In a 2-1 ruling, a three-member panel of the U.S. Court of Appeals for the District of Columbia Circuit, in Washington, shipped the case back to a lower court to consider the evidence more fully, suggesting that U.S. District Judge Paul Friedman had rushed a decision the first time around.

The ruling left unclear what would happen if the courts ultimately find against a merger that has, for all practical purposes, already occurred. If the district court ultimately rules in favor of the Federal Trade Commission, which sought last year to block the deal, it could disrupt Whole Foods' efforts to combine the companies.

The request to block the $565-million merger was brought by the FTC, which had argued that Whole Foods' takeover of its competitor would limit competition and increase prices in the marketplace for natural and organic foods.

In a statement, Whole Foods said it was ''disappointed'' with the court's ruling and was considering its legal options. The company, which is based in Austin, Texas, closed the deal with Wild Oats in August, and has already shuttered four Wild Oats' stores and reflagged 27 others as Whole Foods stores, including locations in Utah.

Shares of Whole Foods, which have declined by 45 percent since the first of the year, gained 36 cents to close at $22.39 on Tuesday.

Jeffrey Schmidt, director of the Federal Trade Commission's bureau of competition, said in a statement that the agency is ''looking forward to future proceedings before the district court, leading to a full trial on the merits'' of the issue.

The merger was announced in February 2007, and Whole Foods executives asserted that it was necessary so that they could compete against much larger rivals like Kroger and Safeway that were starting to offer organic and natural products.

As part of its argument against the trade commission, Whole Foods said there was no longer a defined market for natural and organic foods since so many traditional grocery stores were offering the same products.

Friedman, who adjudicated the matter on a ''very fast track,'' agreed and maintained that ''marginal'' customers, rather than core customers, could easily find the products in other stores.