FTC v. Whole Foods Market, Inc.
Citation and Court
548 F.3d 1028 (D.C. Cir. 2008)
Facts
The FTC sought to block Whole Foods Market’s acquisition of Wild Oats Markets, arguing the merger would substantially lessen competition. The district court denied the preliminary injunction, finding the relevant market was conventional supermarkets broadly — in which Whole Foods had a small share. The FTC appealed.
Issue
Whether the relevant product market for antitrust purposes could be limited to “premium natural and organic supermarkets” (PNOS) rather than the broader conventional supermarket market.
Holding
The D.C. Circuit reversed, finding the FTC showed a likelihood of success on a narrow submarket theory. The relevant market could be limited to PNOS stores because a distinct group of “core” customers — those who strongly prefer natural/organic products — would not substitute to conventional supermarkets in response to a price increase.
Rule / Doctrine
A narrow submarket is cognizable under Brown Shoe if it exhibits distinct industry recognition, peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors. The key submarket question is whether a hypothetical monopolist could profitably raise prices to a defined set of customers who lack reasonable substitutes — here, core natural/organic shoppers.
Significance
Establishes that market definition turns on the purchasing behavior of the marginal customer within the submarket, not all potential customers. A brand or format can constitute a legally cognizable market even if it competes at the margins with a broader market. Frequently cited for the proposition that antitrust markets can be defined around a core group of customers who lack reasonable substitutes. See also Brown Shoe Co. v. United States.