpersuasive or rebutted by credible evidence 

offered by the FTC. Of course, this is not to say that the FTC 

will necessarily be able to prove its asserted product market in 

an administrative proceeding: as the district court recognized, 

Whole Foods has a great deal of evidence on its side, 

evidence that may ultimately convince the Commission that 

no separate market exists. But at this preliminary stage, the 

FTC’s evidence plainly establishes a reasonable probability 

that it will be able to prove its asserted market, and given that 

this “‘case hinges’—almost entirely—‘on the proper 

definition of the relevant product market,’” Whole Foods, 502 

F. Supp. 2d at 8 (quoting Staples, 970 F. Supp. at 1073), this 

is enough to raise “serious, substantial” questions meriting 

further investigation by the FTC, Heinz, 246 F.3d at 714. 

III 

Because we have decided that the FTC showed the 

requisite likelihood of success by raising serious and 

substantial questions about the merger’s legality, all that 

remains is to “weigh the equities in order to decide whether 

enjoining the merger would be in the public interest.” Id. at 

726. Although in some cases we have conducted this 

weighing ourselves, see, e.g., id. at 726-27, three factors lead 

me to agree with Judge Brown that the better course here is to 

remand to the district court for it to undertake this task. First, 

in cases in which we have weighed the equities, the district 

court had already done so, giving us the benefit of its 

factfinding and reasoning. See, e.g., id. Here, by contrast, the 

district court never reached the equities and the parties have 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 37 of 65
17

not briefed the issue, leaving us without the evidence needed 

to decide this question. See Whole Foods, 502 F. Supp. 2d at 

50. Second, this case stands in a unique posture, for in cases 

where we reversed a district court’s denial of a section 13(b) 

injunction, either the district court or this court had enjoined 

the merger pending appeal. See Heinz, 246 F.3d at 713; PPG 

Indus., 798 F.2d at 1501 n.1. Here, by contrast, the companies 

have already merged, and although this doesn’t moot the case, 

it may well affect the balance of the equities, likely requiring 

the district court to take additional evidence. Finally, given 

this case’s unique posture, the usual remedy in section 13(b) 

cases—blocking the merger—is no longer an option. 

Therefore, if the district court concludes that the equities tilt in 

the FTC’s favor, it will need to craft an alternative, fact-bound 

remedy sufficient to achieve section 13(b)’s purpose, namely 

allowing the FTC to review the transaction in an 

administrative proceeding and reestablish the premerger status 

quo if it finds a section 7 violation. To accomplish this, the 

district court could choose anything from issuing a hold 

separate order, see FTC v. Weyerhaeuser Co., 665 F.2d 1072, 

1083-84 (D.C. Cir. 1981), to enjoining further integration of 

the companies, to ordering the transaction partially or entirely 

rescinded, see FTC v. Elders Grain, 868 F.2d 901, 907-08 

(7th Cir. 1989) (Posner, J.). Without more facts, however, we 

are in no position to suggest which remedy is most 

appropriate. 

Given the novel and significant task the district court 

faces on remand, I think it important to emphasize the 

principles that should guide its weighing of the equities. To 

begin with, as this court has held, “a likelihood of success 

finding weighs heavily in favor of a preliminary injunction 

blocking the acquisition,” Weyerhaeuser, 665 F.2d at 1085, 

“creat[ing] a presumption in favor of preliminary injunctive 

relief,” Heinz, 246 F.3d at 726. That said, the district court 

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18

must still weigh the public and private equities “to decide 

whether enjoining the merger would be in the public interest.” 

Id. “The principal public equity weighing in favor of issuance 

of preliminary injunctive relief is the public interest in 

effective enforcement of the antitrust laws.” Id. That is, 

because “[a]dministrative experience shows that the 

Commission’s inability to unscramble merged assets 

frequently prevents entry of an effective order of divestiture” 

after administrative proceedings, FTC v. Dean Foods Co., 384 

U.S. 597, 607 n.5 (1966), the court must place great weight on 

the public interest in blocking a possibly anticompetitive 

merger before it is complete. Here, of course, the merger has 

already been consummated, although as the FTC points out, 

the process of combining the two companies is far from 

complete. Thus, the district court must consider the extent to 

which any of the remedial options mentioned above would 

make it easier for the FTC to separate Wild Oats and Whole 

Foods after the Commission’s administrative proceeding 

(should it find a section 7 violation) than it would be if the 

court did nothing. The court must then weigh this and any 

other equities opposing the merger against any public and 

private equities that support allowing the merger to proceed 

immediately. 

In conducting this weighing, if Whole Foods can show no 

public equities in favor of allowing the merger to proceed 

immediately—such as increased employment or reduced 

prices—the district court should go no further, for “[w]hen the 

Commission demonstrates a likelihood of ultimate success, a 

countershowing of private equities alone [does] not suffice to 

justify denial of a preliminary injunction barring the merger.” 

Weyerhaeuser, 665 F.2d at 1083. But if Whole Foods can 

show some public equity favoring the merger, then the court 

should also consider private equities on Whole Foods’s side of 

the ledger, such as whether it would allow an otherwise failing 

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19

firm to survive. That said, “[w]hile it is proper to consider 

private equities in deciding whether to enjoin a particular 

transaction, we must afford such concerns little weight, lest 

we undermine section 13(b)’s purpose of protecting the 

public-at-large, rather than the individual private 

competitors.” Heinz, 246 F.3d at 727 n.25 (quoting FTC v. 

Univ. Health, Inc., 938 F.2d 1206, 1225 (11th Cir. 1991)) 

(internal quotation marks omitted). Moreover, “[w]e do not 

rank as a private equity meriting weight a mere expectation of 

private gain from a transaction the FTC has shown is likely to 

violate the antitrust laws.” Weyerhaeuser, 665 F.2d at 1083 

n.26. In other words, even if allowing the merger to proceed 

would increase Whole Foods’s profits, that is irrelevant to the 

private equities under section 13(b). 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 40 of 65
 KAVANAUGH, Circuit Judge, dissenting:1

 The Federal 

Trade Commission has sought a preliminary injunction to 

block the Whole Foods-Wild Oats merger as anticompetitive 

under § 7 of the Clayton Act. As in many antitrust cases, the 

analysis comes down to one issue: market definition. Is the 

relevant product market here all supermarkets? Or is the 

relevant product market here only so-called “organic 

supermarkets”? If the former, as Whole Foods argues, the 

Whole Foods-Wild Oats merger would be lawful because it 

would not lessen competition in the broad market of all 

supermarkets: Whole Foods and Wild Oats together operate 

about 300 of the approximately 34,000 supermarkets in the 

United States. If the latter, as the FTC contends, the merger 

may be unlawful: Whole Foods and Wild Oats are the only 

significant competitors in the alleged organic-store market 

and their merger would substantially lessen competition in 

such a narrowly defined market. 

 

More than a year ago, after a lengthy evidentiary hearing 

and in an exhaustive and careful opinion, the District Court 

found that the record evidence overwhelmingly supports the 

following conclusions: Whole Foods competes against all 

supermarkets and not just so-called organic stores; the 

relevant market for evaluating this merger for antitrust 

purposes is all supermarkets; and the merger of Whole Foods 

and Wild Oats would not substantially lessen competition in a 

market that includes all supermarkets. The court therefore 

denied the FTC’s motion for a preliminary injunction. 

 1

 In light of changes made by Judge Brown and Judge Tatel to 

their opinions in response to the petition for rehearing – most 

notably, the fact that Judge Tatel no longer joins Judge Brown’s 

opinion, meaning there is no majority opinion for the Court – this 

dissent contains changes throughout, including a new Part III, from 

the dissenting opinion released on July 29, 2008. 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 41 of 65
2

Also more than a year ago, a three-judge panel of this 

Court unanimously denied the FTC’s request for an injunction 

pending appeal, thereby allowing the Whole Foods-Wild Oats 

deal to close. Since then, the merged entity has shut down, 

sold, or converted numerous Wild Oats stores and otherwise 

effectuated the merger through many changes in supplier 

contracts, leases, distribution, and the like. 

 

The Court’s splintered decision in this case seeks to 

unring the bell. In my judgment, this Court got it right a year 

ago in refusing to enjoin the merger, and there is no basis for 

a changed result now. Both a year ago and now, the same 

central question has been before the Court in determining 

whether to approve an injunction: whether the FTC 

demonstrated the necessary “likelihood of success” on its § 7 

case. A year ago, the Court said no. Now, the Court says yes. 

The now-merged entity, the industry, and consumers no doubt 

will be confused by this apparent judicial about-face. 

The law does not allow the FTC to just snap its fingers 

and temporarily block a merger. Even at the preliminary 

injunction stage, the relevant statutory text and precedents 

expressly require that the FTC show a “likelihood of success 

on the merits.” FTC v. H.J. Heinz Co., 246 F.3d 708, 714 

(D.C. Cir. 2001); see also 15 U.S.C. § 53(b) (“likelihood of 

ultimate success”); cf. Munaf v. Geren, 128 S. Ct. 2207, 2218-

19 (2008). Because “[m]erger enforcement, like other areas 

of antitrust, is directed at market power,” Heinz, 246 F.3d at 

713, the FTC therefore needs to make a sufficient showing 

that the merged company could exercise market power and 

profitably impose a “small but significant and nontransitory 

increase in price,” typically meaning a five percent or greater 

price increase. Horizontal Merger Guidelines § 1.11 (internal 

quotation marks omitted); see 15 U.S.C. § 18. As the District 

Court concluded, the FTC did not come close to presenting 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 42 of 65
3

that kind of evidence in this case; the FTC completely failed 

to make the economic showing that is Antitrust 101. 

By seeking to block a merger without a sufficient 

showing that so-called organic stores constitute a separate 

product market and that the merged entity could impose a 

significant and nontransitory price increase, the FTC’s 

position – which Judge Brown and Judge Tatel largely accept 

– calls to mind the bad old days when mergers were viewed 

with suspicion regardless of their economic benefits. See 

generally ROBERT H. BORK, THE ANTITRUST PARADOX

(1978). I would not turn back the clock. I agree with and 

would affirm the District Court’s excellent decision denying 

the FTC’s motion to enjoin the merger of Whole Foods and 

Wild Oats. See FTC v. Whole Foods Mkt., Inc., 502 F. Supp. 

2d 1 (D.D.C. 2007). 

I 

A 

Section 7 of the Clayton Act prohibits mergers “where in 

any line of commerce or in any activity affecting commerce in 

any section of the country, the effect of such acquisition may 

be substantially to lessen competition, or to tend to create a 

monopoly.” 15 U.S.C. § 18. The Horizontal Merger 

Guidelines jointly promulgated by two Executive Branch 

agencies (the Department of Justice and the FTC) implement 

that statutory directive and recognize that the key initial step 

in the analysis is proper product-market definition. See

Horizontal Merger Guidelines § 1.11; see also 2B PHILLIP E.

AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 536, at 

284-85 (3d ed. 2007). Proper product-market analysis focuses 

on products’ interchangeability of use or cross-elasticity of 

demand. A product “market can be seen as the array of 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 43 of 65
4

producers of substitute products that could control price if 

united in a hypothetical cartel or as a hypothetical monopoly.” 

Id. ¶ 530a, at 226. In the merger context, the inquiry therefore 

comes down to whether the merged entity could profitably 

impose a “small but significant and nontransitory increase in 

price” typically defined as five percent or more. See 

Horizontal Merger Guidelines § 1.11 (internal quotation 

marks omitted). If the merged entity could profitably impose 

at least a five percent price increase (because the price 

increase would not cause a sufficient number of consumers to 

switch to substitutes outside of the alleged product market), 

then there is a distinct product market and the proposed 

merger likely would substantially lessen competition in that 

market, in violation of § 7 of the Clayton Act. 

In considering whether the merged entity could increase 

prices, courts of course recognize that “future behavior must 

be inferred from historical observations.” 2B AREEDA &

HOVENKAMP, ANTITRUST LAW ¶ 530a, at 226. Therefore, the 

courts scrutinize existing markets to assess the probable 

effects of a merger. 

This approach was applied sensibly by Judge Hogan in 

his thorough and leading opinion in FTC v. Staples, 970 F. 

Supp. 1066 (D.D.C. 1997). There, Judge Hogan found that 

office products sold by an office superstore were functionally 

interchangeable with office products sold at other types of 

stores, but he nonetheless found that office-supply superstores 

constituted a distinct product market. One key fact led Judge 

Hogan to that conclusion: In areas where Staples was the 

only office superstore, it was able to set prices significantly 

higher than in areas where it competed with other office 

superstores (Office Depot and OfficeMax). See id. at 1075-

76. For example, the FTC presented “compelling evidence” 

that Staples’s prices were 13 percent higher in areas where no 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 44 of 65
5

office-superstore competitors were present. Id. Judge Hogan 

ultimately concluded that “[t]his evidence all suggests that 

office superstore prices are affected primarily by other office 

superstores and not by non-superstore competitors.” Id. at 

1077 (emphasis added). For that reason, the Court enjoined 

the merger of Staples and Office Depot. 

 

B 

 Consistent with the statute, the Executive Branch’s 

Merger Guidelines, and Judge Hogan’s convincing opinion in 

Staples, the District Court here carefully analyzed the 

economics of supermarkets, including so-called organic 

supermarkets. The court considered whether Whole Foods 

charged higher prices in areas without Wild Oats than in areas 

with Wild Oats. After an evidentiary hearing and based on a 

painstaking review of the evidence in the record, the court 

concluded that “Whole Foods prices are essentially the same 

at all of its stores in a region, regardless of whether there is a 

Wild Oats store nearby.” FTC v. Whole Foods Mkt., Inc., 502 

F. Supp. 2d 1, 22 (D.D.C. 2007). That factual conclusion was 

supported by substantial evidence offered by Dr. Scheffman, 

Whole Foods’s expert, and by the lack of any credible 

evidence to the contrary. 

Dr. Scheffman analyzed Whole Foods’s actual prices 

across stores and concluded that “there is no evidence that 

[Whole Foods] and [Wild Oats] price higher” where they face 

no competition from so-called organic supermarkets 

compared with where they do face such competition. 

Scheffman Expert Report ¶ 292, at 113. At a regional level, 

his studies revealed that only a “very small percentage” of 

products vary in price within a region, indicating that “prices 

are set across broad geographic areas.” Id. ¶ 300, at 116. He 

also analyzed prices at the individual store level, examining 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 45 of 65
6

how many products sold at a specific store have prices that 

differ from the most common price in the region. He found 

that “differences in prices across stores are generally very 

small (less than one half of one percent) and there is no 

systematic pattern as to the presence or absence of [organicsupermarket] competition.” Id. ¶ 305, at 116. 

Moreover, the record evidence in this case does not show 

that Whole Foods changed its prices in any significant way in 

response to exit from an area by Wild Oats. In the four cases 

where Wild Oats exited and a Whole Foods store remained, 

there is no evidence in the record that Whole Foods then 

raised prices. Nor was there any evidence of price increases 

after Whole Foods took over two Wild Oats stores. 

The facts here contrast starkly with Staples, where 

Staples charged significantly different prices based on the 

presence or absence of office-superstore competitors in a 

particular area. The evidence there showed that Staples 

charged prices 13 percent higher in markets without officesuperstore competitors than in markets with such competitors. 

There is nothing remotely like that in this case. 

In the absence of any evidence in the record that Whole 

Foods was able to (or did) set higher prices when Wild Oats 

exited or was absent, the District Court correctly concluded 

that Whole Foods competes in a market composed of all 

supermarkets, meaning that “all supermarkets” is the relevant 

product market and that the Whole Foods-Wild Oats merger 

will not substantially lessen competition in that product 

market. 

 

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7

In addition to the all-but-dispositive price evidence,2

 the 

District Court identified other factors further demonstrating 

that the relevant market consists of all supermarkets. 

The record shows that Whole Foods makes site selection 

decisions based on all supermarkets and checks prices against 

all supermarkets, not only so-called organic supermarkets. As 

Dr. Scheffman concluded, Whole Foods “price checks a broad 

set of competitors . . . nationally, regionally and locally.” Id.

¶ 224, at 86. This “demonstrates that [Whole Foods] views 

itself as competing with a broad range of supermarkets and 

that these supermarkets, in fact, constrain the prices charged 

by [Whole Foods].” Id. Those other supermarkets include 

conventional supermarkets such as Safeway, Albertson’s, 

Wegman’s, HEB, and Harris Teeter, as well as so-called 

organic supermarkets like Wild Oats. Id. ¶¶ 225-26, at 86-87. 

As Professors Areeda and Hovenkamp have explained, a 

“broad-market finding gains some support from long-standing 

documents indicating that A or B producers regard the other 

product as a close competitor.” 2B AREEDA & HOVENKAMP,

ANTITRUST LAW ¶ 562a, at 372. The point here is simple: 

Whole Foods would not examine the locations of and price 

check conventional grocery stores if it were not a competitor 

of those stores. Whole Foods does not price check Sports 

Authority; Whole Foods does price check Safeway. 

The record also demonstrates that conventional 

supermarkets and so-called organic supermarkets are 

aggressively competing to attract customers from one another. 

After reviewing a wide variety of industry information and 

 2

 Judge Tatel’s opinion disparages the evidence about Whole 

Foods’s prices, calling it “all-but-meaningless” and implicitly 

suggesting that Whole Foods manipulated its prices just for the 

expert study. Tatel Op. at 11. But Judge Tatel offers no evidence 

for that suggestion. 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 47 of 65
8

trade journals, Dr. Scheffman concluded that “‘[o]ther’ 

supermarkets are competing vigorously for the purchases 

made by shoppers at [Whole Foods] and [Wild Oats].” 

Scheffman Expert Report ¶ 212, at 77. Whole Foods 

“recognizes the fact that it has to appeal to a significantly 

broader group of consumers than organic and natural focused 

consumers.” Id. ¶ 279, at 108. The record shows that Whole 

Foods has made progress: Most products that Whole Foods 

sells are not organic. Conversely, conventional supermarkets 

have shifted towards “emphasizing fresh, ‘natural’ and 

organic” products. Id. ¶ 215, at 80. “[M]ost of the major 

chains and others are expanding into private label organic and 

natural products.” Id. ¶ 220, at 85; see also id. ¶ 219, at 83-85 

(listing changes in other supermarkets). 

So the dividing line between “organic” and conventional 

supermarkets has blurred. As the District Court aptly put it, 

the “train has already left the station.” Whole Foods, 502 F. 

Supp. 2d at 48. The convergence undermines the threshold 

premise of the FTC’s case. This is an industry in transition, 

and Whole Foods has pioneered a product differentiation that 

in turn has caused other supermarket chains to update their 

offerings. These are not separate product markets; this is a 

market where all supermarkets including so-called organic 

supermarkets are clawing tooth and nail to differentiate 

themselves, beat the competition, and make money.

The District Court’s summary of the evidence warrants 

extensive quotation: 

In sum, while all supermarket retailers, including 

Whole Foods, attempt to differentiate themselves in some 

way in order to attract customers, they nevertheless 

compete, and compete vigorously, with each other. The 

evidence before the Court demonstrates that conventional 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 48 of 65
9

or more traditional supermarkets today compete for the 

customers who shop at Whole Foods and Wild Oats, 

particularly the large number of cross-shopping 

customers – or customers at the margin – with a growing 

interest in natural and organic foods. Post-merger, all of 

these competing alternatives will remain. Based upon the 

evidence presented, the Court concludes that many 

customers could and would readily shift more of their 

purchases to any of the increasingly available substitute 

sources of natural and organic foods. The Court 

therefore concludes that the FTC has not met its burden 

to prove that “premium natural and organic 

supermarkets” is the relevant product market in this case 

for antitrust purposes. 

Id. at 36.3

II 

 In an attempt to save its merger case despite its inability 

to meet the test reflected in the Merger Guidelines and applied 

in Staples, the FTC cites marginally relevant evidence and 

advances a scattershot of flawed arguments. 

First, the FTC says that so-called organic supermarkets 

like Whole Foods and Wild Oats constitute their own product 

 3

 A showing that the merged entity would possess market 

concentration in a defined product market is necessary but not 

sufficient to establish an antitrust violation. See United States v. 

Baker Hughes Inc., 908 F.2d 981, 985 (D.C. Cir. 1990) (listing 

factors that might militate against finding an antitrust violation, 

even assuming market concentration exists). I need not address the 

other necessary components of the FTC’s case, however, because 

the FTC has not satisfied the threshold requirement of showing that 

the merged entity would have such market concentration. 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 49 of 65
10

market because they are characterized by factors that 

differentiate them from conventional supermarkets. Those 

factors include intangible qualities such as customer service 

and tangible factors such as a focus on perishables. 

This argument reflects the key error that permeates the 

FTC’s approach to this case. Those factors demonstrate only 

product differentiation, and product differentiation does not 

mean different product markets. “For antitrust purposes, we 

apply the differentiated label to products that are 

distinguishable in the minds of buyers but not so different as 

to belong in separate markets.” 2B PHILLIP E. AREEDA &

HERBERT HOVENKAMP, ANTITRUST LAW ¶ 563a, at 385 (3d 

ed. 2007). As the District Court noted, supermarkets 

including so-called organic supermarkets differentiate 

themselves by emphasizing specific benefits or characteristics 

to attract customers to their stores. See FTC v. Whole Foods 

Mkt., Inc., 502 F. Supp. 2d 1, 24-26 (D.D.C. 2007). They 

may differentiate themselves along dimensions such as “low 

price, ethnic appeal, prepared foods, health and nutrition, 

variety within a product category, customer service, or 

perishables such as meats or produce.” Stanton Expert Report 

¶ 23, at 6. 

The key to distinguishing product differentiation from 

separate product markets lies in price information. As 

Professors Areeda and Hovenkamp have stated, differentiated 

sellers “generally compete with one another sufficiently” that 

the prices of one are “greatly constrained” by the prices of 

others. 2B AREEDA & HOVENKAMP, ANTITRUST LAW ¶ 563a, 

at 384. To distinguish differentiation from separate product 

markets, courts thus must “ask whether one seller could 

maximize profit” by charging “more than the competitive 

price” without “losing too much patronage to other sellers.” 

Id. ¶ 563a, at 385. Here, in other words, could so-called 

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11

organic supermarkets maximize profit by charging more than 

a competitive price without losing too much patronage to 

conventional supermarkets? Based on the evidence regarding 

Whole Foods’s pricing practices, the District Court correctly 

found that the answer to that question is no. So-called organic 

supermarkets are engaged in product differentiation; they do 

not constitute a product market separate from all 

supermarkets. 

 

Second, the FTC points to internal Whole Foods studies 

and other evidence showing that if a Wild Oats near a Whole 

Foods were to close, most of the Wild Oats customers would 

shift to Whole Foods. But that says nothing about whether 

Whole Foods could impose a five percent or more price 

increase and still retain those customers (and its other 

customers), which is the relevant antitrust question. In other 

words, the fact that many Wild Oats customers would shift to 

Whole Foods does not mean that those customers would stay 

with Whole Foods, as opposed to shifting to conventional 

supermarkets, if Whole Foods significantly raised its prices. 

And even if one could infer that all of those former Wild Oats 

customers would so prefer Whole Foods that they would shop 

there even in the face of significant price increases, that 

would not show whether Whole Foods could raise prices 

without driving out a sufficient number of other customers as 

to make the price increases unprofitable. In sum, this 

argument is a diversion from the economic analysis that must 

be conducted in antitrust cases like this. The District Court 

properly found that the expert evidence in the record leads to 

the conclusion that Whole Foods could not profitably impose 

such a significant price increase.4

 4

 According to Judge Tatel’s opinion, the FTC’s expert 

purported to say that Whole Foods could impose a five percent or 

greater price increase because of the number of Wild Oats 

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12

Third, the FTC cites comments by Whole Foods CEO 

John Mackey as evidence that Whole Foods perceived Wild 

Oats to be a unique competitor. Even if Mackey’s comments 

were directed only to Wild Oats, that would not be evidence 

that Whole Foods and Wild Oats are in their own product 

market separate from all other supermarkets. It just as readily 

suggests that Whole Foods and Wild Oats are two 

supermarkets that have similarly differentiated themselves 

from the rest of the market, such that Mackey would be 

especially pleased to see that competitor vanish. Beating the 

competition from similarly differentiated competitors in a 

product market is ordinarily an entirely permissible 

competitive goal. Saying as much, as Mackey did here, does 

not mean that the similarly differentiated competitor is the 

only relevant competition in the marketplace. Moreover, 

Mackey nowhere says that the merger would allow Whole 

Foods to significantly raise prices, which of course is the 

issue here. In any event, intent is not an element of a § 7 

claim, and a CEO’s bravado with regard to one rival cannot 

 

customers who would switch to Whole Foods rather than 

conventional supermarkets. Tatel Op. at 6 (citing Rebuttal Expert 

Report of Kevin M. Murphy ¶ 32 (July 13, 2007)). But that 

ambiguous statement constituted a single, unexplained sentence in 

the middle of a lengthy report. Moreover, the expert apparently 

based his conclusion entirely on the so-called “Project Goldmine” 

analysis of diversion ratios associated with store closures – that is, 

of the number of Wild Oats customers who would switch to Whole 

Foods in the event that a Wild Oats store closes and Whole Foods 

prices remain constant. As the expert himself appeared to 

acknowledge, see Murphy Report ¶ 32 (noting that “marginal and 

average diversion ratios could be different”), the data do not 

necessarily shed any light on how many customers would continue 

to shop at a merged Wild Oats-and-Whole Foods entity in the event 

that the entity uniformly increased prices. All of this no doubt 

explains why the FTC never even mentioned this aspect of its 

expert’s report in the argument section of its opening brief. 

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alter the laws of economics: Mere boasts cannot vanquish 

real-world competition – here, from Safeway, Albertson’s, 

and the like. As Judge Easterbrook has explained, “Firms 

need not like their competitors; they need not cheer them on 

to success; a desire to extinguish one’s rivals is entirely 

consistent with, often is the motive behind, competition.” 

A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 

1396, 1402 (7th Cir. 1989). And “[i]f courts use the vigorous, 

nasty pursuit of sales as evidence of a forbidden ‘intent’, they 

run the risk of penalizing the motive forces of competition.” 

Id. “Intent does not help to separate competition from 

attempted monopolization . . . .” Id. 

Fourth, the FTC says that a study by its expert, Dr. 

Murphy, demonstrates that Whole Foods’s profit margins 

decreased in geographic areas where it competed against Wild 

Oats. But the relevant inquiry under the Merger Guidelines is 

prices. And Dr. Murphy did not determine whether Whole 

Foods prices ever differed as a result of competition from 

Wild Oats. 

 Moreover, there was only a slight difference between 

Whole Foods margins when Wild Oats was in the same area 

and when it was not. The overall difference was 0.7 percent, 

which Dr. Murphy himself recognized was not statistically 

significant. The FTC’s evidence on margins is wafer-thin and 

does not suffice to show that organic stores constitute their 

own product market. 

Fifth, the FTC points to evidence that Whole Foods’s 

entry into a particular area, unlike the entry of conventional 

supermarkets, caused Wild Oats to lower its prices. Dr. 

Murphy’s reliance on Wild Oats’s reaction to Whole Foods’s 

entry is questionable. Dr. Murphy based his entire analysis on 

a meager two events, hardly a large sample size. In addition, 

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Dr. Murphy’s analysis did not control for the reaction of 

conventional supermarkets to Whole Foods’s entry. In other 

words, he assumed that the relevant product market was socalled organic supermarkets (the point he was trying to prove) 

and therefore assumed that all changes in Wild Oats’s prices 

were directly caused by Whole Foods’s entry. But if 

conventional supermarkets also lowered prices to compete 

with Whole Foods when Whole Foods entered, Wild Oats’s 

price decreases may well have been due to the overall 

reduction in prices by all supermarkets in the area. If that 

were true, the relevant product market would obviously be all 

supermarkets, not just so-called organic supermarkets. Dr. 

Murphy’s analysis never confronted that possibility or the 

complexity of how competition works in this market; his 

analysis appears to have assumed the conclusion and reasoned 

backwards from there. 

Moreover, the fact that Whole Foods and Wild Oats went 

toe-to-toe on occasion does not mean that they did not also go 

toe-to-toe with conventional supermarkets, which is the key 

question. And it is revealing that despite having access to the 

necessary data for six such events, Dr. Murphy did not 

analyze the effect of a Wild Oats exit on Whole Foods’s 

prices. As Dr. Scheffman wrote: “A number of [Wild Oats] 

stores have closed . . . . [Dr. Murphy] has done no analysis to 

assess the effects of those store exits in the local shopping 

areas. . . . This is a curious omission, since such evidence, if 

reliable and reliably analyzed, would be relevant to the issue 

of what happens in local market areas in which a [Wild Oats] 

store closes.” Scheffman Rebuttal ¶ 63, at 21. 

The bottom line is that, as the District Court found, there 

is no evidence in the record suggesting that Whole Foods 

priced differently based on the presence or absence of a Wild 

Oats store in the area. That is a conspicuous – and all but 

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15

dispositive – omission in Dr. Murphy’s analysis and in the 

FTC’s case. 

Sixth, the FTC cites the openings of three Earth Fare 

stores near Whole Foods stores in North Carolina, which 

caused decreases in Whole Foods’s prices in those areas. But 

soon after those entries, Whole Foods’s prices returned to 

normal levels. So the record hardly shows the sort of 

“nontransitory” price changes that are the touchstone of 

product-market definition. See Merger Guidelines § 1.11. A 

price increase ordinarily must last “for the foreseeable 

future,” id., considered by some to be more than a year, to 

qualify as “nontransitory.” See 2B AREEDA & HOVENKAMP,

ANTITRUST LAW ¶ 537a, at 290. Moreover, the entry of a 

Safeway store in Boulder, Colorado, had a similar short-term 

impact on Whole Foods, indicating that whatever inference 

should be drawn from the Earth Fare entries cannot be limited 

to so-called organic supermarkets but rather applies to 

conventional supermarkets. 

The FTC’s reference to Earth Fare mistakenly focuses on 

a few isolated trees instead of the very large forest indicating 

a competitive market consisting of all supermarkets. In short, 

I fail to see how Whole Foods’s temporary price changes to 

compete against three Earth Fare stores in North Carolina 

could possibly be a hook to block this nationwide merger of 

Whole Foods and Wild Oats. 

III 

A 

 The opinions of Judge Brown and Judge Tatel rest on two 

legal points with which I respectfully but strongly disagree. 

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First, the Court’s decision resuscitates the loose antitrust 

standards of Brown Shoe Co. v. United States, 370 U.S. 294 

(1962), the 1960s-era relic. See, e.g., Brown Op. at 16 (“We 

look to the Brown Shoe indicia . . . .”); Tatel Op. at 9 (“Brown 

Shoe lists ‘distinct prices’ as only one of a non-exhaustive list 

of seven ‘practical indicia’ that may be examined to 

determine whether a separate market exists.”) (citation 

omitted). This is a problem because Brown Shoe’s brand of 

free-wheeling antitrust analysis has not stood the test of time. 

See, e.g., EINER ELHAUGE & DAMIEN GERADIN, GLOBAL 

ANTITRUST LAW AND ECONOMICS 874 (2007) (“Modern 

practice takes a much more rigorous approach to market 

definition [than Brown Shoe]”); 4 PHILLIP E. AREEDA &

HERBERT HOVENKAMP, ANTITRUST LAW ¶ 913a, at 62 (2d ed. 

2006) (“One alternative that we do not recommend is a return 

to Brown Shoe’s language of ‘submarkets’”). 

As demonstrated in this Court’s most recent merger case, 

the practical indicia test of Brown Shoe no longer guides 

courts’ merger analyses because it does not sufficiently 

account for the basic economic principles that, according to 

the Supreme Court, must be considered under modern 

antitrust doctrine. See FTC v. H.J. Heinz Co., 246 F.3d 708, 

715-16 (D.C. Cir. 2001) (not applying Brown Shoe practical 

indicia test; instead using the economically grounded 

Herfindahl-Hirschman Index test for market definition 

employed in FTC v. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 

1997)); cf. Leegin Creative Leather Prods. v. PSKS, Inc., 127 

S. Ct. 2705, 2718 (2007) (“the antitrust laws are designed 

primarily to protect interbrand competition”); State Oil Co. v. 

Khan, 522 U.S. 3, 14 (1997) (“Our analysis is also guided by 

our general view that the primary purpose of the antitrust laws 

is to protect interbrand competition.”); Hosp. Corp. of Am. v. 

FTC, 807 F.2d 1381, 1386 (7th Cir. 1986) (Posner, J.) (noting 

the “most important developments that cast doubt on the 

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17

continued vitality of such cases as Brown Shoe”). Judge Bork 

forcefully catalogued the flaws in the Brown Shoe approach 

30 years ago in his landmark antitrust book; indeed, his 

cogent critique helped usher Brown Shoe and several other 

cases to the jurisprudential sidelines. See ROBERT H. BORK,

THE ANTITRUST PARADOX 210, 216 (1978) (“It would be 

overhasty to say that the Brown Shoe opinion is the worst 

antitrust essay ever written. . . . Still, all things considered, 

Brown Shoe has considerable claim to the title. . . . Brown 

Shoe was a disaster for rational, consumer-oriented merger 

policy.”); George L. Priest, The Abiding Influence of The 

Antitrust Paradox, 31 HARV. J.L. & PUB. POL’Y 455, 459 

(2008) (praising Judge Bork’s criticism of the “now 

notorious, though then mainstream” Brown Shoe opinion). 

The Court’s revival of the loose Brown Shoe standard 

threatens to reverse this trend and to upend modern merger 

practice.5

Second, the opinions of Judge Brown and Judge Tatel 

both dilute the standard for preliminary injunction relief in 

antitrust merger cases, such that the FTC apparently need not 

establish a “likelihood of success on the merits.” Heinz, 246 

 5

 As two antitrust commentators perceptively stated: “The 

basic problem with the FTC’s position in Whole Foods was that it 

lacked the pricing evidence it had in Staples, which showed that 

customers did not go elsewhere if the office superstores increased 

their prices. Whole Foods is an attempt by the FTC to persuade a 

court that if you take a CEO’s statements about a merger and stir it 

in with evidence showing the existence of several ‘practical indicia’ 

from Brown Shoe, the resulting mixture should trump objective 

evidence about how customers would react in the event of a price 

increase.” Carlton Varner & Heather Cooper, Product Markets in 

Merger Cases: The Whole Foods Decision (Oct. 2007), 

www.antitrustsource.com. 

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F.3d at 714. In particular, Judge Brown and Judge Tatel rely 

heavily on their belief that: “In this circuit, the standard for 

likelihood of success on the merits is met if the FTC has 

raised questions going to the merits so serious, substantial, 

difficult and doubtful as to make them fair ground for 

thorough investigation, study, deliberation and determination 

by the FTC in the first instance and ultimately by the Court of 

Appeals.” Tatel Op. at 2 (internal quotations and citations 

omitted); see also id. at 10, 12; Brown Op. at 8 (indicating 

that “the FTC will usually be able to obtain a preliminary 

injunction blocking a merger” by satisfying the same test). 

In applying this watered-down test for issuing a 

preliminary injunction in FTC merger cases, Judge Brown 

and Judge Tatel rely on language contained in our opinion in 

Heinz. However, Heinz only assumed this particular gloss on 

the “likelihood of success on the merits” requirement for 

preliminary injunctions based on a concession in the case. 

See Heinz, 246 F.3d at 715 (D.C. Cir. 2001) (“This specific 

standard was articulated by the court below, and it is a 

standard to which the appellees have not objected.”) (citation 

omitted). Heinz did not hold that this gloss was the proper 

meaning of 15 U.S.C. § 53(b) in FTC preliminary injunction 

merger cases.6 

 6

 The gloss on § 53(b) appears to have arisen originally in 

other circuits around the middle of the 20th century in connection 

with a more general view that a lighter “likelihood of success” 

standard is appropriate whenever the balance of equities weighs 

strongly in favor of issuing an injunction. Compare FTC v. 

Beatrice Foods Co., 587 F.2d 1225, 1229 (D.C. Cir. 1978) 

(Appendix to Statement of MacKinnon & Robb, JJ.) (citing 

Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d 

Cir. 1953) (which noted in the FTC merger context that “if the 

other elements are present (i.e., the balance of hardships tips 

decidedly toward plaintiff), it will ordinarily be enough that the 

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This “serious questions” standard is inconsistent with the 

relevant statutory text. The statute unambiguously requires 

that courts consider “the Commission’s likelihood of ultimate 

success” when the FTC seeks to preliminarily enjoin a 

merger. 15 U.S.C. § 53(b).7

 

 

plaintiff has raised questions going to the merits so serious . . . .”)), 

with Omar v. Harvey, 416 F. Supp. 2d 19, 28 (D.D.C. 2006) (citing

Washington Metro. Area Transit Comm’n v. Holiday Tours, 559 

F.2d 841, 842-44 & n.1 (D.C. Cir. 1977) (which noted outside the 

FTC merger context that courts may generally apply the relatively 

lax “serious questions” approach only “when confronted with a case 

in which the other three [preliminary injunction] factors strongly 

favor interim relief”)). But as explained below in footnote 7, 

Congress in 1973 codified a preliminary injunction standard for 

FTC merger cases that specifically directs courts to consider the 

Commission’s “likelihood of ultimate success.” 15 U.S.C. § 53(b). 

And as explained in the text, the Supreme Court recently repudiated 

the “serious questions” approach to preliminary injunctions in 

general by requiring a likelihood of success showing in all cases, 

regardless of whether the balance of equities weighs in favor of the 

injunction. See Munaf v. Geren, 128 S. Ct. 2207, 2219 (2008). 

7

 In justifying his adoption of the “serious questions” test for 

likelihood of success, Judge Tatel highlights the “unique ‘public 

interest’ standard in 15 U.S.C. § 53(b).” Tatel Op. at 3 (citing FTC 

v. Exxon Corp., 636 F.2d 1336, 1343 (D.C. Cir. 1980)); see also id. 

at 3. But the statute explicitly preserves the traditional likelihood 

of success requirement. See § 53(b) (“Commission’s likelihood of 

ultimate success”). What makes § 53’s standard for preliminary 

injunctions “unique,” as we have explained, is that the FTC need 

not show irreparable harm and, secondarily, that private equities are 

subordinated to public equities. See FTC v. Weyerhaeuser Co., 665 

F.2d 1072, 1081-83 (D.C. Cir. 1981) (“The case law Congress 

codified removes irreparable damage as an essential element of the 

preliminary injunction proponent’s case and permits the judge to 

presume from a likelihood of success showing that the public 

interest will be served by interim relief.”); see also Heinz, 246 F.3d 

at 727 n.25; Exxon Corp., 636 F.2d at 1343. Far from reading the 

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There is a significant difference, moreover, between the 

relaxed “serious questions” standard applied by Judge Brown 

and Judge Tatel and the traditional likelihood of success 

standard – as the Supreme Court explained just a few months 

ago in Munaf v. Geren, 128 S. Ct. 2207 (2008), rev’g sub 

nom. Omar v. Harvey, 479 F.3d 1 (D.C. Cir. 2007). To be 

sure, that case did not involve a merger; but the Supreme 

Court there did address the general likelihood-of-success 

preliminary injunction standard – the same standard that is 

expressly articulated in 15 U.S.C. § 53(b). The District Court 

in the Omar litigation – like Judge Brown and Judge Tatel 

here – had concluded that a preliminary injunction was 

justified because the case presented questions “so serious, 

substantial, difficult and doubtful, as to make them fair 

ground for litigation and thus for more deliberative 

investigation.” Omar v. Harvey, 416 F. Supp. 2d 19, 23-24 

(D.D.C. 2006) (citation omitted). This Court then affirmed 

the District Court’s preliminary injunction. See Omar v. 

Harvey, 479 F.3d 1, 11 (D.C. Cir. 2007) (concluding that the 

Court “need not address” the merits of petitioner’s claims). 

But the Supreme Court unanimously rejected that lesser 

“serious questions” standard as too weak and not equivalent 

to the “likelihood of success” necessary for a preliminary 

injunction to issue. See Munaf, 128 S. Ct. at 2219 (“We begin 

with the basics. . . . [A] party seeking a preliminary 

injunction must demonstrate, among other things, ‘a 

likelihood of success on the merits.’”) (citations omitted); see 

also Winter v. NRDC, 2008 WL 4862464 at *9 (Nov. 12, 

 

“likelihood of ultimate success” language out of the statute, we 

have recognized that the statutory phrase “weighing the equities 

and considering the likelihood of ultimate success” was specifically 

added by the Conference Committee and that this “deliberate 

addition” should not “be brushed aside as essentially repetitive or 

meaningless.” Weyerhaeuser, 665 F.2d at 1081. 

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2008) (“A plaintiff seeking a preliminary injunction must 

establish that he is likely to succeed on the merits”) (citing 

Munaf, 128 S. Ct. at 2218-19). And the Supreme Court 

directly criticized the approach of the District Court and this 

Court in the Omar litigation: “one searches the opinions 

below in vain for any mention of a likelihood of success as to 

the merits.” Munaf, 128 S. Ct. at 2219. 

The Court in this case repeats the same mistake made in 

Omar of watering down the preliminary injunction standard. 

Both Judge Brown and Judge Tatel approve the FTC’s request 

for preliminary injunction without making the essential 

“likelihood of success” finding that is required by the 

statutory text and Supreme Court precedent. See Brown Op. 

at 8, 20; Tatel Op. at 1-3, 15-16. To the extent the “serious 

questions” standard they apply was ever appropriate for 

preliminary injunction merger cases, the combination of the 

clear statutory text in 15 U.S.C. § 53(b) and the Supreme 

Court decision in Munaf convincingly demonstrates that it is 

not the proper standard now. 

In short, the approach of Judge Brown and Judge Tatel 

revives the moribund Brown Shoe practical indicia test and 

applies an overly lax preliminary injunction standard for 

merger cases. I respectfully disagree on both counts. In my 

judgment, the FTC may obtain a preliminary injunction only 

by establishing a likelihood of success – namely, a likelihood 

that, among other things, the merged entity would possess 

market power and could profitably impose a significant and 

nontransitory price increase.8

 8

 The precedential effect of today’s splintered decision is 

muddied somewhat by the fact that Judge Brown and Judge Tatel 

have issued individual opinions concurring in the judgment. That 

said, it is of course well-settled that the mere fact that there is no 

majority opinion does not mean that the decision constitutes no 

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22

 

precedent for future cases. This happens quite frequently with 

splintered Supreme Court decisions where there is no majority 

opinion. As the Supreme Court has repeatedly explained, in the 

vast majority of cases without a majority opinion there is still a 

binding holding of the Court – even if it can occasionally be 

difficult to determine. This is known as the Marks principle. See 

Marks v. United States, 430 U.S. 188, 193 (1977); King v. Palmer, 

950 F.2d 771, 783 (D.C. Cir. 1991) (en banc) (“implicit agreement” 

between judges can produce a “controlling” principle of law); see 

generally Planned Parenthood of Southeastern Pennsylvania v. 

Casey, 947 F.2d 682, 691-97 (3d Cir. 1991). Like the Supreme 

Court, this Court has routinely recognized that a decision without a 

majority opinion usually still constitutes a binding precedent. See, 

e.g., In re Navy Chaplaincy, 534 F.3d 756, 759 n.2 (D.C. Cir. 2008) 

(construing Hein v. Freedom From Religion Foundation, 127 S. Ct. 

2553 (2007)); Shurberg Broadcasting of Hartford, Inc. v. FCC, 876 

F.2d 902, 910 (D.C. Cir. 1989) (“a lower federal court must do its 

level best to extract the holding that commanded a majority in each 

case to arrive at the governing principles and limitations”), rev’d on 

other grounds sub nom. Metro Broad., Inc. v. FCC, 497 U.S. 547 

(1990); Martin v. Malhoyt, 830 F.2d 237, 247 n.28 (D.C. Cir. 1987) 

(citing Marks and noting that Justice Black’s concurrence in Barr v. 

Matteo, 360 U.S. 564 (1959), “provides the ‘narrowest grounds’ for 

the Court’s disposition of the case and thus constitutes the Court’s 

holding”). Only in very rare cases do the opinions making up a 

majority of a court contain no common principles or common 

ground on which to derive any precedential holding of the court. 

See Nichols v. United States, 511 U.S. 738, 743-46 (1994) 

(construing Baldasar v. Illinois, 446 U.S. 222 (1980)); King, 950 

F.2d at 782-85. 

It is unclear whether district courts and future courts of appeals 

will construe this case as one of those rare situations that falls 

entirely outside the Marks rule. At a minimum, this confused 

decision will invite years of uncertainty and litigation over what the 

holding of this case is – a separate but important problem with the 

Court’s approach. 

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B 

 In reaching her conclusion, Judge Brown also relies on a 

distinction between marginal consumers and core consumers. 

See, e.g., Brown Op. at 19 (“In sum, the district court believed 

the antitrust laws are addressed only to marginal consumers. 

This was an error of law, because in some situations core 

consumers, demanding exclusively a particular product or 

package of products, distinguish a submarket.”). But the FTC 

never once referred to, much less relied on, the distinction 

between marginal and core consumers in 86 pages of briefing 

or at oral argument. The terms “marginal consumer” and 

“core consumer” are nowhere to be found in its briefs. 

In any event, I respectfully disagree with Judge Brown’s 

emphasis on core customers. For a business to exert market 

power as a result of a merger, it must be able to increase 

prices (usually by five percent or more) while retaining 

enough customers to make that price increase profitable. See 

2B PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST 

LAW ¶ 501, at 109 (3d ed. 2007) (“A defendant firm has 

market power if it can raise price without a total loss of 

sales.”). If too many “marginal” customers are turned off by 

a price hike, then the hike will be unprofitable even if a large 

group of die-hard “core” customers remain active clients. 

Therefore, a focus on core customers alone cannot resolve a 

merger case. The question here is whether Whole Foods 

could increase prices by five percent or more without losing 

so many marginal customers as to make the price increase 

unprofitable. See id. ¶ 536, at 284. As discussed above, the 

FTC has not come close to making that showing. Moreover, 

there is no support in the law for that singular focus on the 

core customer. Indeed, if that approach took root, it would 

have serious repercussions because virtually every merger 

involves some core customers who would stick with the 

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24

company regardless of a significant price increase. So under 

this “core customer” approach, many heretofore permissible 

mergers presumably could be blocked as anticompetitive. 

That cannot be the law, and it is not the law. 

In a related vein, Judge Brown repeatedly suggests that 

Whole Foods and Wild Oats engage in “price discrimination” 

– more specifically, Judge Brown asserts that organic 

supermarkets “discriminate on price between their core and 

marginal customers, thus treating the former as a distinct 

market.” Brown Op. at 17, 19. But this assertion has no 

factual support in the record. For antitrust purposes, price 

discrimination normally involves one seller charging different 

prices to different customers for the same product. See 2B 

PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST 

LAW ¶ 517a (noting as an indication of market power 

“systematic price discrimination, as when a seller can identify 

two (or more) groups of customers with different demands 

and charge each group different prices even though its cost of 

serving each group is the same”). If there is price 

discrimination in an industry, then under certain 

circumstances a relevant market may be defined to include 

only those customers who pay the higher price. See

Horizontal Merger Guidelines § 1.12. In this case, however, 

neither Judge Brown nor the FTC has pointed to any evidence 

suggesting either that price discrimination occurred before 

this merger or that the merged entity will be able to pricediscriminate. In other words, there is no reason to think that 

“core” as opposed to non-core customers ever pay higher 

prices for the same products in organic supermarkets. 

IV 

 In the end, the FTC’s case is weak and seems a relic of a 

bygone era when antitrust law was divorced from basic 

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economic principles. The record does not show that Whole 

Foods priced differently based on the presence or absence of 

Wild Oats in the same area. The reason for that and the 

conclusion that follows from that are the same: Whole Foods 

competes in an extraordinarily competitive market that 

includes all supermarkets, not just so-called organic 

supermarkets. The merged entity thus could not exercise 

market power such that it could profitably impose a 

significant and nontransitory price increase. Therefore, there 

is no sound legal basis to block this merger. 

The issues presented in this case are important to antitrust 

regulators and practitioners, to potentially merging 

companies, and ultimately to the overall economy. The 

splintered panel opinions will create enormous uncertainty, 

debate, and litigation over the meaning and effect of this 

decision. And to the extent common principles and holdings 

are derived from the opinions of Judge Brown and Judge 

Tatel, those principles will authorize the FTC to obtain 

preliminary injunctions and block mergers based on a 

watered-down preliminary injunction standard and without 

sufficient regard for the economic principles that have 

undergirded modern antitrust law. That will give the FTC far 

greater power to block mergers than the statutory text or 

Supreme Court precedents permit. 

* * * 

 I respectfully dissent. 

USCA Case #07-5276 Document #1150494 Filed: 11/21/2008 Page 65 of 65