A lawyer for Whole Foods Markets wfmi Tuesday sought to discredit a government analysis that concluded its proposed acquisition of rival Wild Oats Markets oats would be bad for consumers.
The Federal Trade Commission has filed suit in the U.S. District Court for the District of Columbia to block the deal.
Paul Friedman, Whole Foods' attorney, argued during the opening of a two-day court hearing that an expert witness called by the FTC did not consider relevant economic data, such as changes in prices at Whole Foods stores after Wild Oats exited several markets where the two companies competed.
Such pricing data could show whether Wild Oats acts as a constraint on Whole Foods' ability to raise prices. Whether a transaction will give a combined company greater pricing power is a key question in antitrust law. Whole Foods is arguing that the FTC's antitrust case is weaker without such data.
The government's witness, Kevin Murphy, a professor at the University of Chicago, said that the available pricing data are inadequate. For example, in December 2006 Wild Oats closed a store in Fort Collins, Colo., that competed with a Whole Foods store, Murphy said, but there hasn't been sufficient time since then to determine how the move affected prices at Whole Foods.
Friedman questioned Murphy on expert testimony he provided to the court in writing. Murphy's testimony remains under seal.
Whole Food's effort to buy Wild Oats has attracted widespread attention due to the internal e-mails and online postings of the company's outspoken chief executive, John Mackey.
An e-mail sent by Mackey to Whole Foods' board of directors in February — in which Mackey says the deal would enable the company to "avoid nasty price wars" — is a key part of the FTC's case.
A central issue in the case is how broadly Whole Foods' competition is defined. The FTC argues that Whole Foods and Wild Oats are leading competitors in a specific market of natural and organic food retailers, and a combination of the two will lead to reduced service and quality increased prices.
Whole Foods and Wild Oats counter that they face competition from large supermarket chains that sell increasing amounts of organic goods, such as Safeway swy, Kroger kr and even Wal-Mart wmt.
Whole Foods said in February that it would pay approximately $565 million, or $18.50 a share, for its Boulder, Colo.-based rival — a 17% premium at the time. That price is significantly above Wild Oats' closing price of $15.50 Monday, indicating that the market is skeptical of the deal's chances.