The Federal Trade Commission on Thursday challenged the proposed merger of Sysco and US Foods, saying it would violate antitrust laws by significantly reducing competition nationwide.
The agency said the new entity would have a 75 percent market share and harm customers in 32 local markets for broadline foodservice distribution services. If the deal went ahead as proposed, customers (restaurants, hospitals, hotels and schools) would likely face higher prices and diminished service.
The FTC is also seeking in federal court a temporary restraining order and a preliminary injunction to prevent the parties from consummating the merger.
“This proposed merger would eliminate significant competition in the marketplace and create a dominant national broadline foodservice distributor,” said Debbie Feinstein, director of the FTC’s Bureau of Competition. “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.”
Sysco and US Foods are the United States’ two largest broadline foodservice distributors, and according to the FTC are the only ones with a “truly national footprint” and numerous distribution centers spread throughout the country.
FTC also charges that the proposed sale of 11 US Foods distribution centers to Performance Food Group (PFG) would neither enable PFG to replace US Foods as a competitor nor counteract the significant competitive harm caused by the merger. According to the FTC, even with the addition of 11 distribution centers, PFG would not approach the scale or competitiveness of US Foods today, and therefore would not restore the competition eliminated by this merger.
The following state attorneys general have joined the FTC’s complaint for a preliminary injunction to be filed in federal district court: California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Virginia, Pennsylvania, Tennessee and the District of Columbia.
The FTC voted 3-2 to issue the administrative complaint and to authorize staff to seek a temporary restraining order and preliminary injunction in federal court. The administrative trial is scheduled to begin on 21 July.
