Whole Foods 2008 Annual Report Download - page 63

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On July 29, 2008, the United States Court of Appeals for the District of Columbia Circuit reversed the August 16, 2007
decision of the United States District Court for the District of Columbia which had denied the Federal Trade Commission's
("FTC") motion for a preliminary injunction against the acquisition of Wild Oats Markets by Whole Foods Market, and
remanded the case to the District Court for further proceedings consistent with the appellate decision. On the same day, the
Court of Appeals issued an Order directing the Clerk of the Court of Appeals to withhold issuance of the mandate in the case
until seven days after disposition of any timely petition for rehearing or petition for rehearing en banc. On August 26, 2008,
Whole Foods Market filed a petition for a rehearing en banc with the Court of Appeals, to which the Court of Appeals
ordered the FTC to respond. The FTC opposed the petition. Subsequent to year end, on October 6, 2008, Whole Foods
Market filed a motion for leave to file a reply to the FTC's opposition to the petition for rehearing en banc, which motion the
FTC also opposed. On November 21, 2008 the Court of Appeals denied Whole Foods Market's petition for a rehearing en
banc, amended its earlier opinion and remanded the case to the District Court for further proceedings. On remand the FTC
may renew its motion for some preliminary injunctive relief pending resolution of the administrative action.
On August 8, 2008, the FTC issued an Order rescinding the stay of its administrative proceeding against Whole Foods
Market. The FTC had previously filed a complaint commencing its administrative proceeding on June 28, 2007 but had
stayed the proceeding on its own motion pending resolution of the federal court proceedings related to the merger. . On
September 8, 2008, the FTC issued an Amended Compliant in its administrative proceedings changing the relevant
geographic markets and changing the notice of contemplated relief indicating that, should the FTC prevail in its
administrative proceeding, it would seek relief against Whole Foods Market, which could include (i) an order preventing
Whole Foods from consolidating any Wild Oats stores into the Whole Foods system to the extent such consolidation has not
occurred at the time of the Commission’s decision; (ii) an order preventing Whole Foods from selling or disposing of any
owned or leased property that had been used as a Wild Oats store in any geographic market, or a Whole Foods store in any
relevant geographic market; (iii) an order preventing Whole Foods from discontinuing the use of the Wild Oats name at any
store being operated as Wild Oats at the time of the Commission’s decision; (iv) re-establishment of Wild Oats stores, with
Whole Foods stores added as necessary, along with any associated or necessary assets in a manner that creates a group or
system of stores that may be available for divestiture, including, but not limited to, re-opening closed Wild Oats stores, re-
naming Wild Oats stores that had been changed to the Whole Foods name, reversing any consolidation of Wild Oats stores
into the Whole Foods system and re-establishing the Wild Oats system, and re-establishing Wild Oats’ distribution
arrangements, private label products and supplier relationships; (v) the divestiture of Wild Oats stores, and Whole Foods
stores, and any other associated or necessary assets, including the Wild Oats name, distribution systems or assets, and
supplier relationships, in a manner that restores Wild Oats as a viable, independent competitor in the relevant markets, with
the ability to offer such services as Wild Oats had offered prior to its acquisition by Whole Foods; (vi) maintenance of the
Wild Oats stores pending divestiture, including operating the stores in the ordinary course and maintaining the inventory of
the stores, the hours of operation of the stores and of each department in the stores; (vii) appointment of a monitor, or a
divestiture trustee, to assure that the Wild Oats, Whole Foods, and related assets are re-established and divested within the
time set forth in the Commission’s decision; (viii) a requirement that, for a period of time, Whole Foods provide prior notice
to the Commission of acquisitions, mergers, consolidations, or any other combinations of its operations with any other
company providing the operation of premium and natural organic supermarkets; (ix) a requirement for Whole Foods to file
periodic compliance reports with the Commission; and (x) any other relief appropriate to correct or remedy the
anticompetitive effects of the transaction or to restore Wild Oats as a viable, independent competitor in the relevant markets.
On September 10, 2008, the FTC issued the Scheduling Order for this matter. The trial is scheduled to commence on
February 16, 2009 and will take no more than thirty full trial days. Subsequent to year end, on October 20, 2008, the FTC
designated Acting Chief Administrative Law Judge D. Michael Chappell as the Administrative Law Judge for this matter.
Subsequent to year end, on October 27, 2008, Whole Foods Market was served with the complaint in Kottaras v. Whole
Foods Market, Inc., a putative class action filed in the United States District Court for the District of Columbia, seeking
treble damages, equitable, injunctive, and declaratory relief and alleging that the acquisition and merger between Whole
Foods Market and Wild Oats violates various provisions of the federal antitrust laws.
Whole Foods Market cannot at this time predict the likely outcome of these judicial and administrative proceedings or assess
the financial implications of any judgment or order that may arise from them.
During fiscal year 2008, the Company incurred approximately $2.5 million in legal costs related to the FTC lawsuit which
are included on the accompanying Consolidated Statements of Operations under the caption “General and administrative
expenses.”