U.S. District Judge Amit Mehta this week indicated that how exactly he interprets the food distribution marketplace will be the most important aspect in deciding whether to block the planned merger of Sysco Corp’s takeover of US Foods Inc. The Judge suggested that the case presents unique issues and was more difficult to analyze that some other recent merger cases because Sysco and US foods sell so many different types of products and services.
Judge Mehta heard opening statements this week for an expected seven days of hearings on the Federal Trade Commission’s (FTC) challenge to the merger. The FTC sued Sysco and US Foods in February after rejecting their offer to remedy antitrust concerns by selling 11 facilities to Performance Food Group Co. The FTC is asking Judge Mehta to issue now a preliminary injunction blocking the merger while it holds a more detailed in-house trial in July.
The FTC is asking the court to block the $3.5 billion combination of the two largest U.S. companies that distribute ingredients and supplies to restaurants, hotels, school cafeterias, and other customers, saying that the deal would create an industry “behemoth” in food distribution and “harm competition in many markets.”
Sysco and US Foods say that delaying this deal now via an injunction will kill it. In opening remarks, an attorney for Sysco disputed FTC’s claim that the combined companies would have a 75-percent market share, saying food distribution is a “sprawling industry” where more than 16,000 other businesses have about 60 percent of the market. “People are competing fiercely,” Attorney Rich Parker said, arguing that the competitive landscape is much broader and that the FTC is relying on a “constrained market definition that makes the companies appear to have more sway that they really do.”
