Speedy Amazon-Whole Foods Approval Puts FTC Under Fire

Stay current on the latest developments from agencies including the CFPB, Federal Reserve, FDIC, and OCC to advise clients on real-life regulatory situations.

By Alexei Alexis

Critics of Amazon.com Inc.’s bid to acquire Whole Foods Market Inc. are faulting the Federal Trade Commission for clearing the $13.7 billion deal without a thorough probe.

The deal won quick FTC approval although it triggered a major public reaction when it was announced in June. After getting a green light from the FTC, the companies now expect to close the transaction the week of Aug. 28.

U.S. antitrust regulators are typically permissive toward such “vertical” deals involving companies that don’t compete directly. But Amazon’s decision to purchase Whole Foods is viewed by some — including public interest groups and members of Congress — as a case that warranted close scrutiny because of the company’s extraordinary online dominance.

“Examining such complicated issues is the FTC’s primary responsibility, and I will be calling on the FTC to provide an explanation for why they made such a quick decision regarding this merger,” Sen. Amy Klobuchar (D-Minn.), ranking member of the Senate Judiciary Committee’s antitrust subcommittee, said in a Aug. 25 statement. She said Amazon’s dominance in internet retail and wide access to consumer data “raises questions about whether this merger harms consumers and suppresses competition.”

A number of public interest groups saw the FTC’s brief investigation as a signal that their concerns weren’t taken seriously. They worry that the merger could adversely impact small grocery stores, existing Whole Foods jobs, and food delivery competitors, while allowing Amazon to tighten its grip on retail transactions in general.

“It was inappropriate for the FTC to rubber-stamp a deal of this scale and complexity,” Patrick Woodall, research director at Food and Water Watch, a Washington-based advocacy group, told Bloomberg BNA.

At a minimum, the FTC could have extended the merger review period with a “second request” for information, Woodall said. A second request is a formal step in the review process that, when sought by regulators, requires companies to divulge significant amounts of data to regulators. Merger reviews after a second request can stretch to a year or longer. The FTC approved the Amazon and Whole Foods deal within the 30-day window designed for simple mergers under antitrust law.

The companies originally filed their notice of the merger in June but withdrew and refiled in July to give the FTC additional time to consider the deal.

‘Cursory Look’

Stacy Mitchell, co-director of the Institute for Local Self-Reliance, an advocacy group for communities and independent businesses, said the speed with which the deal is moving forward is “amazing” given the concerns that were raised.

“The FTC apparently did a very cursory look and didn’t take the opportunity to think about how Amazon is impacting markets,” Mitchell told Bloomberg BNA.

The frustration is compounded by the fact that the FTC didn’t offer a full explanation of its decision, she said. The FTC typically doesn’t disclose the details of its probes.

Mitchell said her group will continue to contact lawmakers who are worried about Amazon and market concentration issues broadly. In addition to Klobuchar, the deal has prompted concerns from Rep. David Cicilline (D-R.I.), the ranking Democrat on the House Judiciary Committee’s antitrust subcommittee.

FTC spokeswoman Betsy Lordan said the agency didn’t have any comments beyond its brief public statement on Aug. 23 in which it announced that it would not be pursuing its investigation of the deal any further.

“Of course, the FTC always has the ability to investigate anticompetitive conduct should such action be warranted,” Bruce Hoffman, acting director of the FTC’s Bureau of Competition, said in the statement.

Lower Prices

Amazon and Whole Foods say their deal will immediately lead to consumer benefits, including lower prices on a number of Whole Foods products.

“We’re determined to make healthy and organic food affordable for everyone,” Jeff Wilke, CEO of Amazon Worldwide Consumer, said in an Aug. 24 statement.

Critics of the deal had wanted the FTC to look at factors beyond potential changes in food prices.

New America, a Washington think tank focused on new technologies, issued a statement blasting the FTC for failing to closely examine the full range of ways Amazon’s acquisition might undermine competition or harm consumers.

“This failure is part of a larger trend that strongly suggests the FTC does not fully grasp the realities of how competition works in 21st-century markets, where dominant platforms can entrench their power and use data in anticompetitive ways,” the group said.

Marc Perrone, president of the United Food and Commercial Workers International Union, said the deal remains a threat to workers and their families. The union has been among the most publicly aggressive opponents of the deal.

“Now that the FTC has allowed this deal to move forward, the hard-working men and women who make each Whole Foods store successful deserve a clear commitment from Amazon that their jobs, wages, and benefits will not be destroyed by a business model that puts automation above real people,” Perrone said in a statement.

To contact the reporter on this story: Alexei Alexis in Washington at aalexis@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Antitrust on Bloomberg Law