Court issues preliminary order blocking Sysco-U.S. Foods merger

user-gravatar Headshot
Updated Jun 26, 2015

Sysco 3A U.S. District Court granted the Federal Trade Commission’s request for a preliminary injunction in the proposed merger of Sysco Corp. and U.S. Foods, at least temporarily blocking the merger between the two private fleets.

An FTC administrative law judge will hear arguments from the FTC and Sysco on July 21 over merger plans by the top two U.S. broadline foodservice distributors.

The FTC and attorney generals from 10 states said the merger would violate antitrust laws.

“The Court’s ruling today temporarily blocking Sysco’s proposed acquisition of U.S. Foods will preserve competition in both local and national broadline foodservice distribution markets,” said Federal Trade Commission Bureau of Competition Director Debbie Feinstein. â€śWe look forward to proving at trial that this deal would lead to higher prices and diminished service for customers, including restaurants, hospitals, hotels and schools.”

Sysco and USF are the only two broadline distributors with nationwide networks of distribution centers, the AGs and the FTC told the D.C. federal court Feb. 19.

“Broadliners” sell and deliver food and related products to restaurants and other foodservice operators. Alternative foodservice channels, such as systems foodservice distribution, are inadequate substitutes because they do not offer one-stop shopping and frequent and flexible delivery of broadliners, the FTC says.

When the merger is complete, Sysco will sell USF facilities in 11 markets to Performance Food Group, a move meant to appease commission concerns.

Still, the FTC said the proposed sale “would neither enable PFG to replace US Foods as a competitor nor counteract the significant competitive harm caused by the merger.”