Regulation

FTC’s Antitrust Case ‘Pure Fiction’: Sysco

The Federal Trade Commission's attempt to block Sysco's takeover of US Foods heads to a U.S. district court.
Katie Kuehner-HebertMay 5, 2015
FTC’s Antitrust Case ‘Pure Fiction’: Sysco

The Federal Trade Commission is trying to block Sysco’s takeover of US Foods, claiming the merger would give the food distributor a 75% share of the market and consequently, undue influence over prices.

The FTC filed an antitrust lawsuit in the U.S. District Court, District of Columbia, asking U.S. District Judge Amit Mehta to block the pending merger, according to Bloomberg.

The combination of the two companies “would create an industry behemoth” and eliminate “intense head-to-head competition,” Stephen Weissman, an FTC lawyer, reportedly told Mehta in an opening statement Tuesday.

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Houston-based Sysco disputed the FTC’s market share projections, contending the merger would only give the company a 27% share, considering that 16,000 companies, including local and regional firms, compete with the two merging firms.

Sysco and Rosemont, Ill.-based US Foods together have the broadest network of facilities across the country, Bloomberg said.

“The food-distribution business is fragmented, diffuse, and highly competitive,” Sysco and US Foods reportedly said in response to the FTC’s complaint. “Antitrust analysis must be grounded in competitive reality, and the FTC’s case is pure fiction.”

Roughly two dozen customers and competitors of the two companies are asking the court to shield their identities for fear of retaliation, but the judge declined, saying that Sysco and US Foods have a right to challenge any such evidence in court.

Sysco had earlier offered to sell 11 of its facilities to Performance Food Group to remedy antitrust concerns, but the FTC rejected the proposal as inadequate.

Taking such antitrust issues all the way to court is rare: Of the 1,326 transactions reviewed in the year ended Sept. 30, 2013, fewer than 1% went to court without a settlement, Bloomberg said.