FTC Clears Way for Amazon Purchase of Whole Foods

On Wednesday, August 23, the Federal Trade Commission announced its determination that Amazon’s acquisition of more than 460 Whole Foods Market grocery stores would not harm competition, according to the New York Times.

In a statement, Bruce Hoffman, acting director of the FTC’s Bureau of Competition, said, “The FTC conducted an investigation of this proposed acquisition to determine whether it substantially lessened competition under Section 7 of the Clayton Act, or constituted an unfair method of competition under Section 5 of the FTC Act. Based on our investigation we have decided not to pursue this matter further. Of course, the FTC always has the ability to investigate anticompetitive conduct should such action be warranted.”

Whole Foods shareholders also approved the $13.7 billion deal on Wednesday. By Monday, Amazon began slashing prices as much as 43 percent at Whole Foods Markets, reported Bloomberg, and shares at grocery store chains have fluctuated significantly since Wednesday’s announcement. According to the Chicago Tribune, Kroger shares fell 8.1 percent Thursday before rising 2.8 percent Friday, and Costco’s shares fell 5 percent Thursday, before alternating between losses and gains. Overseas, shares of Royal Ahold Delhaize NV, which operates Giant Food and Food Lion, dropped 7.6 percent, while shares at Britain’s Tesco Plc. and France’s Carrefour SA fell, reported the Tribune.

In response to the merger, Stacy Mitchell, co-director of the Institute for Local Self-Reliance, said, “One day, we’ll come to view this as a watershed moment. Either we’ll look back and see it as the beginning of the end for economic liberty and open markets, or we’ll mark it as the tipping point that spurred a revival of America’s anti-monopoly movement. I’m cautiously optimistic that it will be the latter, in part because the reaction to this deal exceeded anything I would have predicted. Not only did a wide range of organizations and people voice serious concerns about Amazon’s growing dominance, including several members of Congress, but many Americans followed the news and started paying critical attention to Amazon for the first time.

“That critical attention comes at a moment when a growing number of economists and political leaders are beginning to connect the dots between high levels of corporate concentration and rising inequality and weak job growth.”

American Booksellers Association CEO Oren Teicher said, “Getting elected officials moving in the right direction — toward innovative, 21st-century solutions about antitrust enforcement and true consumer protection — won’t be easy. But as this merger makes clear, it’s an essential political fight. ABA remains committed to this effort, including our work as part of the Advocates for Independent Business (AIB). We will continue to vigorously make the case that no single mega-corporation should receive special treatment — or should be able to use its outsized clout to the long-term detriment of consumers and communities.”

After the proposed Amazon acquisition of Whole Foods was made public in mid-June, Rep. David Cicilline (D-RI), the ranking Democrat on the House Judiciary Antitrust Subcommittee, called for a hearing on the proposal.

The AIB echoed Cicilline’s call for a hearing in letters sent to Sen. Mike Lee (R-UT), Chair of the Subcommittee on Antitrust, Competition Policy and Consumer Rights; Sen. Amy Klobuchar (D-MN), the Senate subcommittee’s ranking member; Rep. Tom Marino (R-PA), Chair of the House Subcommittee on Regulatory Reform, Commercial and Antitrust Law; and Rep. Cicilline, the subcommittee’s ranking member.

In the letters, AIB wrote: “Amazon’s bid to buy Whole Foods would only expand the company’s control of commerce, and it would give Amazon new assets that it can leverage to increase its power to harm competition in online shopping. These include physical stores to add to its package delivery logistics network; a significant new source of customer data; and a major beachhead in the large and very pivotal grocery category.”

Open Markets, a project of New America, released a statement on Medium, commenting on the speed with which the Federal Trade Commission made its decision to allow the deal to go through. “The agency did not closely examine the full range of ways Amazon’s acquisition will undermine competition and harm the interests of the American public. 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 statement reads.

“Even if the FTC believes that prevailing interpretations of antitrust law prevent it from blocking this particular takeover, it should have initiated a broader investigation into Amazon’s practices aimed at helping Congress understand the need for new resources or legal tools. By instead swiftly blessing Amazon’s purchase, the FTC has helped solidify Amazon’s growing grip over many of the most vital arteries of America’s economy.”

According to estimates by stock research firm Cowen & Company, this deal will make Amazon and Whole Foods the fifth-largest grocery retailer in the U.S., the Times reported.