Madigan, FTC, and States
sue to block Sysco-US Foods merger
Lawsuit alleges proposed
merger will eliminate competition among food
distributors and lead to higher prices
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[February 20, 2015]
CHICAGO
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Attorney General Lisa Madigan, with the Federal Trade Commission (FTC)
and 10 other states, sought to block Sysco Corporation’s proposed $8.2
billion acquisition of its rival, the Rosemont-based US Foods Inc.
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Madigan, the FTC and other states today filed a complaint in U.S.
District Court for the District of Columbia to stop the acquisition
by the Houston, Texas-based Sysco Corporation, alleging the proposed
acquisition would violate antitrust laws by eliminating Sysco’s
closest competitor and its only competitor operating nationwide.
The lawsuit specifically alleges the merger would substantially
reduce competition among broadline food distributors in Illinois
and across the country, resulting in higher prices and
diminished service for restaurants, healthcare facilities,
hotels, schools and other institutions that require full-service
food distribution services. Broadline food service distribution
is distinct from other types of food distribution because it
requires timely and frequent delivery and a constant
availability of a wide array of food products and supplies.
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“The loss of competition between Sysco and US Foods would raise
costs for their customers and ultimately for anyone purchasing
food served at hospitals, schools, hotels and restaurants,”
Madigan said.
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Because it is difficult for new competitors to enter this
market, the complaint alleges the merger would dramatically
concentrate business and eliminate price competition and reduce
the quality of customer service. Sysco and US Foods are the only
broadline food distributors currently with national operations.
The complaint alleges the two companies currently represent 75
percent of the national market. In the Chicago area, the lawsuit
alleges Sysco and US Foods together control 83 percent of the
market for local and regional customers. The Bloomington area is
another part of Illinois where the market would be highly
concentrated after the merger because the combined companies
would control 77 percent of the market.
Joining Madigan and the FTC in filing today’s complaint were
attorneys general from: California, the District of Columbia,
Maryland, Ohio, Pennsylvania, Virginia, Iowa, Minnesota,
Nebraska and Tennessee.
Bureau Chief Robert Pratt is handling the case for Madigan’s
Antitrust Bureau.
[Office of the Illinois Attorney
General Lisa Madigan] |