FTC Challenges Sysco’s Plans to Buy US Foods

CHICAGO (Chicago Tribune/TNS) -

Sysco’s lengthy attempt to buy US Foods was dealt a blow Thursday, as the Federal Trade Commission and 11 attorneys general sought to block the deal.

The FTC said it filed an administrative complaint, charging that the potential takeover would violate antitrust laws by significantly reducing competition nationwide and in 32 local markets.

The FTC authorized its staff to seek a temporary restraining order and a preliminary injunction to prevent the deal from closing, and to maintain the status quo while waiting for an administrative proceeding scheduled for later this year.

Houston-based Sysco announced its plan to buy US Foods, based outside Chicago, for about $3.5 billion in December 2013.

According to the FTC’s complaint, a combined Sysco-US Foods would have a 75 percent share of the U.S. market for what it calls broadline distribution services, or distributing a variety of food products with frequent and flexible delivery, customer service and other services such as menu planning. The combined company would also have large market shares in a number of local areas, the FTC said.

On Thursday, FTC Commissioner Joshua Wright tweeted that he voted no in the 3-2 vote to challenge the merger. “FWIW I generally do not make statements explaining votes when FTC brings suit in federal court while litigation is pending.” He added in another tweet, “Other than to say I have no reason to believe that the proposed Sysco/US foods transaction violated the Clayton Act.”

Attorneys general from California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Virginia, Pennsylvania, Tennessee and the District of Columbia joined the FTC’s antitrust suit.

“The loss of competition between Sysco and US Foods would raise costs for their customers and ultimately for anyone purchasing food served at hospitals, schools, hotels and restaurants,” Attorney General Lisa Madigan said in a statement.

Sysco stood by its plan to buy its smaller rival.

“The facts are strongly in our favor and we look forward to making our case in court,” Sysco President and CEO Bill DeLaney said in a statement. “Those of us who work in this industry every day know it is fiercely competitive.”

US Foods could not immediately be reached for comment.

DeLaney went on to say that “the overwhelming majority of restaurants and food operators choose their foodservice distributor locally” and have choices among many companies.

Sysco was to speak with analysts and investors at an industry conference in Florida Thursday afternoon.

The administrative trial is slated to start July 21, the FTC said.