Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Sysco, US Foods proposed merger anticompetitive, FTC claims, (Feb 19, 2015)

By Jody Coultas, J.D.

The FTC filed an administrative complaint charging that the proposed merger of Sysco and US Foods would violate the antitrust laws by significantly reducing competition nationwide and in 32 local markets for broadline foodservice distribution services. The Commission additionally authorized staff to seek a temporary restraining order and a preliminary injunction to prevent the parties from consummating the merger (In the Matter of Sysco Corp., File No. 141 0067, Dkt. 9364).

Sysco and US Foods are the largest broadline foodservice distributors in the United States. Broadline distributors offer national-brand and private-label food products, and provide frequent and flexible delivery, customer service, and other value-added services such as order tracking, menu planning, and nutritional information.

“Consumers across the country, and the businesses that serve them, benefit from the healthy competition between Sysco and US Foods, whether they eat at a restaurant, hotel, or a hospital,” stated Deborah L. Feinstein, Director of the FTC’s Bureau of Competition. “This proposed merger would eliminate significant competition in the marketplace and create a dominant national broadline foodservice distributor.”

According to the FTC complaint, a combined Sysco/US Foods would account for 75 percent of the national market for broadline distribution services. In addition, the parties would also hold high shares in a number of local markets. Sysco and US Foods are the only broadline distributors with numerous distribution centers spread throughout the country, and compete vigorously with each other to meet the needs of customers with foodservice locations dispersed nationwide or across multiple regions of the country. Many hotel chains, foodservice management companies, and group purchasing organizations consider Sysco and US Foods to be each other’s closest competitor, and, in some cases, those customers’ only meaningful alternatives for national broadline distribution services. Sysco and US Foods also compete aggressively for the broadline business of independent restaurants and other local customers that operate in a local area or region. The merger is likely to harm competition in 32 local markets, the FTC claims.

The Attorneys General of California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Virginia, Pennsylvania, Tennessee, and the District of Columbia have joined the FTC in seeking an injunction.

Companies: Sysco Corporation; US Foods

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