Federal Trade Commission v. Whole Foods Market, Inc.

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 23, 2008 Decided July 29, 2008
Amended and Reissued November 21, 2008

No. 07-5276

FEDERAL TRADE COMMISSION,
APPELLANT

v.

WHOLE FOODS MARKET, INC., ET AL.,
APPELLEES

Appeal from the United States District Court
for the District of Columbia
(No. 07cv01021)

Marilyn E. Kerst, Attorney, Federal Trade Commission,
argued the cause for appellant. With her on the briefs were
John F. Daly, Deputy General Counsel, and Richard B.
Dagen and Thomas H. Brock, Attorneys.

Paul T. Denis argued the cause for appellees. With him
on the brief were Paul H. Friedman, Nory Miller, and
Rebecca Dick. Clifford H. Aronson and Alden L. Atkins
entered appearances.

David A. Balto was on the brief for amici curiae
American Antitrust Institute, et al. in support of appellant.
 2
Albert A. Foer was on the brief for amicus curiae
American Antitrust Institute in support of appellant.

Before: TATEL, BROWN, and KAVANAUGH, Circuit
Judges.

Judgment of the Court filed by Circuit Judge BROWN.

Opinion filed by Circuit Judge BROWN.

Opinion concurring in the judgment filed by Circuit
Judge TATEL.

Dissenting opinion filed by Circuit Judge KAVANAUGH.

BROWN, Circuit Judge: The FTC sought a preliminary
injunction, under 15 U.S.C. § 53(b), to block the merger of
Whole Foods and Wild Oats. It appeals the district court’s
denial of the injunction. I conclude the district court should
be reversed, though I do so reluctantly, admiring the
thoughtful opinion the district court produced under trying
circumstances in which the defendants were rushing to a
financing deadline and the FTC presented, at best, poorly
explained evidence. Nevertheless, the district court
committed legal error in assuming market definition must
depend on marginal consumers; consequently, it
underestimated the FTC’s likelihood of success on the merits.

I

Whole Foods Market, Inc. (“Whole Foods”) and Wild
Oats Markets, Inc. (“Wild Oats”) operate 194 and 110 grocery
stores, respectively, primarily in the United States. In
February 2007, they announced that Whole Foods would
acquire Wild Oats in a transaction closing before August 31,
 3
2007. They notified the FTC, as the Hart-Scott-Rodino Act
required for the $565 million merger, and the FTC
investigated the merger through a series of hearings and
document requests. On June 6, 2007, the FTC sought a
temporary restraining order and preliminary injunction to
block the merger temporarily while the FTC conducted an
administrative proceeding to decide whether to block it
permanently under § 7 of the Clayton Act. The parties
conducted expedited discovery, and the district court held a
hearing on July 31 and August 1, 2007.

The FTC contended Whole Foods and Wild Oats are the
two largest operators of what it called premium, natural, and
organic supermarkets (“PNOS”). Such stores “focus on high-
quality perishables, specialty and natural organic produce,
prepared foods, meat, fish[,] and bakery goods; generally
have high levels of customer services; generally target
affluent and well educated customers [and] . . . are mission
driven with an emphasis on social and environmental
responsibility.” FTC v. Whole Foods Market, Inc., 502 F.
Supp. 2d 1, 28 (D.D.C. 2007). In eighteen cities, asserted the
FTC, the merger would create monopolies because Whole
Foods and Wild Oats are the only PNOS. To support this
claim, the FTC relied on emails Whole Foods’s CEO John
Mackey sent to other Whole Foods executives and directors,
suggesting the purpose of the merger was to eliminate a
competitor. In addition the FTC produced pseudonymous
blog postings in which Mr. Mackey touted Whole Foods and
denigrated other supermarkets as unable to compete. The
FTC’s expert economist, Dr. Kevin Murphy, analyzed sales
data from the companies to show how entry by various
supermarkets into a local market affected sales at a Whole
Foods or Wild Oats store.
 4
On the other hand, the defendants’ expert, Dr. David
Scheffman, focused on whether a hypothetical monopolist
owning both Whole Foods and Wild Oats would actually have
power over a distinct market. He used various third-party
market studies to predict that such an owner could not raise
prices without driving customers to other supermarkets. In
addition, deposition testimony from other supermarkets
indicated they regarded Whole Foods and Wild Oats as
critical competition. Internal documents from the two
defendants reflected their extensive monitoring of other
supermarkets’ prices as well as each other’s.

The district court concluded that PNOS was not a distinct
market and that Whole Foods and Wild Oats compete within
the broader market of grocery stores and supermarkets.
Believing such a basic failure doomed any chance of the
FTC’s success, the court denied the preliminary injunction
without considering the balance of the equities.

On August 17, the FTC filed an emergency motion for an
injunction pending appeal, which this court denied on August
23. FTC v. Whole Foods Market, Inc., No. 07-5276 (D.C.
Cir. Aug. 23, 2007). Freed to proceed, Whole Foods and
Wild Oats consummated their merger on August 28. The
dissent argues that a reversal today contradicts this earlier
decision, but our standard of review then was very different,
requiring the FTC to show “such a substantial indication of
probable success” that there would be “justification for the
court’s intrusion into the ordinary processes of . . . judicial
review.” Wash. Metro. Area Transit Comm’n v. Holiday
Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977). It is hardly
remarkable that the FTC could fail to meet such a stringent
standard and yet persuasively show the district court erred in
applying the much less demanding § 53(b) preliminary
injunction standard.
 5
II

At the threshold, Whole Foods questions our jurisdiction
to hear this appeal. The merger is a fait accompli, and Whole
Foods has already closed some Wild Oats stores and sold
others. In addition, Whole Foods has sold two complete lines
of stores, Sun Harvest and Harvey’s, as well as some
unspecified distribution facilities. Therefore, argues Whole
Foods, the transaction is irreversible and the FTC’s request
for an injunction blocking it is moot.

Only in a rare case would we agree a transaction is truly
irreversible, for the courts are “clothed with large discretion”
to create remedies “effective to redress [antitrust] violations
and to restore competition.” Ford Motor Co. v. United States,
405 U.S. 562, 573 (1972). Indeed, “divestiture is a common
form of relief” from unlawful mergers. United States v.
Microsoft Corp., 253 F.3d 34, 105 (D.C. Cir. 2001) (en banc).
Further, an antitrust violator “may . . . be required to do more
than return the market to the status quo ante.” Ford Motor,
405 U.S. at 573 n.8. Courts may not only order divestiture
but may also order relief “designed to give the divested [firm]
an opportunity to establish its competitive position.” Id. at
575. Even remedies which “entail harsh consequences”
would be appropriate to ameliorate the harm to competition
from an antitrust violation. United States v. E.I. du Pont de
Nemours & Co., 366 U.S. 316, 327 (1961).

Of course, neither court nor agency has found Whole
Foods’s acquisition of Wild Oats to be unlawful. Therefore,
the FTC may not yet claim the right to have any remedy
necessary to undo the effects of the merger, as it could after
such a determination, du Pont, 366 U.S. at 334. But the
whole point of a preliminary injunction is to avoid the need
for intrusive relief later, since even with the considerable
 6
flexibility of equitable relief, the difficulty of “unscrambl[ing]
merged assets” often precludes “an effective order of
divestiture,” FTC v. Dean Foods Co., 384 U.S. 597, 607 n.5
(1966). Section 53(b), codifying the ability of the FTC to
obtain preliminary relief, FTC v. Weyerhaeuser Co., 665 F.2d
1072, 1082 (D.C. Cir. 1981), preserves the “flexibility” of
traditional “equity practice,” id. at 1084. At a minimum, the
courts retain the power to preserve the status quo nunc, for
example by means of a hold separate order, id., and perhaps
also to restore the status quo ante.

Thus, the courts have the power to grant relief on the
FTC’s complaint, despite the merger’s having taken place,
and this case is therefore not moot. See Byrd v. EPA, 174
F.3d 239, 244 (D.C. Cir. 1999) (“The availability of a partial
remedy is sufficient to prevent [a] case from being moot.”).
The fact that Whole Foods has sold some of Wild Oats’s
assets does not change our conclusion. To be sure, we have
no “authority to command return to the status quo,”
Weyerhaeuser, 665 F.2d at 1077, in a literal way by forcing
absent parties to sell those assets back to Whole Foods, but
there is no reason to think that inability prevents us from
mitigating the merger’s alleged harm to competition. The
stores Whole Foods has sold are only those under the
Harvey’s and Sun Harvest labels, which were never relevant
to the anticompetitive harm the FTC fears. Our inability to
command their return does not limit the relief available to the
FTC. As to the distribution facilities, neither party has
described what they are, suggested Wild Oats would not be a
viable competitor without them, or explained why the district
court could not order some provisional substitute. Moreover,
the FTC is concerned about eighteen different local markets.
If, as appears to be the situation, it remains possible to reopen
or preserve a Wild Oats store in just one of those markets,
 7
such a result would at least give the FTC a chance to prevent
a § 7 violation in that market.

III

“We review a district court order denying preliminary
injunctive relief for abuse of discretion.” FTC v. H.J. Heinz
Co., 246 F.3d 708, 713 (D.C. Cir. 2001). However, if the
district court’s decision “rests on an erroneous premise as to
the pertinent law,” we will review the denial de novo “in light
of the legal principles we believe proper and sound.” Id.

Despite some ambiguity, the district court applied the
correct legal standard to the FTC’s request for a preliminary
injunction. The FTC sought relief under 15 U.S.C. § 53(b),
which allows a district court to grant preliminary relief
“[u]pon a proper showing that, weighing the equities and
considering the Commission’s likelihood of ultimate success,
such action would be in the public interest.” The relief is
temporary and must dissolve if more than twenty days pass
without an FTC complaint. Id. Congress recognized the
traditional four-part equity standard for obtaining an
injunction was “not appropriate for the implementation of a
Federal statute by an independent regulatory agency.” Heinz,
246 F.3d at 714. Therefore, to obtain a § 53(b) preliminary
injunction, the FTC need not show any irreparable harm, and
the “private equities” alone cannot override the FTC’s
showing of likelihood of success. Weyerhaeuser, 665 F.2d at
1082–83.

In deciding the FTC’s request for a preliminary
injunction blocking a merger under § 53(b), a district court
must balance the likelihood of the FTC’s success against the
equities, under a sliding scale. See Heinz, 246 F.3d at 727;
FTC v. Elders Grain, Inc., 868 F.2d 901, 903 (7th Cir. 1989).
 8
The equities will often weigh in favor of the FTC, since “the
public interest in effective enforcement of the antitrust laws”
was Congress’s specific “public equity consideration” in
enacting the provision. Heinz, 246 F.3d at 726. Therefore,
the FTC will usually be able to obtain a preliminary
injunction blocking a merger by “rais[ing] questions going to
the merits so serious, substantial, difficult[,] and doubtful as
to make them fair ground for thorough investigation.” Heinz,
246 F.3d at 714–15. By meeting this standard, the FTC
“creates a presumption in favor of preliminary injunctive
relief,” id. at 726; but the merging parties may rebut that
presumption, requiring the FTC to demonstrate a greater
likelihood of success, by showing equities weighing in favor
of the merger, Weyerhaeuser, 665 F.2d at 1087. Conversely,
a greater likelihood of the FTC’s success will militate for a
preliminary injunction unless particularly strong equities
favor the merging parties. See Heinz, 246 F.3d at 727; Elders
Grain, 868 F.2d at 903.

In any case, a district court must not require the FTC to
prove the merits, because, in a § 53(b) preliminary injunction
proceeding, a court “is not authorized to determine whether
the antitrust laws . . . are about to be violated.” FTC v. Food
Town Stores, Inc., 539 F.2d 1339, 1342 (4th Cir. 1976). That
responsibility lies with the FTC. Id. Not that the court may
simply rubber-stamp an injunction whenever the FTC
provides some threshold evidence; it must “exercise
independent judgment” about the questions § 53(b) commits
to it. Weyerhaeuser, 665 F.2d at 1082. Thus, the district
court must evaluate the FTC’s chance of success on the basis
of all the evidence before it, from the defendants as well as
from the FTC. See FTC v. Beatrice Foods Co., 587 F.2d
1225, 1229–30 (D.C. Cir. 1978) (App’x to Stmt. of
MacKinnon & Robb, JJ.) (“[W]e are also required to consider
the inroads that the appellees’ extensive showing has made
 9
. . . [S]everal basic contentions of the FTC are called into
serious question.”). The district court should bear in mind the
FTC will be entitled to a presumption against the merger on
the merits, see Elders Grain, 868 F.2d at 906, and therefore
does not need detailed evidence of anticompetitive effect at
this preliminary phase. Nevertheless, the merging parties are
entitled to oppose a § 53(b) preliminary injunction with their
own evidence, and that evidence may force the FTC to
respond with a more substantial showing.

The district court did not apply the sliding scale, instead
declining to consider the equities. To be consistent with the
§ 53(b) standard, this decision must have rested on a
conviction the FTC entirely failed to show a likelihood of
success. Indeed, the court concluded “the relevant product
market in this case is not premium natural and organic
supermarkets . . . as argued by the FTC but . . . at least all
supermarkets.” Whole Foods, 502 F. Supp. 2d at 34. It also
observed that several supermarkets “have already repositioned
themselves to compete vigorously with Whole Foods and
Wild Oats for the consumers’ premium natural and organic
food business.” Id. at 48. Thus, considering the defendants’
evidence as well as the FTC’s, as it was obligated to do, the
court was in no doubt that this merger would not substantially
lessen competition, because it found the evidence proved
Whole Foods and Wild Oats compete among supermarkets
generally. If, and only if, the district court’s certainty was
justified, it was appropriate for the court not to balance the
likelihood of the FTC’s success against the equities.

IV

However, the court’s conclusion was in error. The FTC
contends the district court abused its discretion in two ways:
first, by treating market definition as a threshold issue; and
 10
second, by ignoring the FTC’s main evidence. The district
court acted reasonably in focusing on the market definition,
but it analyzed the product market incorrectly.

A

First, the FTC complains the district court improperly
focused on whether Whole Foods and Wild Oats operate
within a PNOS market. However, this was not an abuse of
discretion given that the district court was simply following
the FTC’s outline of the case.

Inexplicably, the FTC now asserts a market definition is
not necessary in a § 7 case, Appellant’s Br. 37–38, in
contravention of the statute itself, see 15 U.S.C. § 18 (barring
an acquisition “where in any line of commerce . . . the effect
of such acquisition may be substantially to lessen
competition”); see also Brown Shoe Co. v. United States, 370
U.S. 294, 324 (1962) (interpreting “any line of commerce” to
require a “determination of the relevant market” to find “a
violation of the Clayton Act”); Elders Grain, 868 F.2d at 906
(“[A]ll this assumes a properly defined market.”). The FTC
suggests “market definition . . . is a means to an end—to
enable some measurement of market power—not an end in
itself.” Appellant’s Br. 38 n.26. But measuring market power
is not the only purpose of a market definition; only
“examination of the particular market—its structure, history[,]
and probable future—can provide the appropriate setting for
judging the probable anticompetitive effect of the merger.”
Brown Shoe, 370 U.S. at 322 n.38.

That is not to say market definition will always be crucial
to the FTC’s likelihood of success on the merits. Nor does
the FTC necessarily need to settle on a market defintion at
this preliminary stage. Although the framework we have
 11
developed for a prima facie § 7 case rests on defining a
market and showing undue concentration in that market,
United States v. Baker Hughes Inc., 908 F.2d 981, 982–83
(D.C. Cir. 1990), this analytical structure does not exhaust the
possible ways to prove a § 7 violation on the merits, see, e.g.,
United States v. El Paso Natural Gas Co., 376 U.S. 651, 660
(1964), much less the ways to demonstrate a likelihood of
success on the merits in a preliminary proceeding.
Section 53(b) preliminary injunctions are meant to be readily
available to preserve the status quo while the FTC develops
its ultimate case, and it is quite conceivable that the FTC
might need to seek such relief before it has settled on the
scope of the product or geographic markets implicated by a
merger. For example, the FTC may have alternate theories of
the merger’s anticompetitive harm, depending on inconsistent
market definitions. While on the merits, the FTC would have
to proceed with only one of those theories, at this preliminary
phase it just has to raise substantial doubts about a
transaction. One may have such doubts without knowing
exactly what arguments will eventually prevail.1 Therefore, a
district court’s assessment of the FTC’s chances will not
depend, in every case, on a threshold matter of market
definition.

1
For example, a merger between two close competitors can
sometimes raise antitrust concerns due to unilateral effects in highly
differentiated markets. See generally Horizontal Merger
Guidelines, 57 Fed. Reg. 41,552, 41,560–61, § 2.2 (1992). In such
a situation, it might not be necessary to understand the market
definition to conclude a preliminary injunction should issue. The
FTC alludes to this theory on appeal, but to the district court it
argued simply that the merger would result in a highly concentrated
PNOS market.
 12
In this case, however, the FTC itself made market
definition key. It claimed “[t]he operation of premium natural
and organic supermarkets is a distinct ‘line of commerce’
within the meaning of Section 7,” and its theory of
anticompetitive effect was that the merger would
“substantially increase concentration in the operation of
[PNOS].” Compl. ¶¶ 34, 43. Throughout its briefs, the FTC
presented a straightforward § 7 case in which “whether the
transaction creates an appreciable danger of anticompetitive
effects . . . depends upon . . . [the] relevant product . . . [and]
geographic market . . . and the transaction’s probable effect
on competition in the product and geographic markets.”
FTC’s Br. Mot. Prelim. Inj. 11–12. It purported to show
“undue concentration in the relevant market,” as the mainstay
of its case. Id. at 12. Because of the concentration in the
supposed PNOS market, the FTC urged the district court to
hold the merger “presumptively unlawful,” and this was its
sole reason for blocking the merger. FTC’s Proposed
Conclusions of Law ¶¶ 57–63, 99–108. At oral argument, the
FTC’s counsel suggested it had other ideas about the
anticompetitive effect of the merger even if its PNOS market
definition is wrong; but the FTC never offered those ideas to
the district court. It is incumbent on the parties to shape a
case, and it was hardly an abuse of discretion for the district
court to focus on the questions as the FTC presented them.

B

Thus, the FTC assumed the burden of raising some
question of whether PNOS is a well-defined market. As the
FTC presented its case, success turned on whether there exist
core customers, committed to PNOS, for whom one should
consider PNOS a relevant market. The district court assumed
“the ‘marginal’ consumer, not the so-called ‘core’ or
‘committed’ consumer, must be the focus of any antitrust
 13
analysis.” Whole Foods, 502 F. Supp. 2d at 17 (citing
Horizontal Merger Guidelines, 57 Fed. Reg. 41,552 (1992)).
To the contrary, core consumers can, in appropriate
circumstances, be worthy of antitrust protection. See
Horizontal Merger Guidelines § 1.12, 57 Fed. Reg. at 41,555
(explaining the possibility of price discrimination for
“targeted buyers”). The district court’s error of law led it to
ignore FTC evidence that strongly suggested Whole Foods
and Wild Oats compete for core consumers within a PNOS
market, even if they also compete on individual products for
marginal consumers in the broader market. See, e.g.,
Appellant’s Br. 50, 53.

A market “must include all products reasonably
interchangeable by consumers for the same purposes.”
Microsoft, 253 F.3d at 52. Whether one product is reasonably
interchangeable for another depends not only on the ease and
speed with which customers can substitute it and the
desirability of doing so, see id. at 53–54, but also on the cost
of substitution, which depends most sensitively on the price of
the products. A broad market may also contain relevant
submarkets which themselves “constitute product markets for
antitrust purposes.” Brown Shoe, 370 U.S. at 325. “The
boundaries of such a submarket may be determined by
examining such practical indicia as industry or public
recognition of the submarket as a separate economic entity,
the product’s peculiar characteristics and uses, unique
production facilities, distinct customers, distinct prices,
sensitivity to price changes, and specialized vendors.” Id.

To facilitate this analysis, the Department of Justice and
the FTC developed a technique called the SSNIP (“small but
significant non-transitory increase in price”) test, which both
Dr. Murphy and Dr. Scheffman used. In the SSNIP method,
one asks whether a hypothetical monopolist controlling all
 14
suppliers in the proposed market could profit from a small
price increase. Horizontal Merger Guidelines § 1.11, 57 Fed.
Reg. at 41,560–61. If a small price increase would drive
consumers to an alternative product, then that product must be
reasonably substitutable for those in the proposed market and
must therefore be part of the market, properly defined. Id.

Experts for the two sides disagreed about how to do the
SSNIP of the proposed PNOS market. Dr. Scheffman used a
method called critical loss analysis, in which he predicted the
loss that would result when marginal customers shifted
purchases to conventional supermarkets in response to a
SSNIP.2 Whole Foods, 502 F. Supp. 2d at 18. He concluded
a hypothetical monopolist could not profit from a SSNIP, so
that conventional supermarkets must be within the same
market as PNOS. In contrast, Dr. Murphy disapproved of
critical loss analysis generally, preferring a method called
critical diversion that asked how many customers would be
diverted to Whole Foods and how many to conventional
supermarkets if a nearby Wild Oats closed. Whole Foods’s
internal planning documents indicated at least a majority of
these customers would switch to Whole Foods, thus making
the closure profitable for a hypothetical PNOS monopolist.
One crucial difference between these approaches was that Dr.
Scheffman’s analysis depended only on the marginal loss of
sales, while Dr. Murphy’s used the average loss of customers.
Dr. Murphy explained that focusing on the average behavior
of customers was appropriate because a core of committed
customers would continue to shop at PNOS stores despite a
SSNIP.

2
Dr. Scheffman did not actually calculate the amount of this loss.
He simply predicted that because many Whole Foods and Wild
Oats customers also shop at conventional supermarkets, the loss
would at any rate be too large.
 15
In appropriate circumstances, core customers can be a
proper subject of antitrust concern. In particular, when one or
a few firms differentiate themselves by offering a particular
package of goods or services, it is quite possible for there to
be a central group of customers for whom “only [that
package] will do.” United States v. Grinnell Corp., 384 U.S.
563, 574 (1966); see also United States v. Phillipsburg Nat’l
Bank & Trust Co., 399 U.S. 350, 360 (1970) (“[I]t is the
cluster of products and services . . . that as a matter of trade
reality makes commercial banking a distinct” market.). What
motivates antitrust concern for such customers is the
possibility that “fringe competition” for individual products
within a package may not protect customers who need the
whole package from market power exercised by a sole
supplier of the package. Grinnell, 384 U.S. at 574.

Such customers may be captive to the sole supplier,
which can then, by means of price discrimination, extract
monopoly profits from them while competing for the business
of marginal customers. Cf. Md. People’s Counsel v. FERC,
761 F.2d 780, 786–87 (D.C. Cir. 1985) (allowing natural gas
pipelines to charge higher prices to captive customers would
be anticompetitive). Not that prices that segregate core from
marginal consumers are in themselves anticompetitive; such
pricing simply indicates the existence of a submarket of core
customers, operating in parallel with the broader market but
featuring a different demand curve. See United States v.
Rockford Mem’l Corp., 898 F.2d 1278, 1284 (7th Cir. 1990).
Sometimes, for some customers a package provides “access to
certain products or services that would otherwise be
unavailable to them.” Phillipsburg Nat’l Bank & Trust, 399
U.S. at 360. Because the core customers require the whole
package, they respond differently to price increases from
marginal customers who may obtain portions of the package
elsewhere. Of course, core customers may constitute a
 16
submarket even without such an extreme difference in
demand elasticity. After all, market definition focuses on
what products are reasonably substitutable; what is
reasonable must ultimately be determined by “settled
consumer preference.” United States v. Phila. Nat’l Bank,
374 U.S. 321, 357 (1963).

In short, a core group of particularly dedicated, “distinct
customers,” paying “distinct prices,” may constitute a
recognizable submarket, Brown Shoe, 370 U.S. at 325,
whether they are dedicated because they need a complete
“cluster of products,” Phila. Nat’l Bank, 374 U.S. at 356,
because their particular circumstances dictate that a product
“is the only realistic choice,” SuperTurf, Inc. v. Monsanto
Co., 660 F.2d 1275, 1278 (8th Cir. 1981), or because they
find a particular product “uniquely attractive,” Nat’l
Collegiate Athletic Ass’n v. Bd. of Regents of the Univ. of
Okla., 468 U.S. 85, 112 (1984). For example, the existence of
core customers dedicated to office supply superstores, with
their “unique combination of size, selection, depth[,] and
breadth of inventory,” was an important factor distinguishing
that submarket. FTC v. Staples, Inc., 970 F. Supp. 1066,
1078–79 (D.D.C. 1997). As always in defining a market, we
must “take into account the realities of competition.” Weiss v.
York Hosp., 745 F.2d 786, 826 (3d Cir. 1984). We look to the
Brown Shoe indicia, among which the economic criteria are
primary, see Rothery Storage & Van Co. v. Atlas Van Lines,
Inc., 792 F.2d 210, 219 n.4 (D.C. Cir. 1986).

The FTC’s evidence delineated a PNOS submarket
catering to a core group of customers who “have decided that
natural and organic is important, lifestyle of health and
ecological sustainability is important.” Whole Foods, 502 F.
Supp. at 223 (citing Hr’g Tr. 43–44, Aug. 1, 2007). It was
undisputed that Whole Foods and Wild Oats provide higher
 17
levels of customer service than conventional supermarkets, a
“unique environment,” and a particular focus on the “core
values” these customers espoused. Id. The FTC connected
these intangible properties with concrete aspects of the PNOS
model, such as a much larger selection of natural and organic
products, FTC’s Proposed Findings of Fact 13–14 & ¶ 66
(noting Earth Fare, a PNOS, carries “more than 45,000 natural
and organic SKUs”) and a much greater concentration of
perishables than conventional supermarkets, id. 14–15 & ¶
69–70 (“Over 60% of Wild Oats’ revenues” and “[n]early
70% of Whole Foods sales are natural or organic
perishables.”). See also Whole Foods, 502 F. Supp. 2d at 22–
23 (citing defendants’ depositions as evidence of Whole
Foods’s and Wild Oats’s focus on “high-quality perishables”
and a large variety of products).

Further, the FTC documented exactly the kind of price
discrimination that enables a firm to profit from core
customers for whom it is the sole supplier. Dr. Murphy
compared the margins of Whole Foods stores in cities where
they competed with Wild Oats. He found the presence of a
Wild Oats depressed Whole Foods’s margins significantly.
Notably, while there was no effect on Whole Foods’s margins
in the product category of “groceries,” where Whole Foods
and Wild Oats compete on the margins with conventional
supermarkets, the effect on margins for perishables was
substantial. Confirming this price discrimination, Whole
Foods’s documents indicated that when it price-checked
conventional supermarkets, the focus was overwhelmingly on
“dry grocery,” rather than on the perishables that were 70% of
Whole Foods’s business. Thus, in the high-quality
perishables on which both Whole Foods and Wild Oats made
most of their money, they competed directly with each other,
and they competed with supermarkets only on the dry grocery
items that were the fringes of their business.
 18
Additionally, the FTC provided direct evidence that
PNOS competition had a greater effect than conventional
supermarkets on PNOS prices. Dr. Murphy showed the
opening of a new Whole Foods in the vicinity of a Wild Oats
caused Wild Oats’s prices to drop, while entry by non-PNOS
stores had no such effect. Similarly, the opening of Earth
Fare stores (another PNOS) near Whole Foods stores caused
Whole Foods’s prices to drop immediately. The price effect
continued, while decreasing, until the Earth Fare stores were
forced to close.

Finally, evidence of consumer behavior supported the
conclusion that PNOS serve a core consumer base. Whole
Foods’s internal projections, based on market experience,
suggested that if a Wild Oats near a Whole Foods were to
close, the majority (in some cases nearly all) of its customers
would switch to the Whole Foods rather than to conventional
supermarkets. Since Whole Foods’s prices for perishables are
higher than those of conventional supermarkets, such
customers must not find shopping at the latter interchangeable
with PNOS shopping. They are the core customers.
Moreover, market research, including Dr. Scheffman’s own
studies, indicated 68% of Whole Foods customers are core
customers who share the Whole Foods “core values.” FTC
Proposed Findings of Fact ¶ 135.

Against this conclusion the defendants posed evidence
that customers “cross-shop” between PNOS and other stores
and that Whole Foods and Wild Oats check the prices of
conventional supermarkets. Whole Foods, 502 F. Supp. 2d at
30–32. But the fact that PNOS and ordinary supermarkets
“are direct competitors in some submarkets . . . is not the end
of the inquiry,” United States v. Conn. Nat’l Bank, 418 U.S.
656, 664 n.3 (1974). Of course customers cross-shop; PNOS
carry comprehensive inventories. The fact that a customer
 19
might buy a stick of gum at a supermarket or at a convenience
store does not mean there is no definable groceries market.
Here, cross-shopping is entirely consistent with the existence
of a core group of PNOS customers. Indeed, Dr. Murphy
explained that Whole Foods competes actively with
conventional supermarkets for dry groceries sales, even
though it ignores their prices for high-quality perishables.

In addition, the defendants relied on Dr. Scheffman’s
conclusion that there is no “clearly definable” core customer.
Whole Foods, 502 F. Supp. 2d at 28. However, this
conclusion was inconsistent with Dr. Scheffman’s own report
and testimony. Market research had found that customers
who shop at Whole Foods because they share the core values
it champions constituted at least a majority of its customers.
Scheffman Expert Report 56–57. Moreover, Dr. Scheffman
acknowledged “there are core shoppers [who] will only buy
organic and natural” and for that reason go to Whole Foods or
Wild Oats. Hr’g Tr. 31, July 31, 2007. He contended they
could be ignored because the numbers are not “substantial.”
Id. Again, Dr. Scheffman’s own market data undermined this
assertion.

In sum, the district court believed the antitrust laws are
addressed only to marginal consumers. This was an error of
law, because in some situations core consumers, demanding
exclusively a particular product or package of products,
distinguish a submarket. The FTC described the core PNOS
customers, explained how PNOS cater to these customers, and
showed these customers provided the bulk of PNOS’s
business. The FTC put forward economic evidence—which
the district court ignored—showing directly how PNOS
discriminate on price between their core and marginal
customers, thus treating the former as a distinct market.
Therefore, I cannot agree with the district court that the FTC
 20
would never be able to prove a PNOS submarket. This is not
to say the FTC has in fact proved such a market, which is not
necessary at this point. To obtain a preliminary injunction
under § 53(b), the FTC need only show a likelihood of
success sufficient, using the sliding scale, to balance any
equities that might weigh against the injunction.

V

It remains to address the equities, which the district court
did not reach, and see whether for some reason there is a
balance against the FTC that would require a greater
likelihood of success. The FTC urges us to carry out the rest
of this determination, but “[w]e believe the proper course of
action at this point is to remand to the district court,
Chaplaincy of Full Gospel Churches v. England, 454 F.3d
290, 304 (D.C. Cir. 2006). Since the district court “expressly
withheld consideration,” id. at 305, of the equities, we have
not had the benefit of its findings. Although the equities in a
§ 53(b) preliminary injunction proceeding will usually favor
the FTC, Heinz, 246 F.3d at 726, the district court must
independently exercise its discretion considering the
circumstances of this case, including the fact that the merger
has taken place. The district court should remember that a
“risk that the transaction will not occur at all,” by itself, is a
private consideration that cannot alone defeat the preliminary
injunction. See id.; Weyerhaeuser, 665 F.2d at 1082–83.

I appreciate that the district court expedited the
proceeding as a courtesy to the defendants, who wanted to
consummate their merger just thirty days after the hearing,
Whole Foods, 502 F. Supp. 2d at 4, but the court should have
taken whatever time it needed to consider the FTC’s evidence
fully. For the reasons stated above, the district court’s
conclusion that the FTC showed no likelihood of success in
 21
an eventual § 7 case must be reversed and remanded for
proceedings consistent with this opinion.

So ordered.
 TATEL, Circuit Judge, concurring in the judgment: I
agree with my colleagues that the district court produced a
thoughtful opinion under incredibly difficult circumstances,
that this case presents a live controversy, and that the district
court generally applied the correct standard in reviewing the
Federal Trade Commission’s request for a preliminary
injunction. I also agree with Judge Brown that the district
court nonetheless erred in concluding that the FTC failed to
“raise[] questions going to the merits so serious, substantial,
difficult and doubtful as to make them fair ground for
thorough investigation, study, deliberation and determination
by the FTC in the first instance and ultimately by the Court of
Appeals.” FTC v. H.J. Heinz Co., 246 F.3d 708, 714-15
(D.C. Cir. 2001). Specifically, I believe the district court
overlooked or mistakenly rejected evidence supporting the
FTC’s view that Whole Foods and Wild Oats occupy a
separate market of “premium natural and organic
supermarkets.”

I
“Section 7 of the Clayton Act prohibits acquisitions,
including mergers, ‘where in any line of commerce or in any
activity affecting commerce in any section of the country, the
effect of such acquisition may be substantially to lessen
competition, or to tend to create a monopoly.’” Id. at 713
(quoting 15 U.S.C. § 18). “Congress used the words ‘may be
substantially to lessen competition,’ to indicate that its
concern was with probabilities, not certainties.” Brown Shoe
Co. v. United States, 370 U.S. 294, 323 (1962).

When the FTC believes an acquisition violates section 7
and that enjoining the acquisition pending an investigation
“would be in the interest of the public,” section 13(b) of the
Federal Trade Commission Act authorizes the Commission to
ask a federal district court to block the acquisition. 15 U.S.C.
§ 53(b); Heinz, 246 F.3d at 714. Because Congress concluded
 2
that the FTC—an expert agency acting on the public’s
behalf—should be able to obtain injunctive relief more readily
than private parties, it “incorporat[ed] a unique ‘public
interest’ standard in 15 U.S.C. § 53(b), rather than the more
stringent, traditional ‘equity’ standard for injunctive relief.”
FTC v. Exxon Corp., 636 F.2d 1336, 1343 (D.C. Cir. 1980)
(citing H.R. REP. NO. 93-624, at 31 (1973)). Under this more
lenient rule, a district court may grant the FTC’s requested
injunction “[u]pon a proper showing that, weighing the
equities and considering the Commission’s likelihood of
ultimate success, such action would be in the public interest.”
15 U.S.C. § 53(b). In this circuit, “the standard for likelihood
of success on the merits is met if the FTC ‘has raised
questions going to the merits so serious, substantial, difficult
and doubtful as to make them fair ground for thorough
investigation, study, deliberation and determination by the
FTC in the first instance and ultimately by the Court of
Appeals.’” Heinz, 246 F.3d at 714-15 (quoting FTC v.
Beatrice Foods Co., 587 F.2d 1225, 1229 (D.C. Cir. 1978)
(Appendix to Joint Statement of Judges MacKinnon &
Robb)); accord FTC v. Freeman Hosp., 69 F.3d 260, 267 (8th
Cir. 1995); FTC v. Warner Commc’ns Inc., 742 F.2d 1156,
1162 (9th Cir. 1984).

Critically, the district court’s task is not “to determine
whether the antitrust laws have been or are about to be
violated. That adjudicatory function is vested in the FTC in
the first instance.” Heinz, 246 F.3d at 714 (quoting FTC v.
Food Town Stores, Inc., 539 F.2d 1339, 1342 (4th Cir. 1976)).
As Judge Posner has explained:

One of the main reasons for creating the
Federal Trade Commission and giving it
concurrent jurisdiction to enforce the Clayton
Act was that Congress distrusted judicial
 3
determination of antitrust questions. It thought
the assistance of an administrative body would
be helpful in resolving such questions and
indeed expected the FTC to take the leading
role in enforcing the Clayton Act . . . .

Hosp. Corp. of Am. v. FTC, 807 F.2d 1381, 1386 (7th Cir.
1986).

The dissent accuses Judge Brown and me of “dilut[ing]
the standard for preliminary injunction relief in antitrust
merger cases, such that the FTC . . . need not establish a
likelihood of success on the merits.” Dissenting Op. at 17-18
(internal quotation marks omitted). This is baffling given that
our opinions scrupulously follow Heinz’s articulation of the
likelihood-of-success standard, which even Whole Foods
insists we apply, see Appellee’s Br. 32 (urging that “the
district court performed the role Congress delegated” to it by
“applying the standard of review this Court prescribed in
Heinz”). The Supreme Court’s recent decision in Munaf v.
Geren, 128 S. Ct. 2207 (2008), does nothing to undermine
this precedent: it concerns the common law standard for
preliminary injunctions, not section 13(b)’s “unique ‘public
interest’ standard,” Exxon Corp., 636 F.2d at 1343. Cf.
Dissenting Op. at 20-21. In his zeal to reach the merits and
preempt the FTC, it is in fact our dissenting colleague who
ignores both circuit precedent and section 13(b).

II
In this case the district court concluded that the FTC had
failed to raise the “serious, substantial” questions necessary to
show a likelihood of success on the merits. FTC v. Whole
Foods Market, Inc., 502 F. Supp. 2d 1, 49 (D.D.C. 2007).
Following the FTC’s lead, the court focused on defining the
 4
product market in which Whole Foods and Wild Oats operate,
saying:

[I]f the relevant product market is, as the FTC
alleges, a product market of “premium natural
and organic supermarkets” . . . , there can be
little doubt that the acquisition of the second
largest firm in the market by the largest firm in
the market will tend to harm competition in
that market. If, on the other hand, the
defendants are merely differentiated firms
operating within the larger relevant product
market of “supermarkets,” the proposed
merger will not tend to harm competition.

Whole Foods, 502 F. Supp. 2d at 8. Thus, the “‘case
hinge[d]’—almost entirely—‘on the proper definition of the
relevant product market.’” Id. (quoting FTC v. Staples, Inc.,
970 F. Supp. 1066, 1073 (D.D.C. 1997)). And after
reviewing the evidence, the district court concluded that
“[t]here is no substantial likelihood that the FTC can prove its
asserted product market and thus no likelihood that it can
prove that the proposed merger may substantially lessen
competition or tend to create a monopoly.” Id. at 49-50.

I agree with the district court that this “‘case hinges’—
almost entirely—‘on the proper definition of the relevant
product market,’” for if a separate natural and organic market
exists, “there can be little doubt that the acquisition of the
second largest firm in the market by the largest firm in the
market will tend to harm competition in that market.” Id. at 8
(quoting Staples, 970 F. Supp. at 1073). But I respectfully
part ways with the district court when it comes to assessing
the FTC’s evidence in support of its contention that Whole
Foods and Wild Oats occupy a distinct market. As the
 5
Supreme Court explained in Brown Shoe Co. v. United States:
“The outer boundaries of a product market are determined by
the reasonable interchangeability of use or the cross-elasticity
of demand between the product itself and substitutes for it.”
370 U.S. at 325. In this case the FTC presented a great deal
of credible evidence—either unmentioned or rejected by the
district court—suggesting that Whole Foods and Wild Oats
are not “reasonabl[y] interchangeab[le]” with conventional
supermarkets and do not compete directly with them.

To begin with, the FTC’s expert prepared a study
showing that when a Whole Foods opened near an existing
Wild Oats, it reduced sales at the Wild Oats store
dramatically. See Expert Report of Kevin M. Murphy ¶¶ 48-
49 & exhibit 3 (July 9, 2007) (“Murphy Report”). By
contrast, when a conventional supermarket opened near a
Wild Oats store, Wild Oats’s sales were virtually unaffected.
See id. This strongly suggests that although Wild Oats
customers consider Whole Foods an adequate substitute, they
do not feel the same way about conventional supermarkets.
Rejecting this study, the district court explained that it was
“unwilling to accept the assumption that the effects on Wild
Oats from Whole Foods’ entries provide a mirror from which
predictions can reliably be made about the effects on Whole
Foods from Wild Oats’ future exits if this transaction occurs.”
Whole Foods, 502 F. Supp. 2d at 21. But even if exit and
entry events differ, this evidence suggests that consumers do
not consider Whole Foods and Wild Oats “reasonabl[y]
interchangeab[le]” with conventional supermarkets. Brown
Shoe, 370 U.S. at 325.

The FTC also highlighted Whole Foods’s own study—
called “Project Goldmine”—showing what Wild Oats
customers would likely do after the proposed merger in cities
where Whole Foods planned to close Wild Oats stores.
 6
According to the study, the average Whole Foods store would
capture most of the revenue from the closed Wild Oats store,
even though virtually every city contained multiple
conventional retailers closer to the shuttered Wild Oats store.
See Murphy Report ¶ 70 & app. C; Rebuttal Expert Report of
Kevin M. Murphy ¶¶ 31-32 (July 13, 2007) (“Murphy
Rebuttal”). This high diversion ratio further suggests that
many consumers consider conventional supermarkets
inadequate substitutes for Wild Oats and Whole Foods. The
district court cited the Project Goldmine study for the
opposite conclusion, pointing only to cities in which Whole
Foods expected to receive a low percentage of Wild Oats’s
business. Whole Foods, 502 F. Supp. 2d at 34. These
examples, however, do not undermine the study’s broader
conclusion that Whole Foods would capture most of the
revenue from the closed Wild Oats, and the district court
never mentioned the FTC expert’s testimony that the
diversion ratio estimated here “is at least four times the
diversion ratio[] needed to make a price increase of 5%
profitable for a joint owner of the two stores.” Murphy
Rebuttal ¶ 32. The dissent also ignores this testimony, saying
incorrectly that the Project Goldmine study “says nothing
about whether Whole Foods could impose a five percent or
more price increase.” Dissenting Op. at 11.

Several industry studies predating the merger also
suggest that Whole Foods and Wild Oats never truly
competed with conventional supermarkets. For example, a
study prepared for Whole Foods by an outside consultant
concludes that “[Whole Foods] will not encounter significant,
if any, competition from leading mainstream retailers[’]
(Safeway, Wal-Mart, Costco, etc.) entry into organics.”
Tinderbox Consulting, Exploring Private Label Organic
Brands 4. Another study concludes that “[w]hile th[e] same
consumer shops” at both “mainstream grocers such as
 7
Safeway” and “large-format natural foods store[s] such as
Wild Oats or Whole Foods Market,” “they tend to shop at
each for different things (e.g., Wild Oats for fresh and
specialty items, Safeway for canned and packaged goods).”
THE HARTMAN GROUP, ORGANIC 2006, at ch. 8, p. 1 (May 1,
2006). In addition, Wild Oats’s former CEO, Perry Odak,
explained in a deposition why conventional stores have
difficulty competing with Whole Foods and Wild Oats: if
conventional stores offer a lot of organic products, they don’t
sell enough to their existing customer base, leaving the stores
with spoiled products and reduced profits. But if
conventional stores offer only a narrow range of organic
products, customers with a high demand for organic items
refuse to shop there. Thus, “the conventionals have a very
difficult time getting into this business.” Investigational
Hearing of Perry Odak 77-78 (quoted in Murphy Report ¶ 77)
(“Odak Hearing”). The district court mentioned none of this.

In addition to all this direct evidence that Whole Foods
and Wild Oats occupy a separate market from conventional
supermarkets, the FTC presented an enormous amount of
evidence of “industry or public recognition” of the natural and
organic market “as a separate economic entity”—one of the
“practical indicia” the Supreme Court has said can be used to
determine the boundaries of a distinct market. Brown Shoe,
370 U.S. at 325. For example, dozens of record studies about
the grocery store industry—including many prepared for
Whole Foods or Wild Oats—distinguish between “traditional”
or “conventional” grocery stores on the one hand and “natural
food” or “organic” stores on the other. See, e.g., FOOD MKTG.
INST., U.S. GROCERY SHOPPER TRENDS 2007, at 20-22 (2007).
Moreover, record evidence indicates that the Whole Foods
and Wild Oats CEOs both believed that their companies
occupied a market separate from the conventional grocery
store industry. In an email to his company’s board, Whole
 8
Foods CEO John Mackey explained that “[Wild Oats] is the
only existing company that has the brand and number of
stores to be a meaningful springboard for another player to get
into this space. Eliminating them means eliminating this
threat forever, or almost forever.” Email from John Mackey
to John Elstrott et al. (Feb. 15, 2007). Echoing this point,
former Wild Oats CEO Perry Odak said that “there’s really
only two players of any substance in the organic and all
natural [market], and that’s Whole Foods and Wild Oats. . . .
[T]here’s really nobody else in that particular space.” Odak
Hearing 58. Executives from several conventional retailers
agreed, explaining that Whole Foods and Wild Oats are not
“conventional supermarkets” because “they focus on a
premium organic-type customer” and “don’t sell a lot of the
things that . . . a lot of people buy.” Dep. of Rojon Diane
Hasker 128-29 (July 10, 2007) (“Hasker Dep.”). As Judge
Bork explained, this evidence of “‘industry or public
recognition of the submarket as a separate economic’ unit
matters because we assume that economic actors usually have
accurate perceptions of economic realities.” Rothery Storage
& Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 218 n.4
(D.C. Cir. 1986).

The FTC also presented strong evidence that Whole
Foods and Wild Oats have “peculiar characteristics”
distinguishing them from traditional supermarkets, another of
the “practical indicia” the Supreme Court has said can be used
to determine the boundaries of a distinct market. Brown Shoe,
370 U.S. at 325. Most important, unlike traditional grocery
stores, both Whole Foods and Wild Oats carry only natural or
organic products. See http://www.wholefoodsmarket.com/pr
oducts/index.html (“We carry natural and organic products . . .
unadulterated by artificial additives, sweeteners, colorings,
and preservatives . . . .”). Glossing over this distinction, the
dissent says “the dividing line between ‘organic’ and
 9
conventional supermarkets has been blurred” because “[m]ost
products that Whole Foods sells are not organic” while
“conventional supermarkets” have begun selling more organic
products. Dissenting Op. at 8. But the FTC never defined its
proposed market as “organic supermarkets,” it defined it as
“premium natural and organic supermarkets.” And everything
Whole Foods sells is natural and/or organic, while many of
the things sold by traditional grocery stores are not. See, e.g.,
Hasker Dep. 130-34; http://www.wholefoodsmarket.com/prod
ucts/unacceptablefoodingredients.html (explaining that Whole
Foods refuses to carry any food item containing one of dozens
of “unacceptable food ingredients,” ingredients that can be
found in countless products at traditional grocery stores).

Insisting that all this evidence of a separate market is
irrelevant, Whole Foods and the dissent argue that the FTC’s
case must fail because the record contains no evidence that
Whole Foods or Wild Oats charged higher prices in cities
where the other was absent—i.e., where one had a local
monopoly on the asserted natural and organic market—than
they did in cities where the other was present. This argument
is both legally and factually incorrect.

As a legal matter, although evidence that a company
charges more when other companies in the alleged market are
absent certainly indicates that the companies operate in a
distinct market, see, e.g., Staples, 970 F. Supp. at 1075-77,
that is not the only way to prove a separate market. Indeed,
Brown Shoe lists “distinct prices” as only one of a non-
exhaustive list of seven “practical indicia” that may be
examined to determine whether a separate market exists. 370
U.S. at 325. Furthermore, even if the FTC could prove a
section 7 violation only by showing evidence of higher prices
in areas where a company had a local monopoly in an alleged
market, the FTC need not prove a section 7 violation to obtain
 10
a preliminary injunction; rather, it need only raise “serious,
substantial” questions as to the merger’s legality. Heinz, 246
F.3d at 714. Thus, the dissent misses the mark when it cites
the FTC’s Horizontal Merger Guidelines to suggest that the
Commission may obtain a preliminary injunction only by
“mak[ing] a sufficient showing that the merged company
could . . . profitably impose a significant and nontransitory
increase in price” of 5% or more. Dissenting Op. at 2
(internal quotation marks omitted). Such evidence in a case
like this, which turns entirely on market definition, would be
enough to prove a section 7 violation in the FTC’s
administrative proceeding. See Hosp. Corp., 807 F.2d at 1389
(stating that “[a]ll that is necessary” to prove a section 7 case
“is that the merger create an appreciable danger of [higher
prices] in the future”). Yet our precedent clearly holds that to
obtain a preliminary injunction “[t]he FTC is not required to
establish that the proposed merger would in fact violate
section 7 of the Clayton Act.” Heinz, 246 F.3d at 714.
Moreover, the Merger Guidelines—which “are by no means
to be considered binding on the court,” FTC v. PPG Indus.,
Inc., 798 F.2d 1500, 1503 n.4 (D.C. Cir. 1986)—specify how
the FTC decides which cases to bring, “not . . . how the
Agency will conduct the litigation of cases that it decides to
bring,” Horizontal Merger Guidelines § 0.1 (emphasis added);
see also id. (“[T]he Guidelines do not attempt to assign the
burden of proof, or the burden of coming forward with
evidence, on any particular issue.”).

In any event, the FTC did present evidence indicating
that Whole Foods and Wild Oats charged more when they
were the only natural and organic supermarket present. The
FTC’s expert looked at prices Whole Foods charged in
several of its North Carolina stores before and after entry of a
regional natural food chain called Earth Fare. Before any
Earth Fare stores opened, Whole Foods charged essentially
 11
the same prices at its five North Carolina stores, but when an
Earth Fare opened near the Whole Foods in Chapel Hill, that
store’s prices dropped 5% below those at the other North
Carolina Whole Foods. See Tr. of Mots. Hr’g, Morning
Session 125-30 (July 31, 2007); Supplemental Rebuttal
Expert Report of Kevin M. Murphy ¶¶ 2-6 (July 16, 2007)
(“Murphy Supp.”). Prices at that store remained lower than at
the other Whole Foods in North Carolina for nearly a year,
until just before the Earth Fare closed. See Murphy Supp. ¶¶
4-5. Whole Foods followed essentially the same pattern when
an Earth Fare opened near its stores in Raleigh and Durham—
the company dropped prices at those stores but nowhere else
in North Carolina. See id.; Tr. of Mots. Hr’g, Morning
Session 127 (July 31, 2007). The FTC’s expert presented
similar evidence regarding Whole Foods’s impact on Wild
Oats’s prices, showing that a new Whole Foods store opening
near a Wild Oats caused immediate and lasting reductions in
prices at that Wild Oats store compared to prices at other
Wild Oats stores. See Tr. of Mots. Hr’g, Morning Session
132 (July 31, 2007); Murphy Report ¶¶ 57-59 & exhibit 5. In
addition to this quantitative evidence, the FTC pointed to
Whole Foods CEO John Mackey’s statement explaining to the
company’s board why the merger made sense: “By buying
[Wild Oats] we will . . . avoid nasty price wars in [several
cities where both companies have stores].” Email from John
Mackey to John Elstrott et al. (Feb. 15, 2007).

The dissent raises two primary arguments against this
pricing evidence. First, it relies on a study by Whole Foods’s
expert to conclude that Whole Foods’s prices remain steady
regardless of the presence or absence of a nearby Wild Oats,
Dissenting Op. at 5-6, calling this “all-but-dispositive price
evidence,” id. at 7. In fact, this study is all-but-meaningless
price evidence because it examined Whole Foods’s pricing on
a single day several months after the company announced its
 12
intent to acquire Wild Oats; this gave the company every
incentive to eliminate any price differences that may have
previously existed between its stores based on the presence of
a nearby Wild Oats, not only to avoid antitrust liability, but
also because the company was no longer competing with
Wild Oats. See Hosp. Corp., 807 F.2d at 1384 (“[E]vidence
that is subject to manipulation by the party seeking to use it is
entitled to little or no weight.”). Second, the dissent asserts
that all Mackey’s statements are irrelevant because—it
claims—anticompetitive “intent is not an element of a § 7
claim.” Dissenting Op. at 12. But the Supreme Court has
clearly said that “evidence indicating the purpose of the
merging parties, where available, is an aid in predicting the
probable future conduct of the parties and thus the probable
effects of the merger.” Brown Shoe, 370 U.S. at 329 n.48
(emphasis added); see also 4A PHILLIP E. AREEDA ET AL.,
ANTITRUST LAW ¶ 964a (2d ed. 2006) (“[E]vidence of
anticompetitive intent cannot be disregarded.”).

To be sure, the pricing evidence here is unquestionably
less compelling than the pricing evidence in some other cases,
and perhaps this will make a difference in the Commission’s
ultimate evaluation of this merger. Cf. Staples, 970 F. Supp.
at 1075-77 (showing price differences of up to 13% where
competitors were absent). But at this preliminary, pre-hearing
stage, the pricing evidence here, together with the other
evidence described above, is certainly enough to raise
“serious, substantial” questions that are “fair ground for
thorough investigation, study, deliberation, and determination
by the FTC.” Heinz, 246 F.3d at 714-15.

Attempting to make these serious questions disappear,
Whole Foods points to evidence the district court cited in
concluding that the FTC could never prove a separate natural
and organic market. That evidence, however, fails to
 13
overcome the “serious, substantial” questions the FTC’s
evidence raises.

To begin with, the district court relied on a study by a
Whole Foods expert concluding that the post-merger
company would be unable to impose a statistically significant
non-transitory increase in price because the “actual loss” from
such an increase would exceed the “critical loss”—the point
at which the revenue gained from raising prices equals the
revenue lost from reduced sales. The FTC’s expert, however,
reached the exact opposite conclusion, finding that the
combined company could impose a statistically significant
non-transitory increase in price. Murphy Report ¶ 147. He
also raised a number of criticisms of the Whole Foods
expert’s study. Most important, he pointed out that the Whole
Foods expert “provide[d] literally no quantitative evidence for
the magnitude of the Actual Loss . . . and no methodology for
calculating the Actual Loss.” Murphy Rebuttal ¶ 11. He
further argued that the Whole Foods expert’s study embodied
a widely recognized flaw in critical loss analysis, namely that
such analysis often overestimates actual loss when a company
has high margins—which Whole Foods does. See id. ¶¶ 6-16
(explaining that when a company has high margins the critical
loss is small, so one might predict an “Actual Loss greater
than the Critical Loss,” but “this story is very incomplete
because a high margin tends to imply a small Actual Loss”
given that high margins suggest customers are price
insensitive (quoting Michael L. Katz & Carl Shapiro, Further
Thoughts on Critical Loss, ANTITRUST SOURCE, March 2004,
at 1, 2)); see also Daniel P. O’Brien & Abraham L.
Wickelgren, A Critical Analysis of Critical Loss Analysis, 71
ANTITRUST L.J. 161, 162 (2003). In light of these cogent
criticisms—which neither Whole Foods’s expert nor the
district court ever addressed—this study cannot eliminate the
“serious, substantial” questions the FTC’s evidence raises.
 14
Although courts certainly must evaluate the evidence in
section 13(b) proceedings and may safely reject expert
testimony they find unsupported, they trench on the FTC’s
role when they choose between plausible, well-supported
expert studies.

The district court next emphasized that when a new
Whole Foods store opens, it takes business from conventional
grocery stores, and even when an existing Wild Oats is
nearby, most of the new Whole Foods store’s revenue comes
from customers who previously shopped at conventional
stores. According to the district court, this led “to the
inevitable conclusion that Whole Foods’ and Wild Oats’ main
competitors are other supermarkets, not just each other.”
Whole Foods, 502 F. Supp. 2d at 21. As the FTC points out,
however, “an innovative [product] can create a new product
market for antitrust purposes” by “satisfy[ing] a previously-
unsatisfied consumer demand.” Appellant’s Opening Br. 50.
To use the Commission’s example, when the automobile was
first invented, competing auto manufacturers obviously took
customers primarily from companies selling horses and
buggies, not from other auto manufacturers, but that hardly
shows that cars and horse-drawn carriages should be treated
as the same product market. That Whole Foods and Wild
Oats have attracted many customers away from conventional
grocery stores by offering extensive selections of natural and
organic products thus tells us nothing about whether Whole
Foods and Wild Oats should be treated as operating in the
same market as conventional grocery stores. Indeed, courts
have often found that sufficiently innovative retailers can
constitute a distinct product market even when they take
customers from existing retailers. See, e.g., Photovest Corp.
v. Fotomat Corp., 606 F.2d 704, 712-14 (7th Cir. 1979)
(finding a distinct market of drive-up photo-processing
companies even though such companies took photo-
 15
processing customers from drugstores, camera stores, and
supermarkets); Staples, 970 F. Supp. at 1077 (finding a
distinct market of office supply superstores even though such
stores took sales primarily from mail-order catalogues and
stores carrying a broader range of merchandise).

The district court also cited evidence that Whole Foods
compares its prices to those at conventional stores, not just
natural foods stores. But nearly all of the items on which
Whole Foods checks prices are dry grocery items, even
though nearly 70% of Whole Foods’s revenue comes from
perishables. Murphy Report ¶ 77. As Judge Brown’s opinion
explains, this suggests that any competition between Whole
Foods and conventional retailers may be limited to a narrow
range of products that play a minor role in Whole Foods’s
profitability. Op. at 17.

Finally, the district court observed that more and more
conventional stores are carrying natural and organic products,
and that consumers who shop at Whole Foods and Wild Oats
also shop at conventional stores. But as noted above, other
record evidence suggests that although some conventional
retailers are beginning to offer a limited range of popular
organic products, they have difficulty competing with Whole
Foods and Wild Oats. See Murphy Report ¶ 77. As Whole
Foods CEO John Mackey put it: “[Wild Oats] is the only
existing company that has the brand and number of stores to
be a meaningful springboard for another player to get into this
space. Eliminating them means eliminating this threat
forever, or almost forever.” Email from John Mackey to John
Elstrott et al. (Feb. 15, 2007) (emphasis added). Other studies
show that “[w]hile th[e] same consumer shops” at both
“mainstream grocers such as Safeway” and “large-format
natural foods store[s] such as Wild Oats or Whole Foods,”
“they tend to shop at each for different things.” THE
 16
HARTMAN GROUP, ORGANIC 2006, at ch. 8, p. 1 (May 1,
2006); see also Photovest, 606 F.2d at 714 (“The law does not
require an exclusive class of customers for each relevant
submarket.”).

In sum, much of the evidence Whole Foods points to is
either entirely unpersuasive or rebutted by credible evidence
offered by the FTC. Of course, this is not to say that the FTC
will necessarily be able to prove its asserted product market in
an administrative proceeding: as the district court recognized,
Whole Foods has a great deal of evidence on its side,
evidence that may ultimately convince the Commission that
no separate market exists. But at this preliminary stage, the
FTC’s evidence plainly establishes a reasonable probability
that it will be able to prove its asserted market, and given that
this “‘case hinges’—almost entirely—‘on the proper
definition of the relevant product market,’” Whole Foods, 502
F. Supp. 2d at 8 (quoting Staples, 970 F. Supp. at 1073), this
is enough to raise “serious, substantial” questions meriting
further investigation by the FTC, Heinz, 246 F.3d at 714.

III
Because we have decided that the FTC showed the
requisite likelihood of success by raising serious and
substantial questions about the merger’s legality, all that
remains is to “weigh the equities in order to decide whether
enjoining the merger would be in the public interest.” Id. at
726. Although in some cases we have conducted this
weighing ourselves, see, e.g., id. at 726-27, three factors lead
me to agree with Judge Brown that the better course here is to
remand to the district court for it to undertake this task. First,
in cases in which we have weighed the equities, the district
court had already done so, giving us the benefit of its
factfinding and reasoning. See, e.g., id. Here, by contrast, the
district court never reached the equities and the parties have
 17
not briefed the issue, leaving us without the evidence needed
to decide this question. See Whole Foods, 502 F. Supp. 2d at
50. Second, this case stands in a unique posture, for in cases
where we reversed a district court’s denial of a section 13(b)
injunction, either the district court or this court had enjoined
the merger pending appeal. See Heinz, 246 F.3d at 713; PPG
Indus., 798 F.2d at 1501 n.1. Here, by contrast, the companies
have already merged, and although this doesn’t moot the case,
it may well affect the balance of the equities, likely requiring
the district court to take additional evidence. Finally, given
this case’s unique posture, the usual remedy in section 13(b)
cases—blocking the merger—is no longer an option.
Therefore, if the district court concludes that the equities tilt in
the FTC’s favor, it will need to craft an alternative, fact-bound
remedy sufficient to achieve section 13(b)’s purpose, namely
allowing the FTC to review the transaction in an
administrative proceeding and reestablish the premerger status
quo if it finds a section 7 violation. To accomplish this, the
district court could choose anything from issuing a hold
separate order, see FTC v. Weyerhaeuser Co., 665 F.2d 1072,
1083-84 (D.C. Cir. 1981), to enjoining further integration of
the companies, to ordering the transaction partially or entirely
rescinded, see FTC v. Elders Grain, 868 F.2d 901, 907-08
(7th Cir. 1989) (Posner, J.). Without more facts, however, we
are in no position to suggest which remedy is most
appropriate.

Given the novel and significant task the district court
faces on remand, I think it important to emphasize the
principles that should guide its weighing of the equities. To
begin with, as this court has held, “a likelihood of success
finding weighs heavily in favor of a preliminary injunction
blocking the acquisition,” Weyerhaeuser, 665 F.2d at 1085,
“creat[ing] a presumption in favor of preliminary injunctive
relief,” Heinz, 246 F.3d at 726. That said, the district court
 18
must still weigh the public and private equities “to decide
whether enjoining the merger would be in the public interest.”
Id. “The principal public equity weighing in favor of issuance
of preliminary injunctive relief is the public interest in
effective enforcement of the antitrust laws.” Id. That is,
because “[a]dministrative experience shows that the
Commission’s inability to unscramble merged assets
frequently prevents entry of an effective order of divestiture”
after administrative proceedings, FTC v. Dean Foods Co., 384
U.S. 597, 607 n.5 (1966), the court must place great weight on
the public interest in blocking a possibly anticompetitive
merger before it is complete. Here, of course, the merger has
already been consummated, although as the FTC points out,
the process of combining the two companies is far from
complete. Thus, the district court must consider the extent to
which any of the remedial options mentioned above would
make it easier for the FTC to separate Wild Oats and Whole
Foods after the Commission’s administrative proceeding
(should it find a section 7 violation) than it would be if the
court did nothing. The court must then weigh this and any
other equities opposing the merger against any public and
private equities that support allowing the merger to proceed
immediately.

In conducting this weighing, if Whole Foods can show no
public equities in favor of allowing the merger to proceed
immediately—such as increased employment or reduced
prices—the district court should go no further, for “[w]hen the
Commission demonstrates a likelihood of ultimate success, a
countershowing of private equities alone [does] not suffice to
justify denial of a preliminary injunction barring the merger.”
Weyerhaeuser, 665 F.2d at 1083. But if Whole Foods can
show some public equity favoring the merger, then the court
should also consider private equities on Whole Foods’s side of
the ledger, such as whether it would allow an otherwise failing
 19
firm to survive. That said, “[w]hile it is proper to consider
private equities in deciding whether to enjoin a particular
transaction, we must afford such concerns little weight, lest
we undermine section 13(b)’s purpose of protecting the
public-at-large, rather than the individual private
competitors.” Heinz, 246 F.3d at 727 n.25 (quoting FTC v.
Univ. Health, Inc., 938 F.2d 1206, 1225 (11th Cir. 1991))
(internal quotation marks omitted). Moreover, “[w]e do not
rank as a private equity meriting weight a mere expectation of
private gain from a transaction the FTC has shown is likely to
violate the antitrust laws.” Weyerhaeuser, 665 F.2d at 1083
n.26. In other words, even if allowing the merger to proceed
would increase Whole Foods’s profits, that is irrelevant to the
private equities under section 13(b).
 KAVANAUGH, Circuit Judge, dissenting:1 The Federal
Trade Commission has sought a preliminary injunction to
block the Whole Foods-Wild Oats merger as anticompetitive
under § 7 of the Clayton Act. As in many antitrust cases, the
analysis comes down to one issue: market definition. Is the
relevant product market here all supermarkets? Or is the
relevant product market here only so-called “organic
supermarkets”? If the former, as Whole Foods argues, the
Whole Foods-Wild Oats merger would be lawful because it
would not lessen competition in the broad market of all
supermarkets: Whole Foods and Wild Oats together operate
about 300 of the approximately 34,000 supermarkets in the
United States. If the latter, as the FTC contends, the merger
may be unlawful: Whole Foods and Wild Oats are the only
significant competitors in the alleged organic-store market
and their merger would substantially lessen competition in
such a narrowly defined market.

More than a year ago, after a lengthy evidentiary hearing
and in an exhaustive and careful opinion, the District Court
found that the record evidence overwhelmingly supports the
following conclusions: Whole Foods competes against all
supermarkets and not just so-called organic stores; the
relevant market for evaluating this merger for antitrust
purposes is all supermarkets; and the merger of Whole Foods
and Wild Oats would not substantially lessen competition in a
market that includes all supermarkets. The court therefore
denied the FTC’s motion for a preliminary injunction.

1
In light of changes made by Judge Brown and Judge Tatel to
their opinions in response to the petition for rehearing – most
notably, the fact that Judge Tatel no longer joins Judge Brown’s
opinion, meaning there is no majority opinion for the Court – this
dissent contains changes throughout, including a new Part III, from
the dissenting opinion released on July 29, 2008.
 2
Also more than a year ago, a three-judge panel of this
Court unanimously denied the FTC’s request for an injunction
pending appeal, thereby allowing the Whole Foods-Wild Oats
deal to close. Since then, the merged entity has shut down,
sold, or converted numerous Wild Oats stores and otherwise
effectuated the merger through many changes in supplier
contracts, leases, distribution, and the like.

The Court’s splintered decision in this case seeks to
unring the bell. In my judgment, this Court got it right a year
ago in refusing to enjoin the merger, and there is no basis for
a changed result now. Both a year ago and now, the same
central question has been before the Court in determining
whether to approve an injunction: whether the FTC
demonstrated the necessary “likelihood of success” on its § 7
case. A year ago, the Court said no. Now, the Court says yes.
The now-merged entity, the industry, and consumers no doubt
will be confused by this apparent judicial about-face.

The law does not allow the FTC to just snap its fingers
and temporarily block a merger. Even at the preliminary
injunction stage, the relevant statutory text and precedents
expressly require that the FTC show a “likelihood of success
on the merits.” FTC v. H.J. Heinz Co., 246 F.3d 708, 714
(D.C. Cir. 2001); see also 15 U.S.C. § 53(b) (“likelihood of
ultimate success”); cf. Munaf v. Geren, 128 S. Ct. 2207, 2218-
19 (2008). Because “[m]erger enforcement, like other areas
of antitrust, is directed at market power,” Heinz, 246 F.3d at
713, the FTC therefore needs to make a sufficient showing
that the merged company could exercise market power and
profitably impose a “small but significant and nontransitory
increase in price,” typically meaning a five percent or greater
price increase. Horizontal Merger Guidelines § 1.11 (internal
quotation marks omitted); see 15 U.S.C. § 18. As the District
Court concluded, the FTC did not come close to presenting
 3
that kind of evidence in this case; the FTC completely failed
to make the economic showing that is Antitrust 101.

By seeking to block a merger without a sufficient
showing that so-called organic stores constitute a separate
product market and that the merged entity could impose a
significant and nontransitory price increase, the FTC’s
position – which Judge Brown and Judge Tatel largely accept
– calls to mind the bad old days when mergers were viewed
with suspicion regardless of their economic benefits. See
generally ROBERT H. BORK, THE ANTITRUST PARADOX
(1978). I would not turn back the clock. I agree with and
would affirm the District Court’s excellent decision denying
the FTC’s motion to enjoin the merger of Whole Foods and
Wild Oats. See FTC v. Whole Foods Mkt., Inc., 502 F. Supp.
2d 1 (D.D.C. 2007).

I

A

Section 7 of the Clayton Act prohibits mergers “where in
any line of commerce or in any activity affecting commerce in
any section of the country, the effect of such acquisition may
be substantially to lessen competition, or to tend to create a
monopoly.” 15 U.S.C. § 18. The Horizontal Merger
Guidelines jointly promulgated by two Executive Branch
agencies (the Department of Justice and the FTC) implement
that statutory directive and recognize that the key initial step
in the analysis is proper product-market definition. See
Horizontal Merger Guidelines § 1.11; see also 2B PHILLIP E.
AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 536, at
284-85 (3d ed. 2007). Proper product-market analysis focuses
on products’ interchangeability of use or cross-elasticity of
demand. A product “market can be seen as the array of
 4
producers of substitute products that could control price if
united in a hypothetical cartel or as a hypothetical monopoly.”
Id. ¶ 530a, at 226. In the merger context, the inquiry therefore
comes down to whether the merged entity could profitably
impose a “small but significant and nontransitory increase in
price” typically defined as five percent or more. See
Horizontal Merger Guidelines § 1.11 (internal quotation
marks omitted). If the merged entity could profitably impose
at least a five percent price increase (because the price
increase would not cause a sufficient number of consumers to
switch to substitutes outside of the alleged product market),
then there is a distinct product market and the proposed
merger likely would substantially lessen competition in that
market, in violation of § 7 of the Clayton Act.

In considering whether the merged entity could increase
prices, courts of course recognize that “future behavior must
be inferred from historical observations.” 2B AREEDA &
HOVENKAMP, ANTITRUST LAW ¶ 530a, at 226. Therefore, the
courts scrutinize existing markets to assess the probable
effects of a merger.

This approach was applied sensibly by Judge Hogan in
his thorough and leading opinion in FTC v. Staples, 970 F.
Supp. 1066 (D.D.C. 1997). There, Judge Hogan found that
office products sold by an office superstore were functionally
interchangeable with office products sold at other types of
stores, but he nonetheless found that office-supply superstores
constituted a distinct product market. One key fact led Judge
Hogan to that conclusion: In areas where Staples was the
only office superstore, it was able to set prices significantly
higher than in areas where it competed with other office
superstores (Office Depot and OfficeMax). See id. at 1075-
76. For example, the FTC presented “compelling evidence”
that Staples’s prices were 13 percent higher in areas where no
 5
office-superstore competitors were present. Id. Judge Hogan
ultimately concluded that “[t]his evidence all suggests that
office superstore prices are affected primarily by other office
superstores and not by non-superstore competitors.” Id. at
1077 (emphasis added). For that reason, the Court enjoined
the merger of Staples and Office Depot.

B

Consistent with the statute, the Executive Branch’s
Merger Guidelines, and Judge Hogan’s convincing opinion in
Staples, the District Court here carefully analyzed the
economics of supermarkets, including so-called organic
supermarkets. The court considered whether Whole Foods
charged higher prices in areas without Wild Oats than in areas
with Wild Oats. After an evidentiary hearing and based on a
painstaking review of the evidence in the record, the court
concluded that “Whole Foods prices are essentially the same
at all of its stores in a region, regardless of whether there is a
Wild Oats store nearby.” FTC v. Whole Foods Mkt., Inc., 502
F. Supp. 2d 1, 22 (D.D.C. 2007). That factual conclusion was
supported by substantial evidence offered by Dr. Scheffman,
Whole Foods’s expert, and by the lack of any credible
evidence to the contrary.

Dr. Scheffman analyzed Whole Foods’s actual prices
across stores and concluded that “there is no evidence that
[Whole Foods] and [Wild Oats] price higher” where they face
no competition from so-called organic supermarkets
compared with where they do face such competition.
Scheffman Expert Report ¶ 292, at 113. At a regional level,
his studies revealed that only a “very small percentage” of
products vary in price within a region, indicating that “prices
are set across broad geographic areas.” Id. ¶ 300, at 116. He
also analyzed prices at the individual store level, examining
 6
how many products sold at a specific store have prices that
differ from the most common price in the region. He found
that “differences in prices across stores are generally very
small (less than one half of one percent) and there is no
systematic pattern as to the presence or absence of [organic-
supermarket] competition.” Id. ¶ 305, at 116.

Moreover, the record evidence in this case does not show
that Whole Foods changed its prices in any significant way in
response to exit from an area by Wild Oats. In the four cases
where Wild Oats exited and a Whole Foods store remained,
there is no evidence in the record that Whole Foods then
raised prices. Nor was there any evidence of price increases
after Whole Foods took over two Wild Oats stores.

The facts here contrast starkly with Staples, where
Staples charged significantly different prices based on the
presence or absence of office-superstore competitors in a
particular area. The evidence there showed that Staples
charged prices 13 percent higher in markets without office-
superstore competitors than in markets with such competitors.
There is nothing remotely like that in this case.

In the absence of any evidence in the record that Whole
Foods was able to (or did) set higher prices when Wild Oats
exited or was absent, the District Court correctly concluded
that Whole Foods competes in a market composed of all
supermarkets, meaning that “all supermarkets” is the relevant
product market and that the Whole Foods-Wild Oats merger
will not substantially lessen competition in that product
market.
 7
In addition to the all-but-dispositive price evidence,2 the
District Court identified other factors further demonstrating
that the relevant market consists of all supermarkets.

The record shows that Whole Foods makes site selection
decisions based on all supermarkets and checks prices against
all supermarkets, not only so-called organic supermarkets. As
Dr. Scheffman concluded, Whole Foods “price checks a broad
set of competitors . . . nationally, regionally and locally.” Id.
¶ 224, at 86. This “demonstrates that [Whole Foods] views
itself as competing with a broad range of supermarkets and
that these supermarkets, in fact, constrain the prices charged
by [Whole Foods].” Id. Those other supermarkets include
conventional supermarkets such as Safeway, Albertson’s,
Wegman’s, HEB, and Harris Teeter, as well as so-called
organic supermarkets like Wild Oats. Id. ¶¶ 225-26, at 86-87.
As Professors Areeda and Hovenkamp have explained, a
“broad-market finding gains some support from long-standing
documents indicating that A or B producers regard the other
product as a close competitor.” 2B AREEDA & HOVENKAMP,
ANTITRUST LAW ¶ 562a, at 372. The point here is simple:
Whole Foods would not examine the locations of and price
check conventional grocery stores if it were not a competitor
of those stores. Whole Foods does not price check Sports
Authority; Whole Foods does price check Safeway.

The record also demonstrates that conventional
supermarkets and so-called organic supermarkets are
aggressively competing to attract customers from one another.
After reviewing a wide variety of industry information and
2
Judge Tatel’s opinion disparages the evidence about Whole
Foods’s prices, calling it “all-but-meaningless” and implicitly
suggesting that Whole Foods manipulated its prices just for the
expert study. Tatel Op. at 11. But Judge Tatel offers no evidence
for that suggestion.
 8
trade journals, Dr. Scheffman concluded that “‘[o]ther’
supermarkets are competing vigorously for the purchases
made by shoppers at [Whole Foods] and [Wild Oats].”
Scheffman Expert Report ¶ 212, at 77. Whole Foods
“recognizes the fact that it has to appeal to a significantly
broader group of consumers than organic and natural focused
consumers.” Id. ¶ 279, at 108. The record shows that Whole
Foods has made progress: Most products that Whole Foods
sells are not organic. Conversely, conventional supermarkets
have shifted towards “emphasizing fresh, ‘natural’ and
organic” products. Id. ¶ 215, at 80. “[M]ost of the major
chains and others are expanding into private label organic and
natural products.” Id. ¶ 220, at 85; see also id. ¶ 219, at 83-85
(listing changes in other supermarkets).

So the dividing line between “organic” and conventional
supermarkets has blurred. As the District Court aptly put it,
the “train has already left the station.” Whole Foods, 502 F.
Supp. 2d at 48. The convergence undermines the threshold
premise of the FTC’s case. This is an industry in transition,
and Whole Foods has pioneered a product differentiation that
in turn has caused other supermarket chains to update their
offerings. These are not separate product markets; this is a
market where all supermarkets including so-called organic
supermarkets are clawing tooth and nail to differentiate
themselves, beat the competition, and make money.

The District Court’s summary of the evidence warrants
extensive quotation:

In sum, while all supermarket retailers, including
Whole Foods, attempt to differentiate themselves in some
way in order to attract customers, they nevertheless
compete, and compete vigorously, with each other. The
evidence before the Court demonstrates that conventional
 9
or more traditional supermarkets today compete for the
customers who shop at Whole Foods and Wild Oats,
particularly the large number of cross-shopping
customers – or customers at the margin – with a growing
interest in natural and organic foods. Post-merger, all of
these competing alternatives will remain. Based upon the
evidence presented, the Court concludes that many
customers could and would readily shift more of their
purchases to any of the increasingly available substitute
sources of natural and organic foods. The Court
therefore concludes that the FTC has not met its burden
to prove that “premium natural and organic
supermarkets” is the relevant product market in this case
for antitrust purposes.

Id. at 36.3

II

In an attempt to save its merger case despite its inability
to meet the test reflected in the Merger Guidelines and applied
in Staples, the FTC cites marginally relevant evidence and
advances a scattershot of flawed arguments.

First, the FTC says that so-called organic supermarkets
like Whole Foods and Wild Oats constitute their own product

3
A showing that the merged entity would possess market
concentration in a defined product market is necessary but not
sufficient to establish an antitrust violation. See United States v.
Baker Hughes Inc., 908 F.2d 981, 985 (D.C. Cir. 1990) (listing
factors that might militate against finding an antitrust violation,
even assuming market concentration exists). I need not address the
other necessary components of the FTC’s case, however, because
the FTC has not satisfied the threshold requirement of showing that
the merged entity would have such market concentration.
 10
market because they are characterized by factors that
differentiate them from conventional supermarkets. Those
factors include intangible qualities such as customer service
and tangible factors such as a focus on perishables.

This argument reflects the key error that permeates the
FTC’s approach to this case. Those factors demonstrate only
product differentiation, and product differentiation does not
mean different product markets. “For antitrust purposes, we
apply the differentiated label to products that are
distinguishable in the minds of buyers but not so different as
to belong in separate markets.” 2B PHILLIP E. AREEDA &
HERBERT HOVENKAMP, ANTITRUST LAW ¶ 563a, at 385 (3d
ed. 2007). As the District Court noted, supermarkets
including so-called organic supermarkets differentiate
themselves by emphasizing specific benefits or characteristics
to attract customers to their stores. See FTC v. Whole Foods
Mkt., Inc., 502 F. Supp. 2d 1, 24-26 (D.D.C. 2007). They
may differentiate themselves along dimensions such as “low
price, ethnic appeal, prepared foods, health and nutrition,
variety within a product category, customer service, or
perishables such as meats or produce.” Stanton Expert Report
¶ 23, at 6.

The key to distinguishing product differentiation from
separate product markets lies in price information. As
Professors Areeda and Hovenkamp have stated, differentiated
sellers “generally compete with one another sufficiently” that
the prices of one are “greatly constrained” by the prices of
others. 2B AREEDA & HOVENKAMP, ANTITRUST LAW ¶ 563a,
at 384. To distinguish differentiation from separate product
markets, courts thus must “ask whether one seller could
maximize profit” by charging “more than the competitive
price” without “losing too much patronage to other sellers.”
Id. ¶ 563a, at 385. Here, in other words, could so-called
 11
organic supermarkets maximize profit by charging more than
a competitive price without losing too much patronage to
conventional supermarkets? Based on the evidence regarding
Whole Foods’s pricing practices, the District Court correctly
found that the answer to that question is no. So-called organic
supermarkets are engaged in product differentiation; they do
not constitute a product market separate from all
supermarkets.

Second, the FTC points to internal Whole Foods studies
and other evidence showing that if a Wild Oats near a Whole
Foods were to close, most of the Wild Oats customers would
shift to Whole Foods. But that says nothing about whether
Whole Foods could impose a five percent or more price
increase and still retain those customers (and its other
customers), which is the relevant antitrust question. In other
words, the fact that many Wild Oats customers would shift to
Whole Foods does not mean that those customers would stay
with Whole Foods, as opposed to shifting to conventional
supermarkets, if Whole Foods significantly raised its prices.
And even if one could infer that all of those former Wild Oats
customers would so prefer Whole Foods that they would shop
there even in the face of significant price increases, that
would not show whether Whole Foods could raise prices
without driving out a sufficient number of other customers as
to make the price increases unprofitable. In sum, this
argument is a diversion from the economic analysis that must
be conducted in antitrust cases like this. The District Court
properly found that the expert evidence in the record leads to
the conclusion that Whole Foods could not profitably impose
such a significant price increase.4

4
According to Judge Tatel’s opinion, the FTC’s expert
purported to say that Whole Foods could impose a five percent or
greater price increase because of the number of Wild Oats
 12
Third, the FTC cites comments by Whole Foods CEO
John Mackey as evidence that Whole Foods perceived Wild
Oats to be a unique competitor. Even if Mackey’s comments
were directed only to Wild Oats, that would not be evidence
that Whole Foods and Wild Oats are in their own product
market separate from all other supermarkets. It just as readily
suggests that Whole Foods and Wild Oats are two
supermarkets that have similarly differentiated themselves
from the rest of the market, such that Mackey would be
especially pleased to see that competitor vanish. Beating the
competition from similarly differentiated competitors in a
product market is ordinarily an entirely permissible
competitive goal. Saying as much, as Mackey did here, does
not mean that the similarly differentiated competitor is the
only relevant competition in the marketplace. Moreover,
Mackey nowhere says that the merger would allow Whole
Foods to significantly raise prices, which of course is the
issue here. In any event, intent is not an element of a § 7
claim, and a CEO’s bravado with regard to one rival cannot

customers who would switch to Whole Foods rather than
conventional supermarkets. Tatel Op. at 6 (citing Rebuttal Expert
Report of Kevin M. Murphy ¶ 32 (July 13, 2007)). But that
ambiguous statement constituted a single, unexplained sentence in
the middle of a lengthy report. Moreover, the expert apparently
based his conclusion entirely on the so-called “Project Goldmine”
analysis of diversion ratios associated with store closures – that is,
of the number of Wild Oats customers who would switch to Whole
Foods in the event that a Wild Oats store closes and Whole Foods
prices remain constant. As the expert himself appeared to
acknowledge, see Murphy Report ¶ 32 (noting that “marginal and
average diversion ratios could be different”), the data do not
necessarily shed any light on how many customers would continue
to shop at a merged Wild Oats-and-Whole Foods entity in the event
that the entity uniformly increased prices. All of this no doubt
explains why the FTC never even mentioned this aspect of its
expert’s report in the argument section of its opening brief.
 13
alter the laws of economics: Mere boasts cannot vanquish
real-world competition – here, from Safeway, Albertson’s,
and the like. As Judge Easterbrook has explained, “Firms
need not like their competitors; they need not cheer them on
to success; a desire to extinguish one’s rivals is entirely
consistent with, often is the motive behind, competition.”
A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d
1396, 1402 (7th Cir. 1989). And “[i]f courts use the vigorous,
nasty pursuit of sales as evidence of a forbidden ‘intent’, they
run the risk of penalizing the motive forces of competition.”
Id. “Intent does not help to separate competition from
attempted monopolization . . . .” Id.

Fourth, the FTC says that a study by its expert, Dr.
Murphy, demonstrates that Whole Foods’s profit margins
decreased in geographic areas where it competed against Wild
Oats. But the relevant inquiry under the Merger Guidelines is
prices. And Dr. Murphy did not determine whether Whole
Foods prices ever differed as a result of competition from
Wild Oats.

Moreover, there was only a slight difference between
Whole Foods margins when Wild Oats was in the same area
and when it was not. The overall difference was 0.7 percent,
which Dr. Murphy himself recognized was not statistically
significant. The FTC’s evidence on margins is wafer-thin and
does not suffice to show that organic stores constitute their
own product market.

Fifth, the FTC points to evidence that Whole Foods’s
entry into a particular area, unlike the entry of conventional
supermarkets, caused Wild Oats to lower its prices. Dr.
Murphy’s reliance on Wild Oats’s reaction to Whole Foods’s
entry is questionable. Dr. Murphy based his entire analysis on
a meager two events, hardly a large sample size. In addition,
 14
Dr. Murphy’s analysis did not control for the reaction of
conventional supermarkets to Whole Foods’s entry. In other
words, he assumed that the relevant product market was so-
called organic supermarkets (the point he was trying to prove)
and therefore assumed that all changes in Wild Oats’s prices
were directly caused by Whole Foods’s entry. But if
conventional supermarkets also lowered prices to compete
with Whole Foods when Whole Foods entered, Wild Oats’s
price decreases may well have been due to the overall
reduction in prices by all supermarkets in the area. If that
were true, the relevant product market would obviously be all
supermarkets, not just so-called organic supermarkets. Dr.
Murphy’s analysis never confronted that possibility or the
complexity of how competition works in this market; his
analysis appears to have assumed the conclusion and reasoned
backwards from there.

Moreover, the fact that Whole Foods and Wild Oats went
toe-to-toe on occasion does not mean that they did not also go
toe-to-toe with conventional supermarkets, which is the key
question. And it is revealing that despite having access to the
necessary data for six such events, Dr. Murphy did not
analyze the effect of a Wild Oats exit on Whole Foods’s
prices. As Dr. Scheffman wrote: “A number of [Wild Oats]
stores have closed . . . . [Dr. Murphy] has done no analysis to
assess the effects of those store exits in the local shopping
areas. . . . This is a curious omission, since such evidence, if
reliable and reliably analyzed, would be relevant to the issue
of what happens in local market areas in which a [Wild Oats]
store closes.” Scheffman Rebuttal ¶ 63, at 21.

The bottom line is that, as the District Court found, there
is no evidence in the record suggesting that Whole Foods
priced differently based on the presence or absence of a Wild
Oats store in the area. That is a conspicuous – and all but
 15
dispositive – omission in Dr. Murphy’s analysis and in the
FTC’s case.

Sixth, the FTC cites the openings of three Earth Fare
stores near Whole Foods stores in North Carolina, which
caused decreases in Whole Foods’s prices in those areas. But
soon after those entries, Whole Foods’s prices returned to
normal levels. So the record hardly shows the sort of
“nontransitory” price changes that are the touchstone of
product-market definition. See Merger Guidelines § 1.11. A
price increase ordinarily must last “for the foreseeable
future,” id., considered by some to be more than a year, to
qualify as “nontransitory.” See 2B AREEDA & HOVENKAMP,
ANTITRUST LAW ¶ 537a, at 290. Moreover, the entry of a
Safeway store in Boulder, Colorado, had a similar short-term
impact on Whole Foods, indicating that whatever inference
should be drawn from the Earth Fare entries cannot be limited
to so-called organic supermarkets but rather applies to
conventional supermarkets.

The FTC’s reference to Earth Fare mistakenly focuses on
a few isolated trees instead of the very large forest indicating
a competitive market consisting of all supermarkets. In short,
I fail to see how Whole Foods’s temporary price changes to
compete against three Earth Fare stores in North Carolina
could possibly be a hook to block this nationwide merger of
Whole Foods and Wild Oats.

III

A

The opinions of Judge Brown and Judge Tatel rest on two
legal points with which I respectfully but strongly disagree.
 16
First, the Court’s decision resuscitates the loose antitrust
standards of Brown Shoe Co. v. United States, 370 U.S. 294
(1962), the 1960s-era relic. See, e.g., Brown Op. at 16 (“We
look to the Brown Shoe indicia . . . .”); Tatel Op. at 9 (“Brown
Shoe lists ‘distinct prices’ as only one of a non-exhaustive list
of seven ‘practical indicia’ that may be examined to
determine whether a separate market exists.”) (citation
omitted). This is a problem because Brown Shoe’s brand of
free-wheeling antitrust analysis has not stood the test of time.
See, e.g., EINER ELHAUGE & DAMIEN GERADIN, GLOBAL
ANTITRUST LAW AND ECONOMICS 874 (2007) (“Modern
practice takes a much more rigorous approach to market
definition [than Brown Shoe]”); 4 PHILLIP E. AREEDA &
HERBERT HOVENKAMP, ANTITRUST LAW ¶ 913a, at 62 (2d ed.
2006) (“One alternative that we do not recommend is a return
to Brown Shoe’s language of ‘submarkets’”).

As demonstrated in this Court’s most recent merger case,
the practical indicia test of Brown Shoe no longer guides
courts’ merger analyses because it does not sufficiently
account for the basic economic principles that, according to
the Supreme Court, must be considered under modern
antitrust doctrine. See FTC v. H.J. Heinz Co., 246 F.3d 708,
715-16 (D.C. Cir. 2001) (not applying Brown Shoe practical
indicia test; instead using the economically grounded
Herfindahl-Hirschman Index test for market definition
employed in FTC v. Staples, Inc., 970 F. Supp. 1066 (D.D.C.
1997)); cf. Leegin Creative Leather Prods. v. PSKS, Inc., 127
S. Ct. 2705, 2718 (2007) (“the antitrust laws are designed
primarily to protect interbrand competition”); State Oil Co. v.
Khan, 522 U.S. 3, 14 (1997) (“Our analysis is also guided by
our general view that the primary purpose of the antitrust laws
is to protect interbrand competition.”); Hosp. Corp. of Am. v.
FTC, 807 F.2d 1381, 1386 (7th Cir. 1986) (Posner, J.) (noting
the “most important developments that cast doubt on the
 17
continued vitality of such cases as Brown Shoe”). Judge Bork
forcefully catalogued the flaws in the Brown Shoe approach
30 years ago in his landmark antitrust book; indeed, his
cogent critique helped usher Brown Shoe and several other
cases to the jurisprudential sidelines. See ROBERT H. BORK,
THE ANTITRUST PARADOX 210, 216 (1978) (“It would be
overhasty to say that the Brown Shoe opinion is the worst
antitrust essay ever written. . . . Still, all things considered,
Brown Shoe has considerable claim to the title. . . . Brown
Shoe was a disaster for rational, consumer-oriented merger
policy.”); George L. Priest, The Abiding Influence of The
Antitrust Paradox, 31 HARV. J.L. & PUB. POL’Y 455, 459
(2008) (praising Judge Bork’s criticism of the “now
notorious, though then mainstream” Brown Shoe opinion).

The Court’s revival of the loose Brown Shoe standard
threatens to reverse this trend and to upend modern merger
practice.5

Second, the opinions of Judge Brown and Judge Tatel
both dilute the standard for preliminary injunction relief in
antitrust merger cases, such that the FTC apparently need not
establish a “likelihood of success on the merits.” Heinz, 246

5
As two antitrust commentators perceptively stated: “The
basic problem with the FTC’s position in Whole Foods was that it
lacked the pricing evidence it had in Staples, which showed that
customers did not go elsewhere if the office superstores increased
their prices. Whole Foods is an attempt by the FTC to persuade a
court that if you take a CEO’s statements about a merger and stir it
in with evidence showing the existence of several ‘practical indicia’
from Brown Shoe, the resulting mixture should trump objective
evidence about how customers would react in the event of a price
increase.” Carlton Varner & Heather Cooper, Product Markets in
Merger Cases: The Whole Foods Decision (Oct. 2007),
www.antitrustsource.com.
 18
F.3d at 714. In particular, Judge Brown and Judge Tatel rely
heavily on their belief that: “In this circuit, the standard for
likelihood of success on the merits is met if the FTC has
raised questions going to the merits so serious, substantial,
difficult and doubtful as to make them fair ground for
thorough investigation, study, deliberation and determination
by the FTC in the first instance and ultimately by the Court of
Appeals.” Tatel Op. at 2 (internal quotations and citations
omitted); see also id. at 10, 12; Brown Op. at 8 (indicating
that “the FTC will usually be able to obtain a preliminary
injunction blocking a merger” by satisfying the same test).

In applying this watered-down test for issuing a
preliminary injunction in FTC merger cases, Judge Brown
and Judge Tatel rely on language contained in our opinion in
Heinz. However, Heinz only assumed this particular gloss on
the “likelihood of success on the merits” requirement for
preliminary injunctions based on a concession in the case.
See Heinz, 246 F.3d at 715 (D.C. Cir. 2001) (“This specific
standard was articulated by the court below, and it is a
standard to which the appellees have not objected.”) (citation
omitted). Heinz did not hold that this gloss was the proper
meaning of 15 U.S.C. § 53(b) in FTC preliminary injunction
merger cases.6

6
The gloss on § 53(b) appears to have arisen originally in
other circuits around the middle of the 20th century in connection
with a more general view that a lighter “likelihood of success”
standard is appropriate whenever the balance of equities weighs
strongly in favor of issuing an injunction. Compare FTC v.
Beatrice Foods Co., 587 F.2d 1225, 1229 (D.C. Cir. 1978)
(Appendix to Statement of MacKinnon & Robb, JJ.) (citing
Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d
Cir. 1953) (which noted in the FTC merger context that “if the
other elements are present (i.e., the balance of hardships tips
decidedly toward plaintiff), it will ordinarily be enough that the
 19
This “serious questions” standard is inconsistent with the
relevant statutory text. The statute unambiguously requires
that courts consider “the Commission’s likelihood of ultimate
success” when the FTC seeks to preliminarily enjoin a
merger. 15 U.S.C. § 53(b).7

plaintiff has raised questions going to the merits so serious . . . .”)),
with Omar v. Harvey, 416 F. Supp. 2d 19, 28 (D.D.C. 2006) (citing
Washington Metro. Area Transit Comm’n v. Holiday Tours, 559
F.2d 841, 842-44 & n.1 (D.C. Cir. 1977) (which noted outside the
FTC merger context that courts may generally apply the relatively
lax “serious questions” approach only “when confronted with a case
in which the other three [preliminary injunction] factors strongly
favor interim relief”)). But as explained below in footnote 7,
Congress in 1973 codified a preliminary injunction standard for
FTC merger cases that specifically directs courts to consider the
Commission’s “likelihood of ultimate success.” 15 U.S.C. § 53(b).
And as explained in the text, the Supreme Court recently repudiated
the “serious questions” approach to preliminary injunctions in
general by requiring a likelihood of success showing in all cases,
regardless of whether the balance of equities weighs in favor of the
injunction. See Munaf v. Geren, 128 S. Ct. 2207, 2219 (2008).
7
In justifying his adoption of the “serious questions” test for
likelihood of success, Judge Tatel highlights the “unique ‘public
interest’ standard in 15 U.S.C. § 53(b).” Tatel Op. at 3 (citing FTC
v. Exxon Corp., 636 F.2d 1336, 1343 (D.C. Cir. 1980)); see also id.
at 3. But the statute explicitly preserves the traditional likelihood
of success requirement. See § 53(b) (“Commission’s likelihood of
ultimate success”). What makes § 53’s standard for preliminary
injunctions “unique,” as we have explained, is that the FTC need
not show irreparable harm and, secondarily, that private equities are
subordinated to public equities. See FTC v. Weyerhaeuser Co., 665
F.2d 1072, 1081-83 (D.C. Cir. 1981) (“The case law Congress
codified removes irreparable damage as an essential element of the
preliminary injunction proponent’s case and permits the judge to
presume from a likelihood of success showing that the public
interest will be served by interim relief.”); see also Heinz, 246 F.3d
at 727 n.25; Exxon Corp., 636 F.2d at 1343. Far from reading the
 20
There is a significant difference, moreover, between the
relaxed “serious questions” standard applied by Judge Brown
and Judge Tatel and the traditional likelihood of success
standard – as the Supreme Court explained just a few months
ago in Munaf v. Geren, 128 S. Ct. 2207 (2008), rev’g sub
nom. Omar v. Harvey, 479 F.3d 1 (D.C. Cir. 2007). To be
sure, that case did not involve a merger; but the Supreme
Court there did address the general likelihood-of-success
preliminary injunction standard – the same standard that is
expressly articulated in 15 U.S.C. § 53(b). The District Court
in the Omar litigation – like Judge Brown and Judge Tatel
here – had concluded that a preliminary injunction was
justified because the case presented questions “so serious,
substantial, difficult and doubtful, as to make them fair
ground for litigation and thus for more deliberative
investigation.” Omar v. Harvey, 416 F. Supp. 2d 19, 23-24
(D.D.C. 2006) (citation omitted). This Court then affirmed
the District Court’s preliminary injunction. See Omar v.
Harvey, 479 F.3d 1, 11 (D.C. Cir. 2007) (concluding that the
Court “need not address” the merits of petitioner’s claims).

But the Supreme Court unanimously rejected that lesser
“serious questions” standard as too weak and not equivalent
to the “likelihood of success” necessary for a preliminary
injunction to issue. See Munaf, 128 S. Ct. at 2219 (“We begin
with the basics. . . . [A] party seeking a preliminary
injunction must demonstrate, among other things, ‘a
likelihood of success on the merits.’”) (citations omitted); see
also Winter v. NRDC, 2008 WL 4862464 at *9 (Nov. 12,

“likelihood of ultimate success” language out of the statute, we
have recognized that the statutory phrase “weighing the equities
and considering the likelihood of ultimate success” was specifically
added by the Conference Committee and that this “deliberate
addition” should not “be brushed aside as essentially repetitive or
meaningless.” Weyerhaeuser, 665 F.2d at 1081.
 21
2008) (“A plaintiff seeking a preliminary injunction must
establish that he is likely to succeed on the merits”) (citing
Munaf, 128 S. Ct. at 2218-19). And the Supreme Court
directly criticized the approach of the District Court and this
Court in the Omar litigation: “one searches the opinions
below in vain for any mention of a likelihood of success as to
the merits.” Munaf, 128 S. Ct. at 2219.

The Court in this case repeats the same mistake made in
Omar of watering down the preliminary injunction standard.
Both Judge Brown and Judge Tatel approve the FTC’s request
for preliminary injunction without making the essential
“likelihood of success” finding that is required by the
statutory text and Supreme Court precedent. See Brown Op.
at 8, 20; Tatel Op. at 1-3, 15-16. To the extent the “serious
questions” standard they apply was ever appropriate for
preliminary injunction merger cases, the combination of the
clear statutory text in 15 U.S.C. § 53(b) and the Supreme
Court decision in Munaf convincingly demonstrates that it is
not the proper standard now.

In short, the approach of Judge Brown and Judge Tatel
revives the moribund Brown Shoe practical indicia test and
applies an overly lax preliminary injunction standard for
merger cases. I respectfully disagree on both counts. In my
judgment, the FTC may obtain a preliminary injunction only
by establishing a likelihood of success – namely, a likelihood
that, among other things, the merged entity would possess
market power and could profitably impose a significant and
nontransitory price increase.8
8
The precedential effect of today’s splintered decision is
muddied somewhat by the fact that Judge Brown and Judge Tatel
have issued individual opinions concurring in the judgment. That
said, it is of course well-settled that the mere fact that there is no
majority opinion does not mean that the decision constitutes no
 22

precedent for future cases. This happens quite frequently with
splintered Supreme Court decisions where there is no majority
opinion. As the Supreme Court has repeatedly explained, in the
vast majority of cases without a majority opinion there is still a
binding holding of the Court – even if it can occasionally be
difficult to determine. This is known as the Marks principle. See
Marks v. United States, 430 U.S. 188, 193 (1977); King v. Palmer,
950 F.2d 771, 783 (D.C. Cir. 1991) (en banc) (“implicit agreement”
between judges can produce a “controlling” principle of law); see
generally Planned Parenthood of Southeastern Pennsylvania v.
Casey, 947 F.2d 682, 691-97 (3d Cir. 1991). Like the Supreme
Court, this Court has routinely recognized that a decision without a
majority opinion usually still constitutes a binding precedent. See,
e.g., In re Navy Chaplaincy, 534 F.3d 756, 759 n.2 (D.C. Cir. 2008)
(construing Hein v. Freedom From Religion Foundation, 127 S. Ct.
2553 (2007)); Shurberg Broadcasting of Hartford, Inc. v. FCC, 876
F.2d 902, 910 (D.C. Cir. 1989) (“a lower federal court must do its
level best to extract the holding that commanded a majority in each
case to arrive at the governing principles and limitations”), rev’d on
other grounds sub nom. Metro Broad., Inc. v. FCC, 497 U.S. 547
(1990); Martin v. Malhoyt, 830 F.2d 237, 247 n.28 (D.C. Cir. 1987)
(citing Marks and noting that Justice Black’s concurrence in Barr v.
Matteo, 360 U.S. 564 (1959), “provides the ‘narrowest grounds’ for
the Court’s disposition of the case and thus constitutes the Court’s
holding”). Only in very rare cases do the opinions making up a
majority of a court contain no common principles or common
ground on which to derive any precedential holding of the court.
See Nichols v. United States, 511 U.S. 738, 743-46 (1994)
(construing Baldasar v. Illinois, 446 U.S. 222 (1980)); King, 950
F.2d at 782-85.
It is unclear whether district courts and future courts of appeals
will construe this case as one of those rare situations that falls
entirely outside the Marks rule. At a minimum, this confused
decision will invite years of uncertainty and litigation over what the
holding of this case is – a separate but important problem with the
Court’s approach.
 23
B

In reaching her conclusion, Judge Brown also relies on a
distinction between marginal consumers and core consumers.
See, e.g., Brown Op. at 19 (“In sum, the district court believed
the antitrust laws are addressed only to marginal consumers.
This was an error of law, because in some situations core
consumers, demanding exclusively a particular product or
package of products, distinguish a submarket.”). But the FTC
never once referred to, much less relied on, the distinction
between marginal and core consumers in 86 pages of briefing
or at oral argument. The terms “marginal consumer” and
“core consumer” are nowhere to be found in its briefs.

In any event, I respectfully disagree with Judge Brown’s
emphasis on core customers. For a business to exert market
power as a result of a merger, it must be able to increase
prices (usually by five percent or more) while retaining
enough customers to make that price increase profitable. See
2B PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST
LAW ¶ 501, at 109 (3d ed. 2007) (“A defendant firm has
market power if it can raise price without a total loss of
sales.”). If too many “marginal” customers are turned off by
a price hike, then the hike will be unprofitable even if a large
group of die-hard “core” customers remain active clients.
Therefore, a focus on core customers alone cannot resolve a
merger case. The question here is whether Whole Foods
could increase prices by five percent or more without losing
so many marginal customers as to make the price increase
unprofitable. See id. ¶ 536, at 284. As discussed above, the
FTC has not come close to making that showing. Moreover,
there is no support in the law for that singular focus on the
core customer. Indeed, if that approach took root, it would
have serious repercussions because virtually every merger
involves some core customers who would stick with the
 24
company regardless of a significant price increase. So under
this “core customer” approach, many heretofore permissible
mergers presumably could be blocked as anticompetitive.
That cannot be the law, and it is not the law.

In a related vein, Judge Brown repeatedly suggests that
Whole Foods and Wild Oats engage in “price discrimination”
– more specifically, Judge Brown asserts that organic
supermarkets “discriminate on price between their core and
marginal customers, thus treating the former as a distinct
market.” Brown Op. at 17, 19. But this assertion has no
factual support in the record. For antitrust purposes, price
discrimination normally involves one seller charging different
prices to different customers for the same product. See 2B
PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST
LAW ¶ 517a (noting as an indication of market power
“systematic price discrimination, as when a seller can identify
two (or more) groups of customers with different demands
and charge each group different prices even though its cost of
serving each group is the same”). If there is price
discrimination in an industry, then under certain
circumstances a relevant market may be defined to include
only those customers who pay the higher price. See
Horizontal Merger Guidelines § 1.12. In this case, however,
neither Judge Brown nor the FTC has pointed to any evidence
suggesting either that price discrimination occurred before
this merger or that the merged entity will be able to price-
discriminate. In other words, there is no reason to think that
“core” as opposed to non-core customers ever pay higher
prices for the same products in organic supermarkets.

IV

In the end, the FTC’s case is weak and seems a relic of a
bygone era when antitrust law was divorced from basic
 25
economic principles. The record does not show that Whole
Foods priced differently based on the presence or absence of
Wild Oats in the same area. The reason for that and the
conclusion that follows from that are the same: Whole Foods
competes in an extraordinarily competitive market that
includes all supermarkets, not just so-called organic
supermarkets. The merged entity thus could not exercise
market power such that it could profitably impose a
significant and nontransitory price increase. Therefore, there
is no sound legal basis to block this merger.

The issues presented in this case are important to antitrust
regulators and practitioners, to potentially merging
companies, and ultimately to the overall economy. The
splintered panel opinions will create enormous uncertainty,
debate, and litigation over the meaning and effect of this
decision. And to the extent common principles and holdings
are derived from the opinions of Judge Brown and Judge
Tatel, those principles will authorize the FTC to obtain
preliminary injunctions and block mergers based on a
watered-down preliminary injunction standard and without
sufficient regard for the economic principles that have
undergirded modern antitrust law. That will give the FTC far
greater power to block mergers than the statutory text or
Supreme Court precedents permit.

***

I respectfully dissent.