in General Mills, Inc./Diageo
For approximately 15 months, the Commission has been investigating the proposed acquisition by General Mills, Inc. of certain food businesses of the Pillsbury Company, a subsidiary of Diageo plc., and the related divestiture of certain assets to International Multifoods Corporation ("Multifoods"). The transaction clearly created competitive problems in those markets where the number of significant competitors was reduced from three to two or two to one. The parties' proposed remedy, however, presented complex and difficult issues, which have given rise to honest differences of opinion.
The outcome of our deliberations today is that the parties will be able to proceed with a significant transaction that is, for the most part, competitively benign. At the same time, we believe that adequate measures have been taken to preserve competition and avoid potential consumer harm in the relatively narrow product areas that would otherwise be adversely affected.
From the beginning, General Mills has recognized that there were serious antitrust issues involving about eight percent of the Pillsbury assets to be acquired. It initially offered a settlement proposal that provided for divestiture of Pillsbury's baking mixes, ready-to-spread frosting, flour products, pancake and potato mixes to Multifoods. With such a divestiture, General Mills would not acquire any competitively problematic products. Along with our colleagues, however, we continued to be concerned that the proposed divestiture package might not sufficiently assure that the pre-transaction level of competition would be maintained, and we were concerned that the divestiture proposal would necessitate undesirable ongoing communications between General Mills and Multifoods.
The parties to the transaction have recently offered substantial commitments, in addition to those offered before, which will in our view minimize these risks. Accordingly, we believe the transaction is now consistent with the public interest, and have voted against the motion to seek judicial relief to enjoin it. The motion has failed by a two-two vote, with Chairman Muris recused.
The following highlights the far-reaching commitments that the parties ultimately made, which we believe are adequate to protect competition.
We would have strongly preferred that these commitments be memorialized in a formal Commission order, consistent with usual practice. Imposition of an order, however, would require an affirmative vote of at least three Commissioners in this situation, and a third vote could not be obtained. On the other hand, the alternative of asking a court to block the overall transaction would not, in our view, serve the public interest. As indicated above, we recognize that there are hard issues in this case and, even though we differ, we respect our colleagues' view that the present settlement is inadequate. We regret that they could not have found a way to assert that view but still vote to include the commitments in an order that the agency can enforce.
Having voiced this regret, we are nevertheless convinced that the parties will honor the letter and the spirit of their promises. Order or no order, we have a variety of enforcement tools at our disposal - including a plenary action to undo the underlying merger transaction - in the extremely unlikely event that the parties renege.