Consumer Inq

(*Or, "On the Internet, nobody knows you're a CEO")

As a sometime customer at Whole Paycheck Markets — whoops, I mean Whole Foods — I have to say that I welcome anything that draws extra scrutiny to the pricey high end of the natural and organic grocery business, or that at least makes me laugh about it. Usually, I just get to laugh at myself for shopping there. (How much did I pay for those organic cherries?)

Today's news fits the bill on both counts: Turns out that John Mackey, Whole Foods' colorful CEO, has been secretly trash-talking the competitor he's trying to buy, Wild Oats Markets, on Internet message boards.

Using an alias, "Rahodeb," he would post things like, "The writing is on the wall. The end game is now underway for OATS. ... Whole Foods is systematically destroying their viability as a business — market by market, city by city."

How do we know this? Because the Federal Trade Commission, guardian of the marketplace, is trying to block Whole Foods' $670 million acquisition of Wild Oats, its chief rival for the amazingly lucrative grandchild of the old organics-and-granola bars of my youth.

Mackey's "the Empire strikes back" warnings, and a footnote explaining his unusual MO, are part of a memorandum that the FTC recently filed in support of its case. (Read a redacted "Public Version" of the memo here.)

The funniest part of this story? There's lots of competition for that honor.

Maybe it's the e-mail statement, quoted by Bloomberg News, in which Whole Foods said Mackey had posted “under an alias to avoid having his comments associated with the company and to avoid others placing too much emphasis on his remarks.”

Or maybe it's the Rahodeb quote, reported in the Wall Street Journal, in which Mackey stepped forward to defend a picture of — who else? — Mackey that appeared in a Whole Foods annual report: "I like Mackey's haircut," Rahodeb wrote. "I think he looks cute!"

But the competition that matters isn't for funniest line from Rahodeb — apparently chosen as an anagram for his wife's name, Deborah. It's the competition that the FTC says Mackey hoped to shut down.

It's hard to prove that any maneuver poses antitrust problems in such a fiercely competitive sector as food retailing. But the FTC is apparently willing to take Mackey at his word, and it says Mackey has argued persuasively that the Whole Foods/Wild Oats niche is essentially a separate market.

For instance, the FTC quotes Mackey as saying: "Safeway and other conventional retailers will keep doing their thing — trying to be all things to all people. ... They really can't effectively focus on Whole Foods Core Customers without abandoning 90% of their own customers."

In his alter-ego commentary, Mackey spent a lot of time addressing the "shorts" — investors who bet on the likelihood that a stock will decline. At times, he seemed mostly to be trying to argue up his stock's price:

"As you know I'm not a 'trader,' he told one fellow poster in June 2005. "The day-in-day-out movement of the stock doesn't concern me. The fundamentals are fantastic and are only getting stronger. Whole Foods will continue to grow very rapidly for at least another 10 to 15 years. With that growth, we will also see growth in the stock price. If the stock trades down then it only becomes a more compelling value for long-term investors."

Other times, as in this February 2005 post on the Wild Oats message board, he seems to be pre-arguing against the FTC's case: "For those of you on this Board who believe that there is always room for a #2 chain in the natural foods industry to compete with Whole Foods — you are right — there is. It's called Trader Joe's. TJs is #2 and OATS is a distant third place and falling further behind with each passing day."

Mackey may eventually have trouble with regulators over Rahodeb's postings, if they're seen as attempts to manipulate the stock market. Nearly a year ago, Rahodeb posted his last message, titled "Congratulations to hubris and goodbye," in which he said he'd lost a bet about stock prices with hubris — not with the fatal flaw, but with a poster named "hubris12000" — and been correctly identified by two other posters. (Want to read his voluminous postings? Click here.)

But right now, his battle is with the FTC, which says that “if Whole Foods is allowed to devour Wild Oats, it will mean higher prices, reduced quality, and fewer choices for consumers.”

I live in a city graced with independent natural grocers (Essene Market on Fourth Street is still going strong) and with institutions such as Mount Airy's Weavers Way coop, which offer many of the same kinds of products as Whole Foods and Wild Oats. I don't live near a Trader Joe's, but I have friends and relatives who swear by it.

So I don't see the problem in my little corner of the world. But that doesn't mean competition isn't threatened — or that John Mackey's Internet wildings aren't a fascinating tale, whatever the competition.

The Federal Trade Commission's case against Whole Foods Market's plan to acquire a key competitor, Wild Oats Markets, has focused attention on the bizarre Internet postings of Whole Foods CEO John Mackey. It seems that for years, Mackey was trash-talking Wild Oats and talking up Whole Foods on Yahoo message boards, using the alias Rahodeb.

Want to read more? The FTC is obliging. Today, it posted a whole slew of documents in the case. To read more of Rahodeb's gems, click 1, 2 or 3. To peruse the list of exhibits, click here.

Not that we really needed any, but this week's recall of nearly one million lead-painted kids' toys by Mattel's Fisher-Price subsidiary is more evidence of the risks of commerce in the Wild East, a.k.a. China, and the particular risks it poses to kids.

Today, the California company apologized for the recall.

"We apologize to everyone affected by this recall, especially those who bought the toys in question," Mattel CEO Robert A. Eckert said in a statement. "Our goal is to correct this problem, improve our systems and maintain the trust of the families that have allowed us to be part of their lives by acting responsibly and quickly to address their concerns."

Here's the rub: Mattel had to recall were 83 types of toys, some based on such classic kids characters Big Bird and Elmo. Recalls of consumer items never catch all the tainted product – usually, they're not even close.

So some kids are going to be chewing on Big Bird and getting lead poisoning – just like some of the millions of kids who have undoubtedly been exposed to Chinese-made trinkets, sold in gumball machines, that have been found to be loaded with lead.

According to the nonprofit Kids in Danger, more than 152 million pieces of vending
machine toy jewelry were recalled between 1990 and 2004 because they contained elemental lead – some of them were as much as 30 percent lead. Of the recalled products traceable to their place of manufacture, only one was manufactured in the United States. Over half were made in China.

What have we done? Despite all the evidence of danger, and despite its own staff's recommendation for a ban, the CPSC still hasn't managed to finally outlaw lead in toy jewelry. After all, it gives that 25-cent trinket a weighty, real-jewelry feel.

Now come the lead-painted Fisher-Price toys, hard on the heels of June's recall of 1.5 million lead-painted Thomas & Friends "Wooden Railway Toys" by RC2 Corp. of Oak Brook, Ill., also made in China.

Will it finally sink in? Consumers Union says the Mattel recall is the 26th toy recall of this year, and that all involved toys produced in China.

I don't want to engage in China-bashing, but I want my kids and your kids to be safe. Something's got to give – and the first thing should be China's laissez-faire regulatory system, and our sluggish, largely laissez-faire response to it.

This just in (though I don't yet know its significance): The Federal Trade Commission announced a streamlined new format for comparing average annual energy consumption when you go shopping for home appliances. See the new one here.

The FTC says the new yellow sticker was the result of a two-year review and was informed by "substantial public comment and consumer research."

Inefficient appliances are big drains on electricity, which means they're costly both to your wallet and the environment. I hope this helps, but at a glance, it's hard to see what's different.