Trade Secrets - A Doozy of a Case

How else to describe what happens when a company depends on information from its competitors for defending against a Federal Trade Commission complaint?

UPDATE: Grocer Loses Bid To Keep Trade Secrets Away From Whole Foods

The FTC is seeking to undo Whole Foods' 2007 acquisition of rival Wild Oats Markets Inc., arguing that the merger would lessen competition in the market for natural and organic foods. The commission is holding an administrative trial in February on the legality of the merger.

To prepare its defense, Whole Foods subpoenaed 93 grocery stores around the country for sensitive business information, saying it needed its competitors' data and documents to prove that a competitive marketplace still exists even after the Wild Oats deal.

Whole Foods said that no one inside its company would see the sensitive data, only its outside lawyers. The FTC, meanwhile, has put in place a protective order that bars unauthorized disclosure of trade secrets.

But New Seasons Market, a nine-store chain in Portland, balked at the request and filed a legal challenge with an FTC administrative law judge, arguing that it should not have to turn over its most closely held business secrets to Whole Foods, which, it said, "has a history of taking a predatory approach toward its competition."

"If New Seasons were required to produce the information Whole Foods seeks, it would provide Whole Foods with a blueprint to New Seasons' success and the means for Whole Foods to engage in anti-competitive conduct against one of its primary competitors in the Portland market," the company said in a legal brief.

New Seasons said Whole Foods' document requests were burdensome and estimated that it could cost at least $250,000 to produce everything Whole Foods requested.

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An FTC administrative law judge rejected New Seasons' request Tuesday, saying its information would be protected and that turning it over was not an undue burden.

"The implied allegations that Whole Foods may be using the document requests to gain a competitive advantage over New Seasons are without support," wrote Administrative Law Judge D. Michael Chappell.

Whole Foods spokeswoman Kate Lowery said the company had no choice but to seek New Seasons' information.

"We have to defend ourselves," Lowery said. "Not only did the FTC put us in this position, they need the same information."

New Seasons Chief Executive Brian Rohter said he disagreed with the ruling and would meet with the company's attorneys "to get guidance on options for our next steps."

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The FTC is seeking to undo Whole Foods' 2007 acquisition of rival Wild Oats Markets Inc., arguing that the merger would lessen competition in the market for natural and organic foods. The commission is holding an administrative trial in February on the legality of the merger.