By Diane Bartz

WASHINGTON (Reuters) - Whole Foods Market Inc (WFMI.O: Quote, Profile, Research) argued on Wednesday that U.S. antitrust officials had no authority to undo its merger last year with rival premium organic grocer Wild Oats Markets Inc.

The Federal Trade Commission, which works with the Justice Department to enforce antitrust law, disagreed in a hearing before the U.S. Court of Appeals for the District of Columbia.

When asked whether there was evidence that Whole Foods charged less when Wild Oats stores were nearby, FTC lawyer Marilyn Kerst said: "Yes, there is evidence."

Kerst put the difference at 1 to 2 percent.

The FTC has asked the court to grant an injunction effectively stopping the ongoing merger process while its administrative law judge considered the deal. Kerst told the court that under law "injunctive relief is to be broadly available to the commission."

But Whole Foods said that the issue had been decided appropriately by Judge Paul Friedman, who denied the FTC a preliminary injunction last August on the grounds that the commission had failed to prove the merger would hurt competition.

Whole Foods has argued that its stores compete against all supermarkets, not just organic grocery stores. The FTC disagrees, saying they compete in the premium, organic niche market.

Outside the court, Whole Foods lawyer Paul Denis said that Whole Foods had already closed 12 or 13 Wild Oats stores and converted about 20 to Whole Foods stores. Some 40 still carry the Wild Oats sign, he said.