US regulator the Federal Trade Commission (FTC) has failed to block a company merger in a case dominated by a chief executive's ill-advised anonymous message board postings.
Food company Whole Foods Market has been given permission to buy Wild Oats Market in a $565 million deal that the FTC claimed would harm competition in the organic food market in the US.
At the centre of the case were message board postings and emails written by Whole Foods CEO John Mackey. In anonymous messages posted on financial news boards he denigrated Wild Oats as badly managed and its stock as overpriced.
In email memos he told his board that acquiring Wild Oats would help them avoid "nasty price wars" in a move that seemed to bolster the FTC's case that the deal would damage competition in the organic foods sector.
A Columbia federal appeals court ruled, though, that the deal could go ahead. It backed an earlier ruling that also cleared that deal. In the original ruling the court found that the merger would not substantially harm competition because 60% of natural and organic food bought was sold through traditional supermarkets and not specialist shops.
Mackey's anonymous message postings, which he wrote under a pseudonym that was an anagram of his wife's name, contained criticism of the competitor which he eventually bought.
The messages appeared over an eight year period on Yahoo!'s finance discussion boards. In one he said that Wild Oats management ''clearly doesn't know what it is doing". In another he said that Wild Oats "has no value and no future".
The US financial regulator the Securities and Exchange Commission (SEC) is conducting an investigation into Mackey's behaviour.
Mackey was identified as the author of the posts in documents submitted to the court by the FTC as part of its case. He said that some of the views he expressed were his own and claimed that others were products of his playing "devil's advocate".
"I posted on Yahoo! under a pseudonym because I had fun doing it," he said in a statement at the time. "Many people post on bulletin boards using pseudonyms. I never intended any of those postings to be identified with me."
The internal memos were potentially more damaging for the court's ruling on the competitive landscape. In them Mackey appeared to bolster the FTC's central accusation, that the deal would reduce competition in the marketplace and could help Whole Foods to have a greater control on pricing.
In those documents he told board members that the deal would "eliminate forever" the chances of someone establishing a new alternative organic food retailer as well as that the deal would help his firm to "avoid nasty price wars".
The case highlighted the risks of executives expressing personal views on public forums. The risks are particularly high for executives in quoted companies who bear a higher regulatory burden than private firms.
"Some executives want to blog and they want to speak their minds to any shareholders or customers who will listen," said Struan Robertson, a technology law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM. "The risk is that executives might spill company secrets in a bid to keep a blog interesting," he said. "Listed companies have to make market announcements through proper channels. Blogs and message boards are not proper channels. Directors are also under fiduciary duties that off-the-cuff remarks might overlook."
"Blogs at executive level are almost always sanitised and filtered, and therefore boring for the reader," said Robertson. "If they're racy they can land the company in hot water. It takes skill to satisfy your readers and your legal team."
