FTC challenges merger of US Foods with Sysco

The Federal Trade Commission and 11 states on Thursday  challenged the $3.5-billion sale of US Foods to Sysco, saying that customers would be hurt due to reduced competition between food supply companies.

US Foods operates a distribution centre located in Streator, Illinois which employed 240 people, according to the Streator Area Chamber of Commerce and Industry website.

Sysco Corp agreed to the acquisition of US Foods in December 2013, saying it would create a company with $65-billion in annual revenue.

However, the deal requires FTC approval.

The FTC filed a complaint on Thursday to block the deal, saying Sysco and US Foods were by far the largest companies in their industry and would have a "dominant" position in the marketplace.

According to the agency, the combined company was likely to lead to higher prices for customers like restaurants, hospitals, hotels and schools.

The deal was opposed by the commissioners of the FTC by a 3-2 vote.

''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 in a press release.

Iowa attorney general Tom Miller and a bipartisan group of state attorneys general had joined the FTC's administrative complaint and opposed the proposed merger between food distribution giants Sysco and US Foods.

According to Millier, the merger would violate anti-trust laws by significantly reducing food distribution competition across the country, and particularly in western Iowa.

He added, the result would be higher prices for Iowa consumers who ate away from home, and higher costs for Iowa restaurants, school districts, hospitals and hotels.

Sysco and US Foods, among the largest food distributers in the US, offered extensive product lines, including national-brand and private-label food products. They also provided frequent and flexible delivery, high levels of customer service, and other value-added services including order tracking, menu planning, and nutritional information.