Food distributor US Foods, Inc. has agreed to divest assets to settle Federal Trade Commission charges that US Foods, Inc.’s proposed $1.8 billion acquisition of Services Group of America, Inc. would violate federal antitrust law.
Broadline foodservice distribution involves the sale and distribution of a broad range of food and foodservice-related products to customers who serve food to consumers away from home in venues such as restaurants, hospital cafeterias, stadiums, and schools. The FTC alleges that the proposed acquisition would likely harm competition for broadline foodservice distribution for customers in four local markets and for national and multi-regional customers throughout the country.
The Commission previously blocked a proposed merger between US Foods and Sysco Corp., the nation’s two largest broadline foodservice distributors. The companies abandoned their plans after a federal judge enjoined the merger, holding that the merger was likely to reduce competition nationwide and in several regional markets.
The complaint alleges that, in Eastern Idaho, Western North Dakota, Eastern North Dakota, and the Seattle Area, the transaction would eliminate a key broadline distributor and limit customers’ ability to switch between distributors to obtain better pricing and service.
According to the complaint, the transaction, as proposed, is also likely to harm competition nationally, resulting in higher prices and lower quality and service to multi-regional and national customers. Services Group of America, Inc., through its foodservice division, Food Services of America, or FSA, belongs to a consortium of regional distributors known as Distribution Market Advantage, or DMA. DMA competes with US Foods to serve multi-regional and national accounts. According to the complaint, if DMA were to lose FSA’s distribution centers in Washington, Idaho, and North Dakota from its network, it would become a significantly less attractive option for this set of customers.
Under the proposed consent agreement, within 30 days of the acquisition closing, US Foods must divest three FSA distribution centers: one in Boise, Idaho; another in Fargo, North Dakota (FSA competes in both Eastern and Western North Dakota out of this facility); and a third in the greater Seattle area. All three divestiture buyers are DMA members, and the divested facilities will maintain DMA’s national footprint.
Further details about the consent agreement, which includes an order to maintain assets, are set forth in the analysis to aid public comment for this matter. The proposed consent order also appoints a monitor to ensure compliance.
The Commission vote to issue the complaint and accept the proposed consent order for public comment was 5-0. The FTC will publish the consent agreement package in the Federal Register shortly. Instructions for filing comments appear in the published notice. Comments must be received 30 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov.
NOTE:The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $42,530.
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