Whole Foods Market co-founder and CEO John Mackey posted numerous negative comments about Wild Oats Market for years before Whole Foods announced an offer to buy the competitor. According to multiple news sources, Mackey posted numerous comments about Wild Oats on Yahoo stock forums using a pseudonym. Some postings said Wild Oats stock was overpriced and others predicted the company would fall into bankruptcy. A January 2005 posting questioned why anyone would buy shares of Wild Oats at their price then of about $8 each, The Wall Street Journal reported. In February, Whole Foods announced it would buy Wild Oats for about $565 million, or $18.50 per share.
Mackey's postings were made public this week as part of a lawsuit by the Federal Trade Commission to block Whole Foods from buying Wild Oats on antitrust grounds. Regulators say the sale would raise prices for consumers by concentrating too much power in one company. Mackey has vehemently opposed the FTC's attempt to block his company's purchase of Wild Oats--using the blog on Whole Food's Web site recently to bash the FTC. The FTC moved to release sealed documents which quoted the CEO telling Whole Foods directors that buying Wild Oats would help the company avoid nasty price wars. The FTC lawsuit is pending in U.S. District Court in Washington.
Austin-based Whole Foods defended Mackey's postings, saying they were being taken out of context years later. Mackey made those postings from 1999 to 2006 under an alias to avoid having his comments associated with the company and to avoid others placing too much emphasis on his remarks, Whole Foods said. Whole Foods concluded by saying the comments were Mackey's, not those of the company.
Legal analysts told the press that Mackey's postings may violate the 'fair disclosure' rule requiring dissemination of important information to all investors. Regardless of the legal ramifications of this behavior, Mackey has surely risked the reputation of the Whole Foods brand with all the bad press. 'The problem with allowing this kind of behavior is that it gives the company no ability to consider what's being said and whether it's accurate and complete,' former SEC chairman Harvey L. Pitt told the Washington Post. MSNBC, CNN, and the Wall Street Journal have also covered the story.
'This company in particular has held itself to higher standards,' said Jeffrey A. Sonnenfeld, a dean at the Yale School of Management in an interview with the Washington Post. 'Any employee at Whole Foods would be fired for doing the same thing. We certainly have come very close to the brink in terms of violating securities laws.'