Sysco Argues Local Competition Negates Antitrust Charges In Proposed US Foods Merger

Last week, one proposed megamerger fell apart and Comcast walked away from buying Time Warner. Meanwhile, the largest megamerger ever proposed in the foodservice industry is winding its way into court.

Sysco Corp. filed a memorandum April 21 in the U.S. District Court for the District of Columbia arguing that there is no national market to be dominated by one foodservice distributor and local markets remain highly competitive. The Houston-based broadliner is trying to get past a Federal Trade Commission move to block its proposed $8.2 billion merger with US Foods, the country’s second largest broadliner and the only other such company with a national reach.

The court filing was sealed, as are many other records in the legal battle between the FTC and Sysco. The FTC has requested a preliminary injunction to stop the merger, and a hearing on the injunction is scheduled for May 5. The loser in that hearing is expected to drop out.

The FTC objects to the merger on the grounds that the two companies represent the lion’s share of the market for national foodservice distributors. The agency argues that Sysco and US Foods are the only competitors in many local markets, creating a heavy reliance on their products and services for smaller chains and independents, schools and hospital foodservice providers.

In building its argument for the merger, Sysco has compiled a witness list with officials from several different restaurant chains, including Culver’s, Del Frisco’s Restaurant Group, Five Guys Enterprises and Subway.