WASHINGTON (AP) _ An appeals court panel of three judges appeared split Wednesday on federal regulators' persistent effort to halt Whole Foods Market Inc.'s takeover of a rival.
The Federal Trade Commission tried to block Whole Foods' acquisition of Boulder, Colo.-based Wild Oats last year, arguing that it would stifle competition and harm consumers. But a federal district court judge rejected the agency's request in August and the two stores closed the deal later that month.
The FTC's appeal of that ruling is unusual because antitrust regulators usually throw in the towel after the courts clear a transaction, since acquisitions can be difficult to unwind.
Judge David Tatel of the U.S. Court of Appeals for the D.C. Circuit expressed some sympathy for the FTC's arguments that the district court had applied an incorrect legal standard when it greenlighted the deal, and failed to consider all the evidence presented by the agency.
Several studies presented by the FTC "just aren't mentioned in the district court's opinion," Tatel said.
But Judge Brett Kavanaugh appeared to accept that the district court applied the proper legal standard.
When Marilyn Kerst, the FTC's lawyer, told the panel that the district court had imposed a higher burden of proof on the agency than required, Kavanaugh responded, "That's not a fair characterization."
Judge Janice Rogers Brown asked few questions.
None of the judges addressed the issue of how the now-combined company could be broken up or what other steps would be in order, such as the sale of some Wild Oats stores, if the district court's ruling is overturned.
Instead, most of the hearing consisted of rehashing arguments about the transaction itself. The government contends that Austin, Texas-based Whole Foods and Wild Oats competed in a distinct market of "premium natural and organic supermarkets" and would be able to raise prices after combining their operations.
Whole Foods' lawyer, Paul Denis, reiterated the company's assertion that it competes against a much broader market that includes conventional supermarkets, such as Safeway Inc., and wouldn't be able to raise prices or reduce services to customers.
"We believe the case is moot at this point," Denis told reporters after the hearing. "Wild Oats as a company doesn't exist anymore."
Whole Foods has already sold 35 of Wild Oats' 109 stores, Denis said, and closed 12 more. About a third of the remaining 62 Wild Oats stores have been converted to Whole Foods outlets, he said.
Whole Foods operated 194 stores before acquiring Wild Oats.
The FTC said in court filings that it still has time to order the combined company to sell stores or other assets to protect competition, if the appeals court rules in its favor. The FTC would have to begin additional legal proceedings to take such a step.
A spokeswoman for the FTC declined to comment after the hearing.
There isn't any timeline for the appeals court to rule. The panel could deny the FTC's appeal or send the decision back to the district court for further consideration.
The government's efforts to block the transaction last year spurred Whole Foods' chief executive, John Mackey, to criticize the agency in a long post on the company's blog. E-mails Mackey sent to his board, arguing that the purchase of Wild Oats would avoid "nasty price wars," became part of the agency's case against the deal.
Shares of Whole Foods rose 39 cents to close at $32.59 Wednesday.
Copyright 2008 The Associated Press.