The proposed merger of Sysco and US Foods would create a dominant firm or even a monopoly, in the broadline foodservice market, the American Antitrust Institute (AAI) said today.
In a letter to Federal Trade Commission (FTC) Chairwoman Edith Ramirez, AAI’s Diana Moss urged careful scrutiny of the proposed merger.
Sysco and US Foods are the two largest national “broadliners” that sell to foodservice outlets such as schools, hospitals, restaurants, and hotels.
Those outlets, in turn, supply meals away from home to the consuming public.
The AAI letter outlines the markets affected by the proposed deal and its possible adverse effects on foodservice outlets and consumers, food suppliers, and the increasingly consolidated U.S. food supply chain.
The proposed merger comes on the heels of a series of large mergers in the U.S. agriculture and food industries, amplifying its significance, Moss said.
“The proposed merger of Sysco and US Foods is likely motivated by the acquisition of bargaining market power in dealing with major food manufacturers and processors,” Moss wrote. “By amassing dominance in the distribution segment, Sysco and US Foods will enhance their buyer power vis-à-vis these midstream entities. A Sysco-US Foods merger will perpetuate the cycle of consolidation in the midstream segment. If approved, there is no logical end to this kind of ‘domino effect’ consolidation, which would erect enormous barriers to entry for smaller and innovative food producers, promote a lack of redundancy and diversity of suppliers, eliminate consumer choice, and potentially increase food safety and reliability problems.”