*** UPDATE ***
Yesterday, Judge Amit P. Mehta in the United States District Court for the District of Columbia granted a preliminary injunction halting the merger of US Foods and Sysco Corporation.
Attorney General Herring, along with 10 other states, the District of Columbia, and the Federal Trade Commission, requested the injunction in order to prevent the completion of the merger pending a full administrative trial.
Judge Mehta's decision sent a clear signal that he agrees with Attorney General Herring and others that there are significant concerns that the proposed merger would significantly reduce competition nationwide and in local markets, leading to higher prices and diminished services for food distribution customers, including restaurants, hospitals, hotels, and schools. If the proposed merger were to move forward, the new company would control an estimated 75% of the national market, including 62% of the market in the areas around Roanoke, Blacksburg, and Lexington.
Attorney General Herring fought for this injunction to protect consumers in Western and Southwest Virginia pending a final decision on the merits.
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Virginia Joins FTC to Challenge Proposed Merger of Sysco and US Foods
RICHMOND (February 19, 2015) -- Attorney General Mark R. Herring has joined ten other states and the Federal Trade Commission in opposing the proposed merger of Sysco and US Foods because of the potential harm to Virginia consumers, especially those in Western and Southwestern Virginia. A preliminary injunction complaint filed by the states, D.C., and FTC charges that the proposed merger would violate the antitrust laws by significantly reducing competition nationwide and in local markets, leading to higher prices and diminished services for food distribution customers, including restaurants, hospitals, hotels, and schools. If the proposed merger were to move forward, the new company would control an estimated 75% of the national market, including 62% of the market in the areas around Roanoke, Blacksburg, and Lexington.
The FTC has authorized its staff to seek in federal court a temporary restraining order and a preliminary injunction to prevent the parties from consummating the merger, and to maintain the status quo pending the administrative proceeding.
"This merger would be a bad deal for Virginia consumers who would likely face higher prices and fewer choices as a result of severely limited competition," said Attorney General Herring. "Our research shows that areas around Roanoke, Blacksburg, and Lexington would be particularly affected, since the new company would control well over half of the market. We're going to do all we can in conjunction with our state and federal partners to protect Virginia consumers and ensure meaningful competition and the benefits it provides."
Sysco and US Foods are by far the largest "broadline foodservice distributors" in the United States, characterized by national-brand and private-label food products, frequent and flexible delivery options, and other value-added services such as order tracking, menu planning, and nutritional information.
As detailed in the complaint, the merger between these two companies presents a significant risk of competitive harm both for national customers, such as hotel or restaurant chains, as well local independent operators in at least 32 markets, including Western and Southwest Virginia.
Attorney General Herring is joined in the complaint for a preliminary injunction by the FTC and the states of California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Pennsylvania, Tennessee, and the District of Columbia.