HOUSTON, TX - Sysco Corporation is fighting back against the Federal Trade Commission's (FTC) attempts to block its merger with US Foods by filing a memorandum opposing the move.
According to the Wall Street Journal, the retail company filed a memo with the U.S. Federal District Court for the District of Columbia yesterday claiming that the merger the FTC is opposed to would actually increase the competitive level of the foodservice market.
"We look forward to presenting all of the facts in court and ultimately, through this merger, delivering better service at a lower cost through a more efficient, innovative and competitive combined company," Bill DeLaney, President and Chief Executive Officer of Sysco, said in a press release.
As we have previously reported, the FTC is currently in pursuit of legal action that would block the merger on the grounds of antitrust law violations, stating that the two companies are too large in the foodservice industry to be united.
“FTC’s flawed logic on the structure of the local food-service distribution market led to dubious analysis of market share,” the company stated, according to the Wall Street Journal.
According to the press release, the memorandum places an emphasis on the following points:
- A market for broadline foodservice distribution services for "national customers" does not exist. The foodservice distribution industry is extremely competitive. Customers of all sizes, including the industry's largest customers, have many options from which to choose, including systems distributors, specialty distributors, cash-and-carry stores and broadline distributors.
- Local markets are highly competitive. The FTC's flawed logic on the structure of the local foodservice distribution market led to dubious analysis of market share. In one instance, the FTC claims Sysco and US Foods would control 100 percent of the market in San Diego. In reality, more than two dozen companies compete for customers' business in San Diego. Local market dynamics are similar across the U.S.
- Synergies will reduce Sysco's annual costs by at least $600 million. These savings allow the combined company to become more efficient, invest in improved customer service and innovative products, and reduce customer prices, all of which contribute to an even more competitive market.
- A robust, binding divestiture package with Performance Food Group creates a stronger competitor. The proposed sale of facilities in 11 markets to PFG directly addresses FTC concerns that the merger might reduce choice for customers with locations in multiple local markets and regions.
How this will influence the case is yet to be seen. The current date for the FTC’s motion is set to be heard by U.S. District Judge Amit Mehta on May 5, so stay tuned to AndNowUKnow as we continue to follow this developing story.
