In 2007, Whole Foods, the popular purveyor of natural foods, sought to expand its business by acquiring rival grocer Wild Oats. However, the Federal Trade Commission claimed that the merger would violate antitrust laws by creating a natural foods monopoly. Although federal judges approved the deal, the FTC won an appeal a year later, after the merger was well under way, and now the case is set to go to trial in February. The company has already spent $17 million cooperating with the FTC and faces millions more in legal fees should the trial proceed. In response, Whole Foods has filed a lawsuit with the US District Court alleging that the FTC has “violated the company’s due process rights by setting a rapid schedule for the trial that won’t allow Whole Foods adequate time to prepare its defense” [see New York Times].
Why is the FTC concerned with how much market share Whole Foods would gain with the merger? While Whole Foods’ acquisition of Wild Oats created a much larger company, its larger size does not endow Whole Foods with the privilege or power to prevent competitors from entering the market. It must grow its business through investment and by offering a superior product to its customers. Its inability to exercise force preserves the freedom of other companies to enter or remain in the natural foods business. That Whole Foods will give them a run for their money does not deprive other companies of their freedom to make money. To wit, one year after the merger, other companies still vigorously compete with Whole Foods in the natural foods market.
On the other hand, consider the indisputable monopolies that exist in America today, those that actually bar entry into markets. Amtrak has a monopoly on passenger rail travel. The USPS system has a monopoly on the delivery of letters and access to mailboxes. Myriad companies have monopolies on electricity, water, and cable in cities across the country. In all cases, these monopolies create legal barriers to entry, eliminate even the possibility of competition, and abrogate the rights of potential entrepreneurs and customers to do business with whomever they please. As Ayn Rand poignantly observed, “Every coercive monopoly was created by government intervention into the economy: by special privileges, such as franchises or subsidies, which closed the entry of competitors into a given field, by legislative action.” Whereas Whole Foods has expanded its market share through voluntary transactions—i.e., by selling customers goods they want to buy and then investing those profits in the purchase of Wild Oats—these coercive monopolies were created by government edict and are maintained by government force. The FTC is both a product and an instrument of such coercion.
While government monopolies forbid freedom in the industries they dominate, the FTC works to thwart the freedom of innocent companies to engage in legitimate business practices, arbitrarily exercising its power to approve or reject business decisions. This is an affront to property rights, the foundations on which a free and prosperous economy is built. As such, the FTC has not violated merely Whole Foods’ right to due process—it has violated the company’s basic right to freely conduct its business as it sees fit. It is a travesty that Whole Foods has to sue the FTC to protect its right to defend itself in a trial the commission has no right to prosecute in the first place. People and companies will never be truly free to go about their business as long as the FTC and government monopolies stand in their way. That they exist at all is the real crime.