Federal Judge Blocks Formation Of Foodservice Supply Voltron

Image courtesy of (Don Buciak II)

Sysco and US Foods, the two biggest national foodservice suppliers, want to merge, and the meanies at the Federal Trade Commission won’t let them. Regulators think this merger would be bad for the companies’ customers–and their customers are food service institutions ranging from the most humble snack bars to the fanciest restaurants. Back in February, the FTC sued to stop the merger, and today a federal judge has issued a preliminary injunction blocking it.

The companies are the two biggest suppliers in the United States, and are considered “broadline distributors” that can supply just about everything a foodservice establishment might need, from frozen ravioli to napkins to ketchup packets.

The management of each restaurant, cafeteria, or ice cream stand might choose specialized or local suppliers for some items, and that’s the companies’ argument: those smaller companies supply the majority of food that pros serve, but there aren’t many distributors that sell everything.

If the merger as proposed went through, even after both companies sold off some local distribution centers to competitors, the newly formed USyscoFoods (not its actual proposed name) would control 25% of the foodservice supply business in the United States. That seemed like a lot to the commissioners of the FTC, and it could threaten competition across the industry: even the customers of both companies’ customers.

“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,” the FTC’s Office of Competition said in a statement when commissioners voted to block the merger.

In a statement, Sysco expressed disappointment in the judge’s decision, and said that the company would consider its options, which may include ending the two companies’ courtship. It would be a sad breakup for them: this merger has been in the works since December 2013.

Federal Judge Halts Sysco-US Foods Merger [Wall Street Journal]

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