File Image:IOL
File Image:IOL
(AP Photo/Rogelio V. Solis, File)
(AP Photo/Rogelio V. Solis, File)
(AP Photo/Gene J. Puskar, File)
(AP Photo/Gene J. Puskar, File)
CAPE TOWN - Amazon.com has cleared two of the biggest hurdles it needed to close its R181 billion acquisition of Whole Foods Market, with approvals from a US regulator and the grocery chain’s shareholders.

The US Federal Trade Commission (FTC) said that it would not pursue its investigation into the proposed merger after reviewing whether the deal would substantially reduce competition or constituted an unfair method of competition.

Amazon said it was on track to close the merger, expected sometime this year. On Wednesday, Whole Foods said its shareholders voted in favour of the deal.

Buying Whole Foods gives the world’s largest online retailer a foothold in the $700bn US grocery market, key for it to grab a greater share of shoppers’ wallets.

It also gives Amazon more than 465 brick-and-mortar stores where it could showcase products and prepare packages for home delivery.

The marriage between the online retailer and the pioneer organic grocery seller has sent shock waves through the supermarket industry, already in the midst of a price war.

Much larger grocers, such as Kroger and Wal-Mart Stores, are racing to add online shopping options so that they do not give ground to Amazon. Meanwhile, they are being forced to discount items as German grocery chains Aldi and Lidl expand in the US.

Amazon has a loyal and spendthrift following thanks to its shopping club, Prime. However, its decade-long effort to deliver groceries to customers’ homes has been unable to unseat brick-and-mortar rivals.

“Prime members are keen to learn the benefits of a bricks-and-mortar approach to Amazon Grocery,” said Baird Equity Research analyst Colin Sebastian. “The deal will close after they sort out more ‘back office’ issues,” he noted.

Antitrust experts had expected the deal to win government approval, because Amazon sells currently few groceries and Whole Foods itself makes up a small fraction of US food sales.

Dominate

Some critics, however, had argued that the government could attempt to block the merger, because Amazon might leverage its retail and supply chain power to dominate a new market.

“You don’t normally see cases on theories that are speculative,” said Richard Feinstein, who headed the FTC’s bureau of competition under former President Barack Obama.

That has not stopped some in political office from questioning the merger.

Last month, the top Democrat on the US House of Representatives’ anti-trust sub-committee voiced concerns about the plan and sought a hearing to look into the deal’s impact on consumers.

The FTC opted not to make a second request for information about the deal, which is often a burden for companies that have to provide extensive information that can drain time and resources to collect.

 - REUTERS