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In deciding the Federal Trade Commissions' (FTC) request for a preliminary injunction blocking a merger under 15 U.S.C.S. § 53(b), a district court must balance the likelihood of the FTC's success against the equities, under a sliding scale. 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. Therefore, the FTC will usually be able to obtain a preliminary injunction blocking a merger by raising questions going to the merits so serious, substantial, difficult, and doubtful as to make them fair ground for thorough investigation. By meeting this standard, the FTC creates a presumption in favor of preliminary injunctive relief, 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. Conversely, a greater likelihood of the FTC's success will militate for a preliminary injunction unless particularly strong equities favor the merging parties.
The Federal Trade Commission (FTC) sought a temporary restraining order and preliminary injunction to block the merger of Whole Foods Market, Inc. and Wild Oats Markets, Inc. According to the FTC, Whole Foods and Wild Oats were the two largest operators of what it called premium, natural, and organic supermarkets ("PNOS"). The FTC alleged that the merger would create monopolies in eighteen cities because Whole Foods and Wild Oats were the only PNOS. The district court held that PNOS was not a distinct market and that Whole Foods and Wild Oats competed 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. FTC appealed.
Did the district court err in denying FTC’s motion for preliminary injunction to block the merger of Whole Foods and Wild Oats?
The court noted that the district court assumed market definition had to depend on marginal consumers. This was an error of law, because in some situations core consumers, demanding exclusively a particular product or package of products, distinguished a submarket. The FTC described the core premium, natural, and organic supermarkets (PNOS) customers, explained how PNOS catered to these customers, and showed these customers provided the bulk of PNOS's business. The FTC put forward economic evidence showing directly how PNOS discriminated on price between their core and marginal customers, thus treating the former as a distinct market. Therefore, the instant court could not conclude that the FTC would never be able to prove a PNOS submarket. This was not to say the FTC had proved such a market, which was not necessary at this point. To obtain a preliminary injunction under § 53(b), the FTC needed only show a likelihood of success sufficient, using the sliding scale, to balance any equities that might weigh against the injunction.