FTC to Sue to Block Sysco/US Foods Deal

The Federal Trade Commission has filed an administrative complaint against Sysco Corp. and US Foods, the two largest broadline foodservice distributors in the country, and will seek a federal court order to block their proposed merger. The federal agency claims that the deal would violate antitrust laws by significantly reducing competition nationwide and in 32 local markets for broadline foodservice distribution services.

The FTC also authorized staff to seek in federal court a temporary restraining order and a preliminary injunction to prevent the parties from consummating the merger and to maintain the status quo pending the administrative proceeding.

“This proposed merger would eliminate significant competition in the marketplace and create a dominant national broadline foodservice distributor,” says 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.”

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 had announced its proposed acquisition of US Foods over a year ago and has spent the time since attempting to placate regulators. Most recently, it had announced a proposed spinoff of some US Foods distribution centers to Performance Food Group if the deal was ratified.