by Hilary Oliver

Almost a year to the day after Austin, Texas-based Whole Foods Market announced it had closed on its acquisition of Boulder, Colo.-based Wild Oats Markets, a federal appeals court overturned a lower court's ruling allowing the deal. A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit reversed the district court's denial of a preliminary injunction to block the merger, which had been requested by the Federal Trade Commission.

The appeals court stated that the district court had underestimated the FTC's likelihood of success in an eventual case while the two companies were rushing toward a financial deadline. The judges wrote that the district court had made a legal error in "assuming market definition must depend on marginal consumers."

Now that Whole Foods has sold or closed a number of Wild Oats stores, Whole Foods argued that the transaction is irreversible, and therefore the FTC's request for an injunction to block it is moot. But the judges wrote that they would rarely consider a transaction truly irreversible, citing previous cases giving the courts "large discretion" to "create remedies effective to redress [antitrust] violations and to restore competition," and stating that the case is, therefore, not moot.

"The whole point of a preliminary injunction is to avoid the need for intrusive relief later," the judges wrote, sending the case back to district court.

Though the ruling did not require the deal itself be undone, it sent a message that the FTC's case had not been fully considered, and that dissolution of the merger was still possible.

Grocery-retailing expert Kevin Coupe said he doesn't know how the two companies could possibly disentangle at this point. "What would this do to shareholders?" he asked. "The FTC is like a dog chasing a car or truck. It's not going to give up, but has no idea what it would do if it actually caught up."