Food company Whole Foods Market has been given
permission to buy Wild Oats Market in a $565 million deal that the
FTC claimed would harm competition in the organic food market in
the US.
At the centre of the case were message board postings and emails
written by Whole Foods CEO John Mackey. In anonymous messages
posted on financial news boards he denigrated Wild Oats as badly
managed and its stock as overpriced.
In email memos he told his board that acquiring Wild Oats would
help them avoid "nasty price wars" in a move that seemed to bolster
the FTC's case that the deal would damage competition in the
organic foods sector.
A Columbia federal appeals court ruled, though, that the deal
could go ahead. It backed an earlier ruling that also cleared that
deal. In the original ruling the court found that the merger would
not substantially harm competition because 60% of natural and
organic food bought was sold through traditional supermarkets and
not specialist shops.
Mackey's anonymous message postings, which he wrote under a
pseudonym that was an anagram of his wife's name, contained
criticism of the competitor which he eventually bought.
The messages appeared over an eight year period on Yahoo!'s
finance discussion boards. In one he said that Wild Oats management
''clearly doesn't know what it is doing". In another he said that
Wild Oats "has no value and no future".
The US financial regulator the Securities and Exchange
Commission (SEC) is conducting an investigation into Mackey's
behaviour.
Mackey was identified as the author of the posts in documents
submitted to the court by the FTC as part of its case. He said that
some of the views he expressed were his own and claimed that others
were products of his playing "devil's advocate".
"I posted on Yahoo! under a pseudonym because I had fun doing
it," he said in a statement at the time. "Many people post on
bulletin boards using pseudonyms. I never intended any of those
postings to be identified with me."
The internal memos were potentially more damaging for the
court's ruling on the competitive landscape. In them Mackey
appeared to bolster the FTC's central accusation, that the deal
would reduce competition in the marketplace and could help Whole
Foods to have a greater control on pricing.
In those documents he told board members that the deal would
"eliminate forever" the chances of someone establishing a new
alternative organic food retailer as well as that the deal would
help his firm to "avoid nasty price wars".
The case highlighted the risks of executives expressing personal
views on public forums. The risks are particularly high for
executives in quoted companies who bear a higher regulatory burden
than private firms.
"Some executives want to blog and they want to speak their minds
to any shareholders or customers who will listen," said Struan
Robertson, a technology law specialist at Pinsent Masons, the law
firm behind OUT-LAW.COM. "The risk is that executives might spill
company secrets in a bid to keep a blog interesting," he said.
"Listed companies have to make market announcements through proper
channels. Blogs and message boards are not proper channels.
Directors are also under fiduciary duties that off-the-cuff remarks
might overlook."
"Blogs at executive level are almost always sanitised and
filtered, and therefore boring for the reader," said Robertson. "If
they're racy they can land the company in hot water. It takes skill
to satisfy your readers and your legal team."
