The Federal Trade Commission has temporarily suspended its antitrust challenge to Whole Foods Market's (NASDAQ: WFMI) 2007 acquisition of Wild Oats to allow the company to explore settlement possibilities.

David Wales, the chief competition enforcer at the FTC, told (subscription required) The Wall Street Journal that "We're going to roll up our sleeves and take a look at what they're offering. We're hopeful that a settlement can be reached."

The FTC won't give up its battle with Whole Foods (NYSE: WFMI) over the company's long-complete merger with Wild Oats Markets, but an agreement has been reached between Whole Foods and a small, local organic and natural foods' grocery, New Seasons Market. About six weeks ago in the New Seasons blog, popular CEO Brian Rohter highlighted an invasive subpoena received from Whole Foods' attorneys, claiming that his company's secrets are party to the FTC/Whole Foods dispute. The subpoena demanded a wide variety of documents, including all documents relating to competition with Whole Foods or Wild Oats; financial information, by store; market studies and strategic plans; and all plans for future stores, expansion and renovation. Local shoppers and business owners cried foul; the subpoena, many believed, was Whole Foods playing dirty pool.

Today, thanks to pressure from both the local and national community, Whole Foods came to an agreement with New Seasons whose terms weren't released, but in which the small Pacific Northwest chain will be required to release far less sensitive information. Rohter wrote that he was "pleased" with the outcome.

It could be that Whole Foods has far bigger fish to fry than whatever advantage it could have gained from New Seasons. The FTC recently asked a judge to order Whole Foods to bring back the Wild Oats signs, and to voluntarily halt whatever integration it still hasn't completed. What's more, rumors that the company is a takeover target could be distracting management as they (depending on these reports' truth) spin the rumor mill or wheel and deal with the potential acquirers. On the days' news, the stock was down 21 cents to $12.16, about four dollars higher than its five-year low, recorded just before Thanksgiving in November 2008.

How do you de-merge two companies? The FTC thinks that the marriage of Wild Oats and Whole Foods (NASDAQ: WFMI) was anti-competitive. Too much concentration in the high-end organic food retail business.

The FTC brought charges against Whole Foods to stop the deal, but the agency did not get its bite at the apple until after the merger had closed. Now it wants to take apart what it sees as a firm created against the better interests of consumers.

According to The Wall Street Journal, the FTC wants all the stores that carried the Wild Oats name to take down their Whole Foods signs and put the old name back up. "The FTC also said it has asked Whole Foods to voluntarily halt further integration of the two companies while the FTC continues its legal challenge to the merger."

Killing a merger that is already done has to be fairly hard. If the FTC prevails, what does Whole Foods do? Does it hire a new management team and spin Wild Oats out into a new public company? Does it restate all of its recent financials to back out Wild Oats results?

From a legal standpoint, the FTC may be right, but rebuilding Wild Oats could kill the company, especially during a recession. The costs of turning it into a standalone operation could be so great that the financial burden would be more than the retailer could bear. Wild Oats might become independent again only to go bankrupt.

The government may be right, but it is not practical.

Douglas A. McIntyre is an editor at 24/7 Wall St.

With the FTC, argues Whole Foods Markets (NYSE: WFMI), it's personal. Ever since the federal agency began its review over the company's merger with Wild Oats Markets about a year and a half ago, Whole Foods says, the deck has been stacked against the organic and natural foods store chain. What's more, the FTC has continued to pursue Whole Foods to undo its deal even though the merger closed in August 2007, after the FTC lost its first challenge to the merger in federal court. Just last week, reports of an intrusive subpoena had many watchers crying foul over Whole Foods' behavior; this week, the FTC is getting its own harsh spotlight.

Whole Foods is appealing to Congress, and yesterday filed a lawsuit to stop the FTC from continuing its challenge to the long-completed merger. The FTC is running a rigged game, says CEO John Mackey, and what's more -- "we would be better off today if we hadn't done this deal" with Wild Oats. With the depressed economy (and, grocery analysts like myself would argue, Whole Foods' inability to develop a cohesive mission that resonated with sustainability-conscious shoppers), Whole Foods sales have been bottoming out, and the debt the company accrued to complete the merger is now weighing heavy on the balance sheet.

Indeed, this battle over a minority of the grocery market -- a minority the FTC inexplicably argues is called "premium and natural grocery" and is unfairly dominated by Whole Foods -- has gone on long enough.

If a new legal ruling forces Whole Foods to reverse its Wild Oats buy-out, WFMI shares could soar.

A federal appeals court has decided that the FTC's challenge of the merger between Whole Foods (NASDAQ: WFMI) and Wild Oats should have gone forward. A lower court has said the FTC had to cease its investigation into whether the marriage was anti-competitive.

According to The Wall Street Journal, "Jeffrey Schmidt, head of the FTC's competition bureau, said the agency is hopeful the ruling will ultimately allow the FTC to undertake a full review of competitive issues raised by the combined companies."

Whole Foods ended up with 74 Wild Oats stores, which it plans to cut down to 50. The FTC could ask the new company to close other locations in areas where the new parent has two stores, and, perhaps a monopoly for that region.

The FTC could also argue that the entire merger constitutes an antitrust threat. That news could not be better for WFMI shareholders. If Wild Oat has to be spun back out, it would need to re-brand its stores, add expensive management, and undertake its own marketing. In other words, it would be a severely weakened competitor for Whole Foods, instead of a thorn in the side of WFMI shareholders.

Shares in WFMI are off well over 40% this year. Stocks in many other major food retailers are closer to flat. Part of this may be due to the concern that premium products do poorly in a recession. But it may also have to do with the fact that Wild Oats stores were considered weaker as a group than the original Whole Foods chain.

If WFMI gets to rid itself of the company it got in the buy-out, its shares might get back from $22, near their 52-week low, to the $30 to $40 range.

Douglas A. McIntyre is an editor at 247walls.com.

Although Whole Foods Market's (NASDAQ: WFMI) acquisition of Wild Oats has already been completed, the FTC is still trying to get in the way. The Commission is asking a Washington appellate court to overturn a federal district court's ruling [subscription required] that allowed the merger to proceed.

According to The Wall Street Journal, the FTC was split on whether to pursue the appeal, and it's considered a Hail Mary pass.

Regardless of whether you support or oppose the district court's ruling that allowed the deal to proceed -- and in spite of Mr. Mackey's crazy message board antics -- you have to wonder what the point of this appeal is. Are taxpayers really having their money spent wisely pursuing an appeal that has no chance?

I don't think so. Consumers would be better served if the FTC devoted some of this energy to cracking down on the numerous fraudulent multi-level marketing companies that continue to recruit distributors, uninhibited by anti-pyramid laws.

MOST NOTEWORTHY: Amazon.com (AMZN), Luminent Mortgage (LUM), Whole Foods (WFMI), Tenet Healthcare (THC) and Pediatrix Medical (PDX) were today's noteworthy upgrades:

• Bernstein upgraded Amazon.com (NASDAQ: AMZN) to Outperform from Market Perform, citing margins on 3rd party transactions that are close to eBay's (EBAY) and that the overseas merchants initiative will increase 3rd party units to 25% of sales. The move is expected to increase operating margins to 6.2% by 2011, above the previously expected improvement of 4.6% by the same time.

• JMP Securities said Luminent Mortgage's (NYSE: LUM) $64.9M emergency financing from Arco Capital may preserve some value for shareholders, and upgraded shares to Market Underperform from Sell.

• JP Morgan added Whole Foods (NASDAQ: WFMI) to its Focus List, and expects the Wild Oats (NASDAQ: OATS) acquisition to be a catalyst for shares.

• Deutsche Bank upgraded Tenet Healthcare (NYSE: THC) to Hold from Sell.

• Matrix USA raised Pediatrix Medical (NYSE: PDX) to Buy from Hold, citing valuation...

OTHER UPGRADES:

• AGL Resources (NYSE: ATG) and Atmos Energy (NYSE: ATO) were upgraded to Buy from Neutral at Calyon.

• Rowan Co (NYSE: RDC) was upgraded to Outperform from Peer Perform at Bear Stearns.

• Goldman raised O'Reilly Automotive (NASDAQ: ORLY) to Buy from Neutral.

• BMO Capital upgraded General Mills (NYSE: GIS) to Outperform from Market Perform.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Things looked pretty rough for the Whole Foods Market (NASDAQ: WFMI) bid to merge with smaller rival Wild Oats (NASDAQ: OATS). In late July, the Whole Foods CEO got himself in trouble over online message board comments and that pushed the stock to a 52-week low of $36. Then the FTC tried to block the merger on the grounds that putting the two companies together would create an operation that would raise prices on organic food.

Since late July, however, Whole Food shares are up 25% while Wild Oats trades just below its 52-week high, at $18.46. In August, short sellers cut their position in Whole Foods by 9.3 million shares to 15.1 million. It was the largest single drop in shares sold short for any company traded on the Nasdaq.

The FTC went so far as to take the fate of the merger to federal court, but both a District and Appeals Court failed to halt the merger. The first case was filed in June and, according to MarketWatch, asked the judge "for a preliminary injunction blocking the deal, pending a full review."

A successful merger is likely to have quick benefits for Whole Foods. Last quarter the smaller Wild Oats made only $1.9 million on almost $312 million of revenue. The organic food retailers costs need to come down.

Cutting those costs is likely to be the first thing that Whole Foods does.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Wal-Mart (NYSE: WMT) has been buying retail chains and entering joint ventures all over the world to improve its international exposure. Now, with same-store sale in the U.S. in trouble, it is setting up a unit to look at acquisitions in the U.S. as well.

According to the Financial Times [subscription], with UK retailer Tesco moving into the U.S. with its "Fresh & Easy" small format neighborhood groceries, Wal-Mart may think that it cannot afford to ignore the success of niche stores.

Wal-Mart could certainly use something to jump start sales in its home market, and groceries may be a good place to start.

There are several retailer operators that could end up on Wal-Mart's radar. One is likely to be Whole Foods (NASDAQ: WFMI), which is about to merge with competing organic food chain Wild Oats (NASDAQ: OATS). At the larger end of the market are operators like Kroger (NYSE: KR), which has a market cap of over $19 billion but has about 3,500 stores and annual sales of over $66 billion. Wal-Mart's market cap is $179 billion.

Wal-Mart needs a lot of help in the U.S. -- it may just buy itself a turnaround.

Douglas A. McIntyre is a partner at 24/7 Wall St.

The FTC's bid to block Whole Foods' (NASDAQ: WFMI) acquisition of Wild Oats (NASDAQ: OATS) has ended in failure. A three-judge panel of D.C.'s U.S. Court of Appeals rejected the government's appeal to have the merger blocked. The judges ruled that the FTC had failed to show that Judge Paul Friedman, who denied the government's motion a week ago today, had acted improperly. Last Thursday, the

Whole Foods says it will close the deal as soon as possible. CEO John Mackey likely remains on the hot-seat, and his anonymous message board ramblings are still the subject of an SEC investigation.

Now that the merger is done, investors can begin to discuss how the merger will impact Whole Foods as a stock. The FTC's effort to block it indicates that it should be very good indeed.

Antitrust is always tough to predict. The laws are sketchy -- and markets can change quickly. Besides, politics can play a big role.

That's why the Federal Trade Commission (FTC)'s antitrust lawsuit -- on the Whole Foods Market (NASDAQ: WFMI) and Wild Oats Markets (NASDAQ: OATS) linkup -- is so interesting.

The FTC believes that the transaction will reduce competition and, as a result, be harmful to consumers.

However, federal Judge Paul Friedman doesn't think so. In fact, yesterday we got his 93-page opinion on the matter (according to a report in Reuters).

Reuters has written that the progress in the Whole Foods (NASDAQ: WFMI) merger with Wild Oats (NASDAQ: OATS) may be a sign that other mergers being scrutinized by the US government may have an easier time of getting approval. Not likely.

The FTC has tried to block the Whole Foods deal because it may raised the amount that consumers have to pay for organic food. Of course, other food retailers offer these products, so the government's position was probably always a bit thin. The agency went to federal court to try to block the marriage, but was unsuccessful.

Now Reuters is floating the theory that the apparent success of the grocery store merger may make it easier for Sirius (NASDAQ: SIRI) to merge with rival satellite company XM (NASDAQ: XMSR).

The concept is full of holes. Sirius and XM are a de facto duopoly and, merged, would be a monopoly. Their ability to send satellite signals with radio content to receivers is not a business that any other company can enter. That is not really a bit like the Whole Foods situation.

The SIRI/XMSR merger is also a deal that faces opposition in Congress. Legislators want to know why they should countenance a business combination that not only lacks any competing technology but is also one that may use its position to raise rates over time.

The news about the Whole Foods merger may be good for it, but the deal has nothing to do with satellite radio.

Douglas A. McIntyre is a partner at 24/7 Wall St.

In spite of John Mackey's most self-destructive efforts at getting the merger he wanted so badly blocked,. it appears that it will go through. Although the FTC says it will appeal, Whole Foods Market (NASDAQ: WFMI) appears poised to acquire rival Wild Oats (NASDAQ: OATS). Shares of Whole Foods are up 6.3% on the news after-hours. Wild Oats, the buyout target, is seeing its stock soar almost 20%.

According to the Associated Press,U.S. District Judge Paul L. Friedman's filed a 93-page document (sealed because if contains trade secrets) denying the FTC's plea to block the deal. The FTC argued that the merger would lead to higher prices for consumers, and appeared to have compelling evidence based on internal documents from the company. The deal was referred to as "Operation Goldmine" at Whole Foods, and the company planned to shutter more than 25% of Wild Oats stores. Emails from Mackey to the company's directors referred to the acquisition as a way to "eliminate a threat" and avoid "price wars".

Mackey has got to be thrilled that the deal is going through. Aside from the obvious strategic benefits to his company, the failure of the deal would likely have been pinned on him. He would have become known as "Motor Mouth Mackey": The man who helped the FTC block an important acquisition because he couldn't shut his trap.

Given Whole Foods Market (NASDAQ: WFMI) CEO John Mackey's penchant for posting too much information on his blog/anonymous message boards, it might seem ironic that the company is considering suing the FTC for inadvertently posting the company's trade secrets on the internet.

On Tuesday, the FTC failed to completely redact Whole Foods' trade secrets from a court filing that was posted on an online database. Reporters caught the glitch, and information was leaked.

Some of the information that should have been redacted included an assertion that Whole Foods prevents its suppliers from selling directly to Wal-Mart (NYSE: WMT) in an effort to raise the retailer's costs.

Both Whole Foods and Wild Oats (NASDAQ: OATS) have an option to terminate the merger agreement if it does not gain regulatory approval by the end of the month.

Shares of Wild Oats continue to languish more than 20% below the agreed upon price, indicating investor skepticism about the deal's prospects.

The battle over the proposed Whole Foods (NASDAQ: WFMI) acquisition of Wild Oats (NASDAQ: OATS) is getting even more complicated. In a U.S. District Court, two antitrust experts gave opposite opinions [subscription required] on whether the merger would be anticompetitive.

One expert argued that the two chains compete in a much broader market -- grocery stores -- with much bigger chains like Safeway and Kroger also in the space. But another expert discussed research suggesting that markets containing a Whole Foods and a Wild Oats store tend to have lower prices, which would suggest that they are in fact competing.

The U.S. District court is expected to issue a decision on the FTC's preliminary injunction seeking to block the merger some time in the next few weeks.

Given that this doesn't appear to be a black and white issue, as evidenced by disagreement among the experts, CEO John Mackey's "macho posturing" emails could end up looming large, as they seem to suggest that the merger is motivated by a desire to eliminate competition. Not only has he embarrassed himself and run into trouble with the SEC for his message board post, but he may also have harmed his company's growth prospects with his overactive typing fingers.