Last week in this space, we endeavored to determine why the Federal Trade Commission is seeking to block the relatively innocuous proposed merger of Whole Foods Market and Wild Oats Markets.

This week the fog lifted and no less a figure than John Mackey, Whole Foods’ chief, stood in stark relief as the chief protagonist in the saga.

Clarity prevailed when the FTC provided to SN an unexpurgated version of the complaint that sets forth the FTC’s case. The earlier version of the complaint was heavily censored, with some 50 lines in the 17-page document blacked out.

Last week, we wondered what might follow these intriguing words cited in the complaint: “... Mackey bluntly advised his board of directors of the purpose of the acquisition: ...” Several blacked-out lines followed, but we speculated they might have something to do with muting competition. Now, here are those missing lines: “By buying [Wild Oats] we will ... avoid nasty price wars in Portland (both Oregon and Maine), Boulder, Nashville, and several other cities, which will harm [Whole Foods’] gross margins and profitability. By buying [Wild Oats] ... we eliminate forever the possibility of Kroger, SuperValue [sic], or Safeway using their brand equity to launch a competing national natural/organic food chain to rival us ... [Wild Oats] may not be able to defeat us, but they can still hurt us ... [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.” (Ellipses follow the original.)

Let’s be generous and assume that Mackey was engaging in hyperbole to sell the idea of buying Wild Oats to his board. After all, it’s difficult to imagine that a union of Whole Foods and Wild Oats would forever foreclose the possibility that Super- valu, Kroger or Safeway could start a competing chain. In fact, little short of that is happening right now. But then, he stipulated the likelihood that tucking in Wild Oats would allow Whole Foods to avoid price competition in several markets. Finally, elsewhere in the complaint, he’s quoted as saying that conventional supermarkets are not significant competition even when they offer like product.

All this is exceedingly curious since Whole Foods

intends to argue in court that the proposed merger won’t lessen competition owing to conventional supermarkets’ addition of similar product. Indeed, the chain last week took the unusual step of adding to its website a section about the FTC challenge, which sets out that very argument. There, Mackey himself robustly excoriates FTC methods. This will likely be as counterproductive as it is naive (wholefoodsmarket.com/ftchearingupdates).

The site also links to a number of articles published in various media that earlier found the FTC action mystifying. Some reach toward conspiracy theories. One in the on-line magazine Slate is titled “Bush’s War on Whole Foods.” It postulates that liberals shop Whole Foods, so that’s what’s driving the FTC. Also linked is a lead Wall Street Journal

editorial suggesting that the FTC took action to demonstrate to Capitol Hill that “it’s on the job.” 

Actually, a far better conspiracy theory than these might be spun out of the fact that Democratic financier Rob Burkle has a large position in Wild Oats.