U.S. District Court Blocks Proposed Merger of Sysco and US Foods

Wednesday, June 24, 2015 | 12:00pm

Tennessee Attorney General Herbert H. Slatery III announced today that the U.S. District Court for the District of Columbia has issued an order temporarily blocking the merger of Sysco and US Foods. The court order states that a preliminary injunction is in the public interest as there “is a reasonable probability that the proposed merger will substantially impair competition.”

Tennessee, along with ten other states, joined the Federal Trade Commission (FTC) in seeking a temporary restraining order and preliminary injunction to prevent the proposed merger between the nation’s two largest food distributors until the FTC completes an administrative hearing. The hearing, scheduled to begin July 21, 2015, will determine whether the proposed combination would violate the antitrust laws.

According to the complaint filed by the FTC and Attorneys General, the merger would violate antitrust laws by significantly reducing competition nationwide and in 32 local markets. In addition, the foodservice customers, including restaurants, hospitals, hotels, and schools, would likely face higher prices and diminished services.

“A merger of this kind would negatively impact consumers and the businesses that serve them,” said Attorney General Slatery. “This would especially be the case in Memphis, where the merger would result in one broadline foodservice distributor controlling 81% of the market.”

Sysco and US Foods are – by far – the largest broadline foodservice distributors in the United States. A combined Sysco/US Foods would account for 75% of the national market for broadline distribution services and high shares in a number of local markets. Broadline distributors offer extensive product lines, including national-brand and private-label food products, and provide frequent and flexible delivery, high levels of customer service, and other value-added services such as order tracking, menu planning, and nutritional information.

In addition to Tennessee, California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Pennsylvania, Virginia, and the District of Columbia joined the FTC’s complaint for a preliminary injunction.