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CNN reports that the US Federal Trade Commission (FTC), fresh from a victory last month in the U.S. Court of Appeals that said a lower court had erred in not issuing a temporary injunction that would have prevented the $565 million acquisition of Wild Oats by Whole Foods, is going ahead with plans for administrative hearings into the deal.

The FTC has long maintained that the combination of the two companies would hurt the competitive balance in the segment by allowing the nation’s two largest natural/organic chains to merge; proponents of the deal have argued that Whole Foods and Wild Oats are parts of the broader supermarket industry, in which many players sell natural and organic products.

While the Whole Foods-Wild Oats deal was completed a year ago, the FTC has continued to oppose it, with CNN noting that this leaves open “the possibility that it could try to halt further integration of the two companies or require Whole Foods to sell some operations … The FTC's latest order requires lawyers for Whole Foods to meet with the commission next week to set dates for full hearings on the merger, which would take place in front of an administrative law judge. If Whole Foods loses in the administrative proceedings before the commission, it could appeal to the federal courts.”

• Meanwhile, the New York Times this morning reports that days after Whole Food announced that it was pulling ground beef off its shelves in 24 states, the District of Columbia and Canada because of concerns about E. coli contamination, the retailer aid that it would increase and improve its oversight of suppliers.

As the Times notes, the supplier of the ground beef, Coleman Natural Beef, came under new ownership and “began using a slaughterhouse in Omaha that had received multiple citations and had fought a long-running battle with the Agriculture Department. The government has said the plant was the source of ground beef that has sickened scores of people around the country … Whole Foods acknowledged that a code stamped on beef packages arriving at its stores accurately reflected the change in processing plants. But the grocery chain said it had no procedures in place to watch the codes on arriving meat packages, and therefore failed to notice it was getting beef from a packing plant it had never approved.

“Whole Foods will immediately institute new procedures to detect such a change in the future, the chain said.”

• Finally, the Brooklyn Paper reports that Whole Foods is “revising” its plans for the first store the company planned to open in Brooklyn, though what exactly those revisions might be is anybody’s guess.

According to the paper, “The announcement of the revision came after the upscale food grocer announced it would reduce the number of stores it planned to open across the country due to the worsening economy … It’s the latest admission that the stalled supermarket is off track.”

KC's View:
At this point, you have to figure that the folks at Whole Foods are simply trying to run out the clock on the FTC, hoping that whoever wins the presidential election in November will replace the fools at the FTC who misguidedly continue to try and stop a deal that always made a lot of sense.

It isn’t like Whole Foods is stronger and more dominant now than it was a year ago. If anything, the company is going through some tough times…though, to be fair, those tough times probably have little to do with the merger with Wild Oats.

As the economy went south, Whole Foods wasn’t positioned right to deal with the financial challenges facing many of its customers. When the food safety issue erupted, Whole Foods found out that there was a hole in the safety net. And right now, the company is dealing with brand equity that has been tarnished a bit. The problems aren’t likely to be fatal, but they require some attention…

I will say this about Whole Foods. It is a big company with a big infrastructure. But its press releases and statements, especially about the food safety issue, read like they were co-written by some PR flack and a lawyer…and that probably does a disservice to both its customers and the company culture that attracted these shoppers to begin with. The company needs to eat some organic humble pie and get in front of this issue…and do so in an honest and forthright way that puts the customer’s needs and concerns first.

All in all, management at Whole Foods must be looking back fondly at those halcyon times when the biggest problem the brand had was CEO John Mackey doing some anonymous posting on Internet message boards. Those were the days…