Full opinion text
PUBLIC VERSION PAUL L. FRIEDMAN, District Judge. OPINION This matter is before the Court on plaintiffs motion for a preliminary injunction. Plaintiff, the Federal Trade Commission (“FTC”), filed this lawsuit on June 6, 2007 seeking to enjoin defendant Whole Foods Market, Inc. from acquiring defendant Wild Oats Markets, Inc. during the pen-dency of an administrative proceeding to be commenced by the FTC pursuant to Sections 7 and 11 of the Clayton Act, 15 U.S.C. §§ 18, 21, and Section 5(b) of the Federal Trade Commission Act (“FTCA”), 15 U.S.C. § 45(b). See Complaint at 2, 6. The FTC believes that the acquisition of Wild Oats by Whole Foods “would violate Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act because [it] may substantially lessen competition and/or tend to create a monopoly in the operation of premium natural and organic supermarkets across the United States.” Complaint ¶ 15. This lawsuit has been litigated on a very fast track. Fact discovery took place in the space of 30 days, expert reports were exchanged three days after the close of fact discovery, and rebuttal expert reports and expert depositions took place within nine days thereafter. Initial briefs were filed two days later and reply briefs five days after that. The Court held a two-day hearing six days later. The parties’ respective economists, Dr. Kevin M. Murphy and Dr. David T. Scheffman, Jr., were examined by counsel and by the Court on July 31, 2007, and counsel presented their final arguments on the record in Court on August 1, 2007. The evidence presented by the parties consists of: (1) transcripts of the testimony of 13 lay witnesses taken by the FTC at investigational hearings before it filed suit; (2) transcripts of the deposition testimony of 22 lay witnesses and five expert witnesses taken after suit was filed; (3) the declarations of 16 lay witnesses submitted by defendants and of one lay witness submitted by plaintiff; (4) the expert reports (and exhibits thereto) of five expert witnesses; (5) 19 volumes of exhibits submitted by plaintiff, consisting of approximately a total of 700 exhibits; (6) 27 volumes of exhibits submitted by defendants, consisting of 811 exhibits; and (7) the examination and cross-examination of two of the expert witnesses in Court — Dr. Kevin M. Murphy and Dr. David T. Scheffman, Jr. The Court has also considered the written and oral arguments presented by counsel and the exhibits and demonstrative exhibits used in connection with their arguments. The fast track on which this litigation has proceeded has put immense pressure on counsel for the parties and their teams who, despite these pressures, have all acted professionally, civilly, effectively, and in a timely manner in presenting their evidence and argument. Unfortunately, the Court, too, has had to act under severe time constraints (and with fewer resources than counsel has had) in evaluating the evidence and arguments, reaching its decision and attempting quickly to articulate that decision in a reasonably thorough and comprehensible opinion — so as to provide the losing side (as the Court promised it would) sufficient time to proceed promptly to the court of appeals for a decision before the consummation of the proposed merger, scheduled for August 31, 2007. For the reasons set forth in this Opinion, the Court will deny plaintiffs motion for a preliminary injunction. I. BACKGROUND Defendant Whole Foods Market, Inc. (“Whole Foods”) is a Texas corporation which opened its first store in 1980. Whole Foods operates approximately 194 stores in North America and the United Kingdom. Defendant Wild Oats Markets, Inc. (“Wild Oats”) is a Delaware corporation founded in 1987 and headquartered in Colorado. Wild Oats operates approximately 110 stores in the United States and Canada. Both firms are engaged in the business of selling grocery products, with an emphasis on natural and organic foods. In February 2007, the defendants announced that Whole Foods planned to acquire Wild Oats, and the two companies entered into a formal merger agreement on February 21, 2007. The FTC alleges that the “operation of premium natural and organic supermarkets is a distinct ‘line of commerce’ within the meaning of Section 7 of the Clayton Act.” Complaint ¶ 34. The FTC further alleges that Whole Foods and Wild Oats are “the only two nationwide operators of premium natural and organic supermarkets in the United States[,]” and “are one another’s closest competitor in twenty-one geographic markets.” Id. ¶¶ 37-38. According to the FTC, “[consumers in those markets have reaped price and non-price benefits of competition between Whole Foods and Wild Oats.” Id. ¶ 38. “[TJhose benefits will be lost if the acquisition occurs in the markets where the two currently compete and they will not occur in those markets where each is planning to expand.” Id. ¶ 42. II. LEGAL FRAMEWORK Section 13(b) of the Federal Trade Commission Act provides: Whenever the Commission has reason to believe ... that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission, and ... that the enjoining thereof pending the issuance of a complaint by the Commission and until such complaint is dismissed by the Commission or set aside by the court on review, or until the order of the Commission made thereon has become final, would be in the interest of the public ... the Commission ... may bring suit in a district court of the United States to enjoin any such act or practice. 15 U.S.C. § 53(b). “Upon a proper showing that, weighing the equities and considering the Commission’s likelihood of ultimate success, such action would be in the public interest, and after notice to the defendant, a temporary restraining order or a preliminary injunction may be granted” Id.; see also FTC v. Libbey, Inc., 211 F.Supp.2d 34, 43 (D.D.C.2002). In contrast to the four-part equity standard for the granting of a preliminary injunction in other contexts, “[i]n deciding whether to grant preliminary injunctive relief under section 13(b), the court evaluates whether it is in the public interest to enjoin the proposed merger.” FTC v. H.J. Heinz Co., 246 F.3d 708, 713 (D.C.Cir.2001). “This standard is broader than the traditional equity standard that is normally applicable to requests for injunc-tive relief and is consistent with Congress’ intention that injunctive relief be broadly available to the FTC.” FTC v. Libbey, Inc., 211 F.Supp.2d at 44 (quoting and citing FTC v. Weyerhaeuser, 665 F.2d 1072, 1080-81 (D.C.Cir.1981)) (internal quotations omitted). “The FTC is not required to establish that the proposed merger would in fact violate section 7 of the Clayton Act.” FTC v. H.J. Heinz Co., 246 F.3d at 713 (emphasis in original) (citing FTC v. Staples, Inc., 970 F.Supp. 1066, 1071 (D.D.C.1997) and FTC v. Food Town Stores, Inc., 539 F.2d 1339, 1342 (4th Cir.1976) (“The district court is not authorized to determine whether the antitrust laws- have been or are about to be violated. That adjudicatory function is vested in the FTC in the first instance.”)); see also FTC v. Swedish Match, 131 F.Supp.2d 151, 155 (D.D.C. 2000). It is required only to show that it is “likely” to succeed in showing under Section 7 of the Clayton Act that the proposed merger “may substantially lessen competition” or “tend to create a monopoly.” 15 U.S.C. § 18; see also FTC v. H.J. Heinz Co., 246 F.3d at 714; FTC v. Libbey, Inc., 211 F.Supp.2d at 44; FTC v. Staples, Inc., 970 F.Supp. at 1071 (citing cases). The FTC must show a “reasonable probability” that the proposed merger may substantially lessen competition in the future. See FTC v. Arch Coal, Inc., 329 F.Supp.2d 109, 116 (D.D.C.2004); FTC v. Swedish Match, 131 F.Supp.2d at 156; FTC v. Staples, Inc., 970 F.Supp. at 1072 (citing cases). “[T]he FTC’s burden is not insubstantial, and ‘[a] showing of fair or tenable chance of success on the merits will not suffice for injunctive relief.’ ” FTC v. Arch Coal, Inc., 329 F.Supp.2d at 116 (quoting FTC v. Tenet Health Care Corp., 186 F.3d 1045, 1051 (8th Cir.1999)). To meet its burden to establish its likelihood of success on the merits, the FTC may raise questions “going to the merits so serious, substantial, difficult and doubtful as to make them fair ground for thorough investigation, study, deliberation and determination by the FTC in the first instance and ultimately by the Court of Appeals.” FTC v. H.J. Heinz Co., 246 F.3d at 714-15 (citing, inter alia, FTC v. Beatrice Foods Co., 587 F.2d 1225, 1229 (D.C.Cir.1978); FTC v. Staples, Inc., 970 F.Supp. at 1071: FTC v. Warner Communications, Inc., 742 F.2d 1156, 1162 (9th Cir.1984)) (internal quotations omitted). “[T]he FTC does not have to prove ... that the proposed merger will in fact violate Section 7 of the Clayton Act because the Congress used the words may be substantially to lessen competition ... to indicate that its concern was with probabilities, not certainties.” FTC v. Libbey, Inc., 211 F.Supp.2d at 44 (internal quotations and citations omitted); see also FTC v. Staples, Inc., 970 F.Supp. at 1071 (“The FTC is not required to prove, nor is the Court required to find, that the proposed merger would in fact violate Section 7 of the Clayton Act.... The determination of whether the acquisition actually violates the antitrust laws is reserved for the Commission and is, therefore, not before this Court.”). “Merger enforcement, like other areas of antitrust, is directed at market power. It shares with the law of monopolization a degree of schizophrenia: an aversion to potent power that heightens risk of abuse; and tolerance of that degree of power required to attain economic benefits.” FTC v. H.J. Heinz Co., 246 F.3d at 713 (internal citations omitted). The Congress therefore has empowered the FTC “to weed out those mergers whose effect ‘may be substantially to lessen competition from those that enhance competition.’” Id. (internal citations omitted). With respect to Section 7 of the Clayton Act, the D.C. Circuit has explained: Section 7 of the Clayton Act prohibits acquisitions ... “where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” 15 U.S.C. § 18; see United States v. Philadelphia Nat’l Bank, 374 U.S. 321, 355, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963) (“The statutory test is whether the effect of the merger ‘may be substantially to lessen competition’ ‘in any line of commerce in any section of the country.’ ”). The “Congress used the words ‘may be substantially to lessen competition’ (emphasis supplied), to indicate that its concern was with probabilities, not certainties.” Brown Shoe Co. v. United States, 370 U.S. 294, 323, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962) (emphasis original); see S.Rep. No. 1775, at 6 (1950), U.S.Code Cong. & Admin. News [1950] at 4293, 4298 (“The use of these words [“maybe”] means that the bill, if enacted, would not apply to the mere possibility but only to the reasonable probability of the prescribed effect....”). FTC v. H.J. Heinz Co., 246 F.3d at 713 (parallel citations omitted) (brackets in original). To reiterate, Section 7 deals “in probabilities, not ephemeral possibilities.” FTC v. Arch Coal, Inc., 329 F.Supp.2d at 115; see also United States v. Sungard Data Systems, 172 F.Supp.2d 172, 180 (D.D.C.2001). “To determine whether the FTC has met its burden of establishing a prima facie case that the proposed acquisition in this matter may violate the antitrust laws, this court must initially analyze the likely anti-competitive effects the merger would have.” FTC v. Libbey, Inc., 211 F.Supp.2d at 44-45 (internal quotations and citations omitted) (citing FTC v. Staples, Inc., 970 F.Supp. at 1072-73); see also FTC v. Swedish Match, 131 F.Supp.2d at 156. “Analysis of the likely competitive effects of a merger requires determinations of (1) the relevant product market in which to assess the transaction, (2) the geographic market in which to assess the transaction, and (3) the transaction’s probable effect on competition in the relevant product and geographic markets.” FTC v. Arch Coal, Inc., 329 F.Supp.2d at 117. As Chief Judge Hogan has noted, “[a]s with many antitrust cases, the definition of the relevant product market in this case is crucial. In fact, to a great extent, this case hinges on the proper definition of the relevant product market.” FTC v. Staples, Inc., 970 F.Supp. at 1073; see also FTC v. Swedish Match, 131 F.Supp.2d at 156. The general rule when determining a relevant product market is that “[t]he outer boundaries of a product market are determined by the reasonable interchangeability of use [by consumers] or the cross-elasticity of demand between the product itself and substitutes for it.” Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). Interchangeability of use and cross-elasticity of demand look to the availability of substitute commodities, i.e. whether there are other products offered to consumers which are similar in character or use to the product or products in question, as well as how far buyers will go to substitute one commodity for another. E.I. du Pont de Nemours, 351 U.S. [377, 393, 76 S.Ct. 994, 100 L.Ed. 1264 (1956)]. In other words, the general question is “whether two products can be used for the same purpose, and if so, whether and to what extent purchasers are willing to substitute one for the other.” Hayden Pub. Co. v. Cox Broadcasting Corp., 730 F.2d 64, 70 n. 8 (2d Cir.1984). FTC v. Staples, Inc., 970 F.Supp. at 1074 (parallel citations omitted); see also United States v. Sungard Data Systems, 172 F.Supp.2d at 182; FTC v. Swedish Match, 131 F.Supp.2d at 157. In addition to cross-elasticity of demand, courts also consider “practical indicia” such as “industry or public recognition of the [ ] market as a separate economic entity, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes and specialized vendors” when defining the relevant market. Brown Shoe Co. v. United States, 370 U.S. at 325, 82 S.Ct. 1502. Courts do not apply these factors rigidly or exclusively, but rather use them as “practical aids” to ensure that the market definition comports with business reality. FTC v. Swedish Match, 131 F.Supp.2d at 159. Judge Bates has explained: “[0]nly examination of the particular market — its structure, history, and probable future — can provide the appropriate setting for judging the probable anti-competitive effects of the merger.” Hence, antitrust theory and speculation cannot trump facts, and even Section 13(b) cases must be resolved on the basis of the record evidence relating to the market and its probable future. FTC v. Arch Coal, Inc., 329 F.Supp.2d at 116-17 (internal citations omitted). In this case, if the relevant product market is, as the FTC alleges, a product market of “premium natural and organic supermarkets” consisting only of the two defendants arid two other non-national firms, there can be little doubt that the acquisition of the second largest firm in the market by the largest firm in the market will tend to harm competition in that market. If, on the other hand, the defendants are merely differentiated firms operating within the larger relevant product market of “supermarkets,” the proposed merger will not tend to harm competition. As in Staples, “this case hinges” — almost entirely — “on the proper definition of the relevant product market.” FTC v. Staples, Inc., 970 F.Supp. at 1073. The government also has the burden of proving the relevant geographic market. FTC v. Tenet Health Corp., 186 F.3d at 1052. “A geographic market is that geographic area to which consumers can practically turn for alternative sources of the product and in which the antitrust defendant faces competition.” FTC v. Staples, Inc., 970 F.Supp. at 1073 (internal quotations omitted). It is the geographic area that would be adversely affected by the proposed acquisition. United States v. Philadelphia Nat’l Bank, 374 U.S. 321, 357-58, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963). As Judge Bates put it in Arch Coal: FTC v. Arch Coal, Inc., 329 F.Supp.2d at 123 (parallel citations omitted). If the FTC shows that the merger may lessen competition in any one of the alleged geographic markets, it is entitled to injunctive relief. See 15 U.S.C. § 18. The relevant geographic market in which to examine the effects of a merger is “the region in which the seller operates, and to which the purchaser can practicably turn for supplies.” FTC v. Cardinal Health, Inc., 12 F.Supp.2d 34, 49 (D.D.C.1998) (citing Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961)). The Supreme Court has emphasized that the relevant geographic market must both “correspond to the commercial realities of the industry and be economically significant.” Brown Shoe [Co. v. United States], 370 U.S. at 336-37[, 82 S.Ct. 1502] (internal citations omitted). The Merger Guidelines also provide guidance for determining the relevant geographic market. The geographic market should be delineated as “a region such that a hypothetical monopolist that was the only present or future producer of the relevant product at loeátions in that region would profitably impose at least a ‘small but significant and non-transitory’ increase in price, holding constant the terms of sale for all products produced elsewhere.” Merger Guidelines § 1.21. If buyers would respond to the SSNIP by shifting to products produced outside the proposed geographic market, and this shift were sufficient to render the SSNIP unprofitable, then the proposed geographic market would be too narrow. Id. After the relevant product and geographic markets have been established, the ultimate question under Section 7 of the Clayton Act is whether the proposed merger will have anticompetitive effect within those markets — that is, whether the effect of the merger “may be substantially to lessen competition” in the relevant market. 15 U.S.C. § 18. As the Supreme Court has noted, “clearly, this is not the kind of question which is susceptible of a ready and precise answer in most cases. It requires not merely an appraisal of the immediate impact upon competition, but a prediction of its impact upon competitive conditions in the future....” United States v. Philadelphia Nat’l Bank, 374 U.S. at 362, 83 S.Ct. 1715; see Brown Shoe Co. v. United States, 370 U.S. at 317, 82 S.Ct. 1502 (focus is on arresting anticom-petitive mergers “in their incipieney”); id. at 323, 82 S.Ct. 1502 (Section 7 “deals in probabilities, not certainties”). “By focusing on the future, section 7 gives a court the uncertain task of assessing probabilities.” United States v. Baker Hughes Inc., 908 F.2d 981, 991 (D.C.Cir.1990). The “law allows both sides to make competing predictions about a transaction’s effects.” United States v. Baker Hughes Inc., 908 F.2d at 991. It does so by “shifting the burden of producing evidence.” Id. As the D.C. Circuit has explained: In United States v. Baker Hughes Inc., 908 F.2d 981, 982-83 (D.C.Cir.1990), [the D.C. Circuit] explained the analytical approach by which the government establishes a section 7 violation. First the government must show that the merger would produce “a firm controlling an undue percentage share of the relevant market, and would result in a significant increase in the concentration of firms in that market.” [United States v.] Philadelphia Nat’l Bank, 374 U.S. at 363[, 83 S.Ct. 1715]. Such a showing establishes a “presumption” that the merger will substantially lessen competition. See [United States v.] Baker Hughes [Inc.], 908 F.2d at 982. To rebut the presumption, the defendants must produce evidence that “shows that the market-share statistics give an inaccurate account, of the merger’s probable effects on competition” in the relevant market. United States v. Citizens & S. Nat’l Bank, 422. U.S. 86, 120, 95 S.Ct. 2099, 45 L.Ed.2d 41 (1975). “If the defendant successfully rebuts the presumption of illegality, the burden of producing additional evidence of anticompetitive effect shifts to ■the government, and merges with the ultimate burden of persuasion, which remains with the government at all times.” Baker Hughes Inc., 908 F.2d at 983; see also Kaiser Aluminum [and Chemical Corp. v. FTC], 652 F.2d [1324,] 1340 & n. 12 [ (7th Cir.1981) ]. FTC v. H.J. Heinz Co., 246 F.3d at 715 (brackets, footnotes and parallel citations omitted). The FTC generally can establish a prima facie case of anticompetitive effect by showing that “the merged entity will have a significant percentage of the relevant market.” FTC v. Swedish Match, 131 F.Supp.2d at 166. In addition to market share, courts also must examine “market concentration and its increase as a result of the proposed acquisition.” Id. As noted, the defendants can then rebut the presumption of anticompetitive effect by showing that the statistical data doesn’t reflect reality in the relevant market. One factor that is an important consideration when analyzing possible anti-competitive effects is whether the acquisition “would result in the elimination of a particularly aggressive competitor in a highly concentrated market ...” FTC v. Libbey, Inc., 211 F.Supp.2d at 47 (quoting FTC v. Staples, Inc., 970 F.Supp. at 1083 (citation omitted)). III. WHOLE FOODS, WILD OATS, AND THE PROPOSED MERGER A. Whole Foods and Wild Oats Whole Foods first opened its doors in 1980. Today it operates 194 stores in the United States, with a broad array of conventional, natural, organic, gourmet, prepared and specialty product offerings. Sud Decl. ¶¶ 14, 16, 17, 18. It also operates three stores in Canada; and six stores in the United Kingdom. PX01302 at 004; see also PX00011 at 003. Whole Foods currently employs over 39,000 people across its U.S. stores. DX 457 (Whole Foods 2006 10-K). Its operations in the United States are divided into eleven regions. Each region is headed by a regional president. Each regional president reports to one of the two Whole Foods’ Co-Presidents and Chief Operating Officers. Over two decades, Whole Foods has expanded by opening new stores and by acquiring several other premium natural and organic supermarkets: Blue Bonnet Natural Foods Grocery in 1984, Whole Food Company in 1988, Wellspring Grocery in 1991, Bread & Circus in 1992, Mrs. Gooch’s in 1993, Bread of Life (San Francisco) in 1995, Unicorn Village in 1995, Oak Street Market in 1995, Fresh Fields in 1996, Granary Market in 1997, Bread of Life (Florida) in 1995, Merchant of Vino in 1997, Nature’s Heartland in 1999, Food 4 Thought Natural Food Market and Deli in 2000, Harry’s Farmers Market in 2001, and Whole Grocer in 2006. Murphy Report ¶ 25; JX 40 at 32-33:23-5 (Chamberlain Dep.). Most competitive decisions at Whole Foods — including decisions with respect to pricing — are made at the regional level under the supervision of Whole Foods’ regional presidents. Sud Deck ¶¶ 7-9; Alls-house Deck ¶ 5; Besancon Deck ¶ 2; Bradley Deck ¶¶ 1-3; Lannon Deck ¶ 4; Megahan ¶ 23; Meyer Deck ¶ 3; Paradise Deck ¶ 4; JX 41 at 51-52 (Foster I.H.). Whole Foods has articulated five “Core Values” that it emphasizes “reflect what is truly important to us as an organization.” Among these is “selling the highest quality natural and organic products available.” PX01302 at 006. Its stores typically stock around 30,000 stock keeping units (“SKUs”) of natural and organic products. PX00182 at 004; PX01333 at 003. Whole Foods has evolved from a health food store into a supermarket. Whole Foods’ new stores typically range in size between 50,-000 and 60,000 square feet. DX 457 (2006 Whole Foods 10-K). Its 92 stores in development average 54,500 square feet. Sud Deck ¶ 18. Whole Foods currently operates four stores in excess of 65,000 square feet and has an additional 17 stores of that size in development. DX 457. Whole Foods’ stores now carry a wide variety of conventional products, everyday value private label items, and premium and gourmet offerings. Many of these items are not organic, including more than half of the produce Whole Foods sells and a significant portion of its prepared foods, bakery, and specialty items. Sud Deck ¶¶ 17, 25. Wild Oats is headquartered in Boulder, Colorado and operates 115 stores in the United States, under three different banners: Wild Oats Marketplace (nationwide), Henry’s Farmers Market (in Southern California), and Sun Harvest (in Texas). DX 494 at 3 (2006 Wild Oats 10-K). It also has stores in British Columbia, Canada, under the name Capers Community Market. PX00613 at 005, 027; PX2705. Wild Oats says it is committed to selling the “best variety of high-quality products made with wholesome ingredients.” PX00601 at 003. Wild Oats sells a large array of natural and organic products that appeal to “health-conscious shoppers,” and include “dry groceries, produce, meat, poultry, seafood, dairy, frozen, prepared foods, bakery” offered in a manner “that emphasizes customer service.” PX00613 at 005. Wild Oats has expanded over the past two decades by opening new stores and acquiring several other premium and organic supermarkets: Alfalfa’s Markets in 1996, Henry’s Marketplace stores in 1999, Sun Harvest stores in 1999, and Natures stores in 1999. PX04449 at 047; PX04449 at 002. The average square footage of Wild Oats’ stores today are less than 25,-000 square feet. DX 807 (Wild Oats Response to Spec. 2 of FTC’s Second Request). B. The Proposed Merger and the FTC’s Response On February 21, 2007, Whole Foods and Wild Oats executed an Agreement and Plan of Merger (“Agreement”), pursuant to which Whole Foods would commence a tender offer for all of Wild Oats stock at a price of $18.50 per share. DX 811 (Agreement and Plan of Merger). At this share price, the total price of the transaction would be approximately $565 million. The parties have agreed to close the transaction contemplated by the Agreement on or before August 31, 2007. Sud Dec! ¶ 45. After the merger, Whole Foods plans to close a number of Wild Oats stores. Murphy Report ¶ 22.4. It also will sell off all 35 Henry’s and Sun Harvest stores (located in California and Texas) to be acquired from Wild Oats. PX00329. On February 26, 2007, Whole Foods filed its Premerger Notification and Report Forms with the Federal Trade Commission and the Department of Justice. On June 5, 2007, the FTC authorized its staff to seek both a temporary restraining order and a preliminary injunction to prevent Whole Foods from acquiring Wild Oats pending the outcome of an administrative trial under Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act. On June 6, 2007, the FTC filed a complaint in this Court seeking a temporary restraining order and preliminary injunction to halt the transaction pending an administrative trial on the merits. On June 7, 2007, with the consent of the parties, the Court entered a temporary restraining order to delay completion of the transaction until the Court could rule on the motion for a preliminary injunction. IV. THE EXPERT WITNESSES The Federal Trade Commission proffered two expert witnesses: Dr. Kevin M. Murphy, an economist, and Dr. Kent Van Liere, a sociologist. The defendants proffered three expert witnesses: Dr. David T. Scheffman, Jr., an economist; Dr. John L. Stanton, an expert in food marketing; and Ms. Kellyanne Conway, a polling expert. Dr. Murphy is the George J. Stigler Distinguished Service Professor of Economics at the University of Chicago Graduate School of Business. PX02878 at 002. Dr. Murphy has a doctorate degree in economics from the University of Chicago. His undergraduate degree from UCLA is also in economics. Id. at 006. He teaches courses and publishes “in a variety of areas in economics.” Id. Dr. Murphy has consulted in the area of antitrust for over 20 years. He has worked on over 50 antitrust cases. PX02878 at 007. Dr. Murphy is a Fellow of the Econometric Society-and is a member of the American Academy of Arts and Sciences. PX02878 at 007. In 1997, he was awarded the John Bates Clark medal for economics. Id. In 2005, Dr. Murphy received a five-year unrestricted research award from the MacArthur Foundation in recognition of his past contributions and potential future contributions to economics. Id. Dr. Scheffman is an Adjunct Professor of Business Strategy and Marketing, Owen Graduate School of Management, Vanderbilt University, and a Director with LECG, LLC. Scheffman Report ¶ 1 and App. A at 1. He has twice served as Director of the Bureau of Economics at the Federal Trade Commission, most recently from 2001 to 2003. Id. at 1 & 3. He is an expert in the fields of economics, microeconomics, industrial organization economics, antitrust economics (including mergers), econometrics, statistics, marketing, financial analysis, and retailing. Scheffman Report ¶¶3-6, 13,16. Dr. Scheffman has experience analyzing the competitive and efficiency benefits of mergers. Scheffman Report ¶ 16. This experience, and experience from private economics consulting, includes extensive work involving the supermarket industry. JX 18 at 21-24 (Scheffman Dep.). The FTC invited Dr. Scheffman to speak at its May, 2007, conference on “Grocery Store Antitrust: Historical Retrospective & Current Developments.” PX 322; Scheffman Report, Appendix A at 7; JX 18 at 38-39 (Scheffman Dep.). Dr. Stanton is Professor of Food Marketing at Saint Joseph’s University in Philadelphia, Pennsylvania. He received his Ph.D. in marketing from Syracuse University. He has been in the food industry for over 30 years. His research and consulting has been in both the retail side and the supplier side of food marketing. Stanton Report ¶4. Dr. Stanton previously held the first endowed chair in food marketing in the United States, entitled the C.J. McNutt chair in food marketing research, from 1985 to 1995. Stanton Report ¶ 6. Dr. Stanton teaches a variety of food marketing courses in both the B.S. and M.S. programs including Food Marketing Strategy, Target Marketing in the Food Industry, Segmentation and Positioning, and Food Marketing Advertising. His M.S. courses include elements of both retail food marketing and food service marketing. Stanton Report ¶5. Dr. Stanton has authored or co-authored 57 articles in refereed journals and has published several industry books. Stanton Report Appendix A. Dr. Stanton has also been the editor of the Journal of Food Products Marketing since 1994. Stanton Report Appendix A. Dr. Stanton testified regarding his knowledge of the store formats and operations of the following chains: Sunflower, Kroger, Supervalu, Albertson’s, Shaw’s, Jewel, Safeway, Wal-Mart, Target, Giant Food, Food Lion, Hannaford, Bloom, Whole Foods, Wegmans, Wild Oats, Mei-jer, HEB, Central Market, Publix, Shop Rite, Harris Teeter, Price Chopper, Giant Eagle, A & P, Food Emporium, Wald-baum’s, Pathmark, Trader Joe’s, Tesco, Byerly’s/Lund’s, and Andronico’s. See JX 19 at 123-167 (Stanton Dep.). Ms. Conway and her firm, the polling company, inc., were commissioned by defendants to conduct a survey that would support Dr. Scheffman’s report and would corroborate his analysis. Scheffman Report 159; PX02066 at 023; JX 20 at 7:16-20; 8:20-9:2 (Conway Dep.). Dr. Van Liere was retained by the Federal Trade Commission to review and evaluate the survey conducted by Ms. Conway. Van Liere Report (PX02890-002) ¶2. Dr. Van Liere has an M.A. and a Ph.D. in Sociology from Washington State University where he specialized in social psychology and research methods and statistics, including survey research. Van Liere Report ¶ 4. From 1978 to 1985, he served as an Assistant, then Associate Professor with tenure, at the University of Tennessee, where he taught classes in attitudes and opinions, survey research, research methods and statistics. Id. He also regularly publishes academic research in leading journals based on data collected using surveys. Id. Dr. Van Liere has published papers in peer-reviewed journals and monographs on a range of topics involving surveys. Van Liere Report ¶ 8. After reviewing Ms. Conway’s report and the survey backup materials, Dr. Van Liere concluded that her survey methodology and procedures were fundamentally flawed, which rendered her data .and results unreliable. Van Liere Report ¶ 3. The Court agrees with Dr. Van Liere. It therefore will not give Ms. Conway’s report any weight or consideration in evaluating the evidence before it. The FTC also maintains that the reports of Dr. Stanton, also submitted on behalf of defendants, are entitled to no weight. The Court disagrees. Plaintiff criticizes Dr. Stanton’s report for not analyzing the facts of this case, but rather discussing the food retailing industry more generally. The Court notes, however, that the state of the industry itself is an important factor in a case like this. See supra at 7-8; infra at 15; see also FTC v. Arch Coal, Inc., 329 F.Supp.2d at 116-17, and Dr. Stanton is a recognized expert in this field. For that reason, the Court found Dr. Stanton’s report to be helpful and will rely on it as appropriate. The Court also notes that plaintiff could have offered its own industry expert or rebuttal to Dr. Stanton’s report, and chose not to do so. The defendants and Dr. Scheffman criticize the methodology utilized by Dr. Murphy and the bases for his opinions and conclusions. The FTC and Dr. Murphy criticize the methodology, opinions and conclusions of Dr. Scheffman. The defendants criticize Dr. Murphy because he has not conducted any direct test of whether Wild Oats.imposes unique constraints on Whole Foods that will disappear as a result of the proposed transaction. They also criticize him for analyzing and relying upon Whole Foods’ banner entries in certain markets and its impact on Wild Oats, without examining the effects of either banner entry or (the more relevant) banner exit by Wild Oats on Whole Foods, because Whole Foods will be the surviving company if this deal is consummated. Because a central concern of the Merger Guidelines is with the impact of competition on prices, the defendants also criticize Dr. Murphy for relying on margins rather than on prices. They maintain that Dr. Murphy’s reliance on analyses of margins is not based on sound methodology in economics, accounting, and financial analysis. See Scheffman Rebuttal Report ¶ 15. They argue that any effects inferred from margins, however defined and estimated, are relevant only if a valid inference can be made about prices from margins. Defendants and their experts maintain that in this case reliable inferences about prices cannot be made from margins alone. See Scheffman Rebuttal Report ¶ 16. The defendants also argue that Dr. Murphy’s analyses of the effect of Whole Foods’ entry on Wild Oats net sales, margin and prices do not control for the pricing or promotional strategies of all other supermarkets in response to Whole Foods’ entry. Instead, Dr. Murphy includes the responses of competitors to Whole Foods’ entry, and the effects caused by those competitors, as effects caused by Whole Foods. See JX 26 at 233 (Murphy Dep.); see also Scheffman Rebuttal Report ¶ 10 (“Dr. Murphy’s analysis of why competitive effects implicitly but importantly assume that non-PNOS competitors are not significant factors impacting the competition between [Whole Foods] and [Wild Oats],...”). Defendants criticize Dr. Murphy for inferring the price effect of a Wild Oats exit by equating that event with a Whole Foods entry in reverse — that is, Dr. Murphy’s “exit” analysis assumes that the effect of a Wild Oats exit would be exactly the same as a Whole Foods entry, albeit in the opposite direction. Where multiple firms enter simultaneously, Dr. Murphy’s regression analysis does not permit one to tell which of the firms is causing how much of the effect on Wild Oats’ margins, net sales, and prices. See JX 26 at 228 (Murphy Dep.). Fundamentally, the defendants maintain, Dr. Murphy’s analyses study the wrong events. He analyzes the effects of Whole Foods’ banner entry on Wild Oats when he should be looking at the price effects of Wild Oats exits. July 31 a.m. Hearing Tr. at 23-24, 26 (Scheffman); Scheffman Rebuttal Report ¶ 41. According to the defendants, the effect of Whole Foods’ banner entry on Wild Oats’ prices, margins or sales does not directly test whether Wild Oats imposes any constraint on Whole Foods. July 31 a.m. Hearing Tr. at 28-30 (Scheffman); see Murphy Report ¶ 63. Finally, the defendants maintain that Dr. Murphy’s study of five Whole Foods’ entry events into Wild Oats “markets” was in fact based on only two areas (West Hartford, Connecticut and Fort Collins, Colorado), Murphy Report ¶ 58; Scheff-man Rebuttal Report ¶ 56, only one of which offers sufficient post-entry “price” and volume data to discern a time-pattern of effects. Murphy Report ¶ 57; July 31 a.m. Hearing Tr. at 71-72 (Murphy). In the end, defendants maintain, Dr. Murphy’s analysis of the effect of Wholé Foods banner entry on Wild Oats’ prices really comes down to his analysis of Hartford, Connecticut, and even there, he failed to account for all relevant variables, such as partial shrink, the idiosyncratic price observations for the salad bar, and the simultaneous entry of Trader Joe’s. The FTC has equally vigorous criticisms of Dr. Scheffman and his analysis. One of the FTC’s criticisms of Dr. Scheffman is that he used a 5% standard for what constitutes a “small but significant non-transitory increase in price” (“SSNIP”) under the Merger Guidelines, even though he accepts and recently publicly opined that smaller SSNIP’s are more appropriate for mergers in low net margin industries like supermarkets. See Murphy Rebuttal Report ¶ 4; PX00322 at 132. The FTC also criticizes Dr. Scheffman’s “critical loss” analysis. It maintains that while Dr. Scheffman concludes that the actual loss for a hypothetical premium natural and organic food supermarket (“PNOS”) monopolist would “greatly exceed” or “swamp” the critical loss thresholds, Dr. Scheffman actually only “assumes” what the actual loss would be and provides no quantitative evidence for the magnitude of the actual loss that could be compared to these thresholds, and no methodology for calculating the actual loss. Murphy Rebuttal Report ¶¶ 10-11. Finally, the FTC criticizes Dr. Scheff-man for basing his pricing analysis on item-specific register prices at Whole Foods stores on a single day in June of 2007. The FTC maintains that an analysis of a single day’s pricing, even if otherwise well done, cannot provide the basis for any reliable conclusions. It criticizes Dr. Scheffman for extrapolating from this single day to reach a variety of conclusions about pricing generally. The FTC also says Dr. Scheffman’s conclusions about pricing are also inconsistent with econometric evidence on Whole Foods’ margins, which vary across stores according to the presence or absence of local competition from Wild Oats. Murphy Rebuttal Report ¶47. V. RELEVANT PRODUCT MARKET As noted above, and as was the case in Staples, “the definition of the relevant product market in this case is crucial. In fact, to a great extent, this case hinges on the proper definition of the relevant product market.” FTC v. Staples, Inc., 970 F.Supp. at 1073. The FTC .believes the relevant product market is premium natural and organic supermarkets (“PNOS”), of which it alleges there are four in the entire country — Whole Foods (the largest), Wild Oats (the second largest), Earth Fare (with 13 stores in only four states), and New Seasons (with eight stores, all in Oregon). Defendants Whole Foods and Wild Oats believe that the relevant product market is one that includes all supermarkets. “[0]nly examination of the particular market — its structure, history, and probable future” — how it operates in the real world — can provide the appropriate setting for determining the relevant product (and geographic) market and for judging the probable anticompetitive effects of a merger or acquisition. FTC v. Arch Coal, Inc., 329 F.Supp.2d at 116-17. Antitrust theory “cannot trump facts, and even Section 13(b) cases must be resolved on the basis of the record evidence relating to the market and its probable future.” Id. The Court looks first at the Horizontal Merger Guidelines and the testimony and reports of the economic experts and then examines what the evidence shows is really happening in the marketplace. A. The Horizontal Merger Guidelines and the Economic Evidence The Horizontal Merger Guidelines issued by the Department of Justice and the Federal Trade Commission in 1992, and revised in 1997 (“Merger Guidelines”), articulate the analytical framework the Justice Department and the FTC. apply in determining whether a merger is “likely substantially to lessen competition.” Merger Guidelines § 0.1. Under the Guidelines, as under the case law, the relevant product market is determined according to the “reasonable interchangeability of use” or cross-elasticity of demand between the product sold and “substitutes for it.” Merger Guidelines §§ 1.0, 1.11; Brown Shoe Co. v. United States, 370 U.S. at 325, 82 S.Ct. 1502. The analytical framework set forth in the Merger Guidelines approaches the inquiry regarding the reasonable interchangeability of- use or cross-elasticity of demand by asking whether a “hypothetical monopolist ... would profitably impose at least a ‘small but significant and nontransitory [price] increase’ ” (“SSNIP”). Merger Guidelines § l.ll. Reasonable interchangeability of use in effect means “substitutability” — the practical ability of a consumer to switch from one product to another. See Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d at 218-19; FTC v. Arch Coal, Inc., 329 F.Supp.2d at 119-20; FTC v. Swedish Match, 131 F.Supp.2d at 158. The forward-looking test of the Horizontal Merger Guidelines therefore asks where customers would turn if a hypothetical monopolist of the candidate product imposed a SSNIP. Merger Guidelines § 1.11. As the FTC explained it, the issue is whether there is a group of customers for whom there are not sufficiently close substitutes that a price increase — a “small but significant nontransitory increase in price” — can be inflicted on them. Aug. 1 a.m. Hearing Tr. at 42 (Bloom). If there are alternatives to which customers could readily take their business such that the price increases would not be profitable for the hypothetical monopolist, the proposed product market is too narrow and additional alternatives must be included in the relevant product market, even if customers did not view them as substitutes at the lower price. In order to determine which products should be included in the relevant product market, the Guidelines methodology begins with each of the products sold by the two firms in question and then performs the hypothetical monopolist test. If a hypothetical firm that was the sole seller of a given set of products would find it profitable to impose a small but significant non-transitory increase in the price of any of those products, then the given set of products satisfies the relevant product market test. If not, then the product which is the next best substitute (defined in the Guidelines as the product that gains the largest share of the revenue diverted by a price increase) is added. Merger Guidelines § 1.11. The test is then repeated. Products are added sequentially in this way until a sole seller would find it profitable to increase price by the amount deemed to be “small but significant.” Murphy Report ¶ 96. Because the FTC contends that the relevant market is “premium and natural organic supermarkets” (“PNOS”), Dr. Scheffman applied the hypothetical monopolist test by focusing on how consumers likely would behave if the price of grocery products in PNOS rose relative to the price of grocery products in other supermarkets. JX 18 at 33-34, 49 (Scheffman Dep.); Scheffman Report ¶ 49. He stated that the economic implication of this framework is that product market definition must focus its attention on “consumers at the margin” rather than consumers who are “inframarginal.” Scheffman Report ¶¶ 50, 99; see JX 18 at 95 (Scheffman Dep.). A marginal consumer is someone who would switch where he or she shops in response to a SSNIP — that is, if his supermarket of choice imposed a small but significant and nontransitory price increase. According to Dr. Scheffman, in the context of supermarkets — including premium natural and organic supermarkets — such marginal consumers can switch or divert their purchases in any of three ways. First, they can reduce the size of their shopping basket at one supermarket and substitute by buying the same or similar items at another retailer — if that other retailer offers similar products for sale. Second, from the set of supermarkets that the consumer currently frequents, the consumer can switch a particular shopping trip from one supermarket to another. Third, the consumer can change retailers by deciding to no longer frequent a particular supermarket that the consumer no longer believes offers good quality for value. Scheffman Report ¶ 51. Dr. Scheffman concludes that firms compete to retain existing business and win new business by competing for marginal consumers. It is these consumers who are susceptible to being won or retained by offering better prices, improved service, higher quality or more diverse product offerings. Scheffman Report ¶ 52. Supermarket retailers make their pricing, quality and service decisions in ways designed to retain and attract marginal consumers. While businesses value “core” customers, they simply “cannot survive — let alone grow and remain profitable — solely by catering to this small segment of customers.” Scheffman Report ¶55. The appropriate focus for defining .the relevant product (and geographic) market therefore is those marginal consumers. Dr. Scheffman con-eludes that the “marginal” consumer, not the so-called “core”, or “committed” consumer, must be the focus of any antitrust analysis. Aug. 1 p.m. Hearing Tr. at 74-76 (Denis). He believes that this is consistent with the analytical framework set out in the Merger Guidelines. Scheffman Report ¶ 53. The Court agrees. Dr. Scheffman used critical loss analysis to analyze the FTC’s proposed product market. As the FTC acknowledges, this is a widely accepted analytical tool in antitrust cases both to analyze market definition and competitive effects. Scheffman Report ¶ 100; JX 18 at 33-34 (Scheffman Dep.); see also Aug. 1 a.m. Hearing Tr. at 64 (Bloom) (FTC agrees). That is because critical loss is implicit in the hypothetical monopolist test. Scheffman Report ¶ 100. The latter tests whether a SSNIP would be profitable over a candidate product; critical loss analysis assesses how much substitution in response to a SSNIP' could occur before a SSNIP becomes unprofitable. Scheffman Report ¶ 110. To put it another way, SSNIP tests at what price increase a consumer will switch where he or she shops; critical loss tests at what point a purveyor’s price increases lead to a sufficient amount of lost sales (and lost customers) that the economic loss exceeds the gain from having raised prices (the “critical” loss). Critical loss analysis stems from the recognition that for almost any product, a price increase results in some lost sales as consumers make do with less, switch to other suppliers, or substitute other products. There is a profit detriment to the price increase equal to the product of the per unit gross margin and the number of units lost. But there is also an economic gain from the increased gross margin earned from the higher price on each remaining unit sold. The “critical loss” is the amount of lost sales at which the economic detriment equals the economic gain. It is a “critical” loss because any greater loss will result in the economic detriment exceeding the economic gain, thereby rendering the price increase unprofitable. Scheffman Report ¶ 96. The application of the critical loss technique to market definition is a three step process. The first step is to estimate the incremental margin (gross margin) and determine the volume the hypothetical monopolist (or merged entity) would have to lose to render the price increase unprofitable (¿a, the critical loss). The second step is to separately estimate what the actual loss in volume is likely to be as a result of the hypothesized price increase (ie., the estimated “actual loss”). The last step is to compare the estimate of the actual loss with the critical loss. If the actual loss is greater than the critical loss, the product market definition must be expanded. Scheffman Report ¶ 112. In calculating critical loss, Dr. Scheff-man originally used a SSNIP of 5% across all products sold by “premium natural and organic supermarkets.” This is the SSNIP used in most contexts under the Merger Guidelines and (according to Dr. Scheffman) traditionally used by the FTC in supermarket mergers. JX 18 at 34-37 (Scheffman Dep.). As the FTC has pointed out, however, a lower SSNIP is sometimes used. See also Merger Guidelines § 1.11. According to the FTC, Dr. Scheff-man himself has acknowledged that a 1% SSNIP may be appropriate to analyze markets characterized by high volume sales but low profit margins. See PX0322 at 132 (May 2007 remarks of Dr. Scheff-man at an FTC conference); Scheffman Report ¶ 114. Whole Foods has an average gross margin at the store level of approximately [Redacted] A 5% price increase implies a critical loss for Whole Foods of about [Redacted] in volume. Wild Oats stores typically have a gross margin at the store level of about [Redacted] or less. A 5% price increase implies a critical loss for Wild Oats of about [Redacted] in volume. Scheffman Report ¶ 115. In response to Dr. Murphy’s report and the FTC’s criticism of his use of a 5% SSNIP, Dr. Scheff-man also did exactly the same analysis again but this time calculated critical loss for a 1% SSNIP. Critical loss for Whole Foods at that price increase would be a little over [Redacted] in volume — that is, if the hypothetical monopolist lost a little over [Redacted] of its sales, then a 1% SSNIP would not be profitable. JX 18 at 41^42 (Scheffman Dep.). Critical loss analysis next considers what the actual loss is likely to be if prices increase. Actual loss depends on how many marginal customers are likely to exist and how likely they are to shift purchases in response to a SSNIP. Scheff-man Report ¶ 98. There is no evidence in the record from which to determine cross-elasticity of demand between premium natural and organic supermarkets and other supermarkets and grocery retailers. July 31 p.m. Hearing Tr. at 13-14 (Scheffman); JX 18 at 70-71 (Scheffman Dep.). Nor is there statistical evidence of actual loss, as the SSNIP is hypothetical rather than actual. July 31 p.m. Hearing Tr. at 10 (Scheffman). Therefore, Dr. Scheffman based his estimate of actual loss on weighing the evidence in the case, including the 47 market studies he reviewed. JX 18 at 91 (Scheffman Dep.). Dr. Scheffman summarized (and then discussed in detail) what the market studies show: (1) grocery shopping is a relatively highly price sensitive category of retail; (2) Whole Foods and Wild Oats customers are shifting purchases between PNOS and other supermarkets, and can further shift purchases costlessly, ie., without having to change their shopping patterns; (3) most Whole Foods and Wild Oats shoppers shop frequently at other supermarkets and grocery retailers; (4) other supermarkets compete vigorously for the patronage of customers who also shop at Whole Foods and Wild Oats; and (5) Whole Foods (and to a lesser degree Wild Oats) regularly and extensively price check other supermarkets and food retailers in order to gauge their pricing, their assortments, and other strategies that these competitors are using to attract Whole Foods shoppers and other customers into their stores. Scheffman Report ¶¶ 122, 123, 125, 127, 204, 212, 213, 216, 127, 224-29. Dr. Scheffman concluded that a substantial portion of Whole Foods and Wild Oats business is at the margin such that in the event of a PNOS price increase, the actual loss would substantially exceed the critical loss. Scheffman Report f 128. “Where marginal customers comprise such a significant portion of the business, there is no doubt that the actual loss from a PNOS price increase would greatly exceed the [Redacted] critical loss.” Scheffman Report ¶ 121 (discussing 5% SSNIP test results). Dr. Scheffman’s conclusion obtains regardless if the SSNIP is 5% or 1%. JX 18 at 40, 89 (Scheffman Dep.); see id., - at 89-93 (the actual loss on a 1% price increase would be more than [Redacted] and is likely to be about [Redacted]. Even accepting the possibility that certain products are sold only at Whole Foods or Wild Oats, or that certain consumers perceive that the quality they want is only available at those stores, Dr. Scheffman concluded that critical loss analysis shows that, particularly with a small SSNIP, a relatively small sales loss would make a price increase unprofitable. The record evidence, including market research studies and evidence of how both consumers and retailers are actually acting in the marketplace, suggests that because so many people are cross-shopping for natural and organic foods and are marginal rather than core customers, the actual loss from a SSNIP would exceed the critical loss. July 31 p.m. Hearing Tr. at 25-27 (Scheffman). The Court agrees with Dr. Scheffman. Dr. Scheffman’s critical loss analysis demonstrates that the relevant product market must be broader than the market proposed by the FTC: “If all PNOS raised prices, there would be a substantial loss in business,” and the loss necessarily would be to other supermarkets. Scheffman Report ¶ 120. “Based on this qualitative and quantitative evidence, I have concluded that the relevant product market must encompass at least all supermarkets.” Scheffman Report ¶ 120. Evidence of the significant amount of sales that are “at the margin” shows that it is not plausible that a 5% increase in prices attempted by the proposed merged entity would be'profitable, since the actual loss in sales arising from such a price increase is likely to far exceed the critical loss. Scheffman Report ¶¶ 117, 121. Actual loss would also defeat a 1% price increase. Scheffman Rebuttal Report ¶¶ 104-105. Applying the product market definition framework of the case law and the Merger Guidelines, it follows that the relevant product market within which to evaluate the proposed transaction must be at least as broad as the retail sale of food and grocery items in supermarkets. Scheff-man Report ¶¶ 128, 235. As a result, the FTC’s proposed relevant product market of PNOS fails. See JX 18 at 55-56 (Scheffman Dep.) (“[T]he FTC’s relevant market is not supportable as a matter of economic analysis and [ ] it would have to include non-PNOS supermarkets and other grocery retailers”). Dr. Scheffman also reviewed data regarding the sales at newly opened Whole Foods stores in certain markets where Whole Foods had no other stores, so-called “banner” entries. Scheffman Report ¶¶ 60-94. According to Dr. Scheffman, a study of these store opening events is relevant to product market definition because it provides a natural experiment regarding how consumers react to a change in their options. Scheffman Report ¶ 61; July 31 p.m. Hearing Tr. at 21-23 (Scheffman). His analysis demonstrates that when Whole Foods enters a new local area, Whole Foods generates substantial sales that are overwhelmingly captured from the local traditional or conventional supermarkets and grocery retailers regardless of whether there are other PNOS in the area. Scheffman Report ¶ 60. Dr. Scheffman concludes from this analysis that premium natural and organic supermarkets compete directly with other supermarkets. In an area in which there are no other PNOS, all the sales for the new Whole Foods store necessarily come from other grocery retailers. Scheffman Report ¶ 62. Dr. Scheffman nevertheless found that these new Whole Foods stores succeeded even though they had to draw all of their customers from other grocery retailers and supermarkets. Scheffman Report ¶¶ 65-66; see July 31 p.m. Hearing Tr. at 11 (Scheffman). It is obvious that when Whole Foods opens a new store in an area with no other PNOS it does not create new demand for groceries; rather, consumers divert some of their grocery purchases from other grocery retailers to Whole Foods. Scheffman Report ¶ 65. On the other hand, when a Whole Foods store opens in an area already served by a Wild Oats store (or other PNOS), clearly Wild Oats stores can be expected to lose sales. Scheffman Report ¶ 62. But combined Whole Foods and Wild Oats revenues after entry of the Whole Foods store average more than [Redacted] times the revenues of the Wild Oats store prior to entry. Scheffman Report ¶¶ 75-76. Reviewing Whole Foods entry events in areas where Wild Oats also operated, Dr. Scheff-man found that the reduction in Wild Oats sales was only about [Redacted] in most areas — in some less than [Redacted] In other words, when a Whole Foods enters an area that has a Wild Oats store, its sales do not overwhelmingly come from Wild Oats, but primarily from other supermarkets; the main competitive interaction is between Whole Foods and “other” grocery retailers. Scheffman Report ¶¶ 83, 90. Dr. Scheffman found that: (1) on average, the opening of a new Whole Foods store generated substantially more sales of natural and organic products than existed in the area prior to the opening, and (2) in every instance, the new Whole Foods store generated substantially more in sales than the Wild Oats store previously had. Scheffman Report ¶ 76. He observed, “[c]ontrary to the prediction implied by the FTC’s product market, in all cases ... [Whole Foods’] sales are much larger than the reduction in sales of ... [Wild Oats].” Scheffman Report ¶¶ 77-79. Thus, when Whole Foods opens a new store in an area that has a Wild Oats, the data shows that Whole Foods gains a lot of sales, “and most of those sales by far did not come from Wild Oats.” JX 18 at 81-82 (Scheff-man Dep.). From the data, it is clear that most of the sales are coming from non-PNOS supermarkets. Id. at 82. Whole Foods is “overwhelmingly ... picking up its sales from non-PNOS markets and of course necessarily has to be ... competitive with those supermarkets to attract those sales and keep them.” Id., at 83. Dr. Scheffman made calculations that showed that the combined revenue at a new Whole Foods store and an existing area Wild Oats store was, on average, [Redacted] times the revenue that the Wild Oats store had attracted before the Whole Foods store opened. Id. ¶ 79. These facts show that most of Whole Foods’ sales came from non “premium natural and organic” supermarkets and other grocery retailers. It follows that most of the customers who frequent the new Whole Foods store come not from Wild Oats but from other competitors. These facts lead to the inevitable conclusion that Whole Foods’ and Wild Oats’ main competitors are other supermarkets, not just each other. Scheffman Report ¶¶ 74-90. , Dr. Murphy conducted a number of economic analyses. He concluded, among other things, that the estimated impact of banner entry by Whole Foods on Wild Oats’ existing-store dollar sales indicates that the entry by Whole Foods into a geographic area reduces sales at nearby Wild Oats stores by [Redacted] He further concluded that the introduction of competition from Whole Foods has a larger eff