FTC Fights Whole Foods Ruling

Updated from 3:37 p.m. EDT

SAN FRANCISCO -- The Federal Trade Commission will appeal a federal judge's ruling rejecting its attempt to block a merger between Whole Foods(WFMI Quote)and its main rival, Wild Oats(OATS Quote), on anti-competitive grounds.

U.S. District Court Judge Paul Friedman on Thursday dismissed the FTC's argument that the $565 million merger would result in higher prices and diminished services for customers in the organic-food sector, in which Whole Foods and Wild Oats are dominant players. The FTC had been seeking a preliminary injunction to halt the transaction.

Mitch Katz, a spokesman for the FTC, says the agency is now appealing the decision to the U.S. Court of Appeals for the District of Columbia. It is also asking for an emergency stay from the appeals court to prevent the merger from moving forward.

Whole Foods and Wild Oats have agreed to hold off on any proceedings to close the deal until Monday at noon. If the appeals court does not issue the emergency stay before then, the two companies can begin to merge, making it much harder for the FTC to stop the deal.

Friedman's 93-page opinion is under seal because it contains confidential information about Whole Foods and Wild Oats, as well as other supermarket chains. But Whole Foods put out a statement on Friday supporting the judge's decision.

"The opinion is firmly grounded in both the facts and the law, and provides a detailed analysis of 'what is really happening in the marketplace,'" the company said in the statement. "We are confident that the merger will be allowed to proceed, which will benefit the customers, vendor partners, shareholders and communities of Whole Foods Market and Wild Oats Markets."