December 1st, 2008 | by KELLY CLARKE News | Posted In: CLEAN UP, CLEAN UP, CLEAN UP

UPDATED--Screw Market Share: Whole Foods subpoenas New Seasons' financial and marketing records.

Brian-Rohter

UPDATED TUESDAY, DEC. 2: Whole Foods just emailed me to respond to this post. The gist? Company media relations rep Libba Letton contends that the New Seasons subpoena, one of 96 subpoenas of third parties by Whole Foods, is totally NOT about eyeballing competitors info. It's about building a case against the FTC... Scroll down to read their full missive.

ORIGINAL MONDAY, DEC. 1 POST:

What the hell? Amidst all the reports of Wal-Mart carnage and gravy-induced comas last week, New Seasons head Brian Rohter posted a very local news bomb on the local grocery store's blog. It seems that Whole Foods' long-running battle with the Federal Trade Commission over whether the upscale market mega chain's merger with Wild Oats violates federal antitrust laws has had some unexpected consequences for the Portland-owned New Seasons , which operates nine stores in and around the Rose City.

Basically, Whole Foods (270 stores and counting) is using their lawsuit as an opportunity to subpoena New Seasons' financial and marketing records. In Battlestar Galactica terms (new episodes January 16!), they're pretty much demanding a direct download, Cylon-style, from New Seasons' Resurrection ship. Which is soooo not cool.

Here's a snippet of Rohter's post:
As it turns out, because of their legal dispute with the FTC, Whole Foods has an opportunity to try and force us to give them copies of some of our most confidential financial records – for instance what our sales are, week by week, at each of our stores. They've also demanded all of our files that detail our strategic plans, all of our marketing plans and all of our studies about where we are considering opening new stores. You can see the entire subpoena here , and below is a partial list of what they're trying to get (quoted directly from the subpoena):

3. All documents relating to Whole Food's acquisition of Wild Oats, including documents discussing the effect of the merger on you.

4. All documents discussing competition with Whole Foods or Wild Oats, including responses by you to a new Whole Foods or Wild Oats store and responses by you to prices, product selection, quality, or services at Whole Foods or Wild Oats stores.

5. All market studies, strategic plans or competition analyses relating to competition in each Geographic Area, including documents discussing market shares.

6. All market studies, strategic plans or competition analyses relating to the sale of natural and organic products, including the sale of natural and organic products in your stores.

7. All documents relating to your plans to increase the shelf space at your stores allocated to natural and organic products, the number of natural and organic products sold in your stores, or the sales of natural or organic products in your stores.

8. All documents discussing your plans to renovate or improve your stores to sell additional natural and organic products or to open stores emphasizing natural and organic products.

9. Provide documents sufficient to show, or in the alternative submit a spread sheet showing: (a) the store name and address of each of your stores separately in each Geographic Area; and (b) for each store provide the total weekly sales for each week since January 1, 2006 to the current date .

Daaaamn.

And exactly what right does Whole Foods have to demand all this info? I'm guessing that the chain is using New Seasons as an example of other competing upscale, organic and natural foods-friendly grocers in the marketplace, although I don't exactly know how a one-state operation honestly stacks up with a company with outposts all over the states and England and a payroll of more than 50,000 workers. Perhaps I'm missing something here. When I find a lawyer—who won't charge me anything—to explain it to me, I'll get back to you.

According to Rohter, Whole Foods swears that the info is for its lawyers —and not for anybody else in the Whole Foods organization. "That's like trusting the fox to guard the henhouse – and we don't have any faith it's going to work like that," Rohter writes. "I'm sorry to say this, but some of the people at Whole Foods have a history of less than stellar behavior when it comes to competing fairly."

Uh, he'd be referring to the infamous Whole Food CEO fake name/blogging fiasco among other red alerts.

New Seasons has filed a motion with the FTC (check it out ), and is already "running up whopping legal bills in the process," according to the post. If they lose the case they'll have to turn the info over to Whole Foods or face hefty fines and perhaps jail time.

UPDATED TUESDAY, DEC. 2: Whole Foods just emailed me this statement responding to this post and the New Season subpoena:
December 2, 2008

Whole Foods Market continues to defend itself against the FTC's ongoing effort to challenge the Whole Foods Market/Wild Oats merger. Part of that defense is gathering information from third parties through subpoenas, mostly from competing retailers but also from some vendors who supply Whole Foods Market.

This is absolutely NOT an attempt to look into competitors' information. Rather, it is something our counsel must do so that they can defend Whole Foods Market against the FTC's overreaching complaint. New Seasons is but one of 96 third parties that outside counsel has subpoenaed. The FTC has targeted Whole Foods Market in 29 different markets, and the company must now defend in each of those 29 markets against the claim that it does not face substantial competition from other supermarkets.

It is important to understand that no competitor will be disadvantaged by complying with the subpoena because all responses are subject to an FTC-issued protective order. The protective order precludes any of this information from being shared with any WFM employee,including in-house counsel. Only outside counsel and their consultants can see this information. Subpoenas and protective orders are a standard part of litigation practiced in virtually every antitrust case in the United States.

If is unfortunate that the FTC's ongoing pursuit to affect a merger that was consummated more than a year ago and is now complete continues to be burdensome to Whole Foods Market, third parties, and U.S. taxpayers.

Still, Uwajimaya , if you're still thinking of building that Chinatown outpost, watch yer back.

Image of Brian Rohter courtesy of newseasonsmarket.com.

A big thanks to Darryl for the heads up on the New Seasons post.
 
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