Sysco/US Foods: Stories from the GCR Archives

FTC sues to stop Sysco/US Foods

Originally published 20 February 2015

The Federal Trade Commission yesterday sued to block Sysco’s acquisition of food distribution rival US Foods after finding that the proposed $8.2 billion deal would raise prices for restaurants, hotels, hospitals and schools around
the country.

The announcement comes after Sysco’s last-ditch attempt to solve the commission’s concerns with divestitures. Last Wednesday the company held meetings with the five FTC commissioners to persuade them to reject calls from staff to block the deal, and instead bless the sale of 11 distribution centres to
a rival.

The vote to file the administrative complaint was 3-2, with Republican commissioners Josh Wright and Maureen Ohlhausen voting no.

In a statement, FTC competition bureau director Debbie Feinstein said the merger would create a dominant, national broadline food distributor and eliminate significant competition from the market.

“Consumers across the country, and the businesses that serve them, benefit from the healthy competition between Sysco and US Foods, whether they eat at a restaurant, hotel or hospital,” Feinstein said.

According to the complaint, the combined Sysco/US Foods would account for 75% of the national market for broadline distribution services – shipping various types of produce, food, napkins and other items to food outlets around the country.

The FTC says Sysco and US Foods are the only distributors with a national footprint and currently compete vigorously with one another for customers with multiple outlets around the country. They are also the only broadline distributors with distribution centres spread throughout the country, the FTC says.

“Many hotel chains, foodservice management companies and group purchasing organisations, for example, consider Sysco and US Foods to be each other’s closest competitor, and in some cases those customers’ only meaningful alternatives,” the FTC says.

The complaint also alleges the deal would harm competition in 32 local markets where Sysco and US Foods compete for local customers.

Sysco and US Foods announced plans to merge in December 2013. Since then the FTC has given the deal close scrutiny amid concerns by lobby groups, restaurant businesses and workers’ unions that the deal would remove an important competitive dynamic from the US food industry.

In early February, Sysco formally offered to sell distribution centres worth $4.6 billion to Performance Food Group (PFG) to quell some of these concerns, and took the proposal to the commissioners having reached an impasse with the staff reviewing the deal.

In the complaint filed yesterday, the FTC explained why it thought these concessions do not go far enough.

“Adding 11 distribution centres to PFG’s current footprint will not replace the competition lost for national customers because PFG still will lack the necessary geographic coverage to serve national customers, and the capacity, operational efficiencies, reputation, product breadth and industry-specific expertise to compete with the merged Sysco/US Foods as effectively as US Foods competes with Sysco today,” the FTC staff wrote.

Sysco has promised to contest the challenge. In a statement yesterday chief executive Bill Delaney said the decision is based on a wrong-headed view of competition in the food-service distribution industry.

He said the commission ignores the fact that national customers use multiple regional and local distributors, and neglects to consider competition from cash-and-carries and club stores.

“By unlocking at least $600 million in annualized cost synergies, the merger will allow Sysco to lower costs for customers, deliver better service and improve selection across all product segments, all of which will increase competition across the entire food service distribution industry to the benefit of customers,” DeLaney said.

The complaint includes one five-line section on efficiencies, saying US Foods and Sysco cannot demonstrate merger-specific efficiencies to rebut the presumption of harm to competition.

Speaking with GCR yesterday, commissioner Wright said he thought the merger was pro-competitive on its face even without the proposed divestitures.

“I didn’t think there was a reason to believe the merger violated the antitrust laws or that the challenge would be in the public interest,” Wright said in an interview. “I had no reason to believe the merger in the first instance would violate the antitrust laws, even without a remedy.”

The 24-page complaint cites internal documents in which company officials appear to admit that US Foods and Sysco are “the only true options” for one national customer. The redacted filing also includes apparent examples of at times aggressive price competition between the two companies in the run-up to their merger.

Attorneys general from California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Virginia, Pennsylvania, Tennessee and the District of Columbia have joined the FTC’s complaint.

The FTC will also file papers with a federal court asking for a preliminary injunction against the merger.

Sysco, FTC prepare for battle

By Yasmine Harik

Originally published 9 April 2015

For the past year, the largest food distributor in the US had expected to close its $8.2 billion purchase of its nearest rival this spring. Instead, Sysco has put its merger with US Foods on hold while it tries to fend off a lawsuit and preliminary injunction request from the FTC, which claims the tie-up would create a single national food distributor capable of hiking prices and harming consumers.

Since the FTC filed the lawsuit, the initial fireworks have given way to a subtler courtroom and public relations chess match, with both sides fighting a battle for position in the hopes of a stronger endgame once the injunction hearing begins in May.

Less than 24 hours after the FTC filed its 19 February lawsuit, lawyers for Sysco and US Foods held a press conference berating the FTC’s decision and labelling its faulty economic analysis “pure mythology”.

Richard Parker of O’Melveny & Myers and Damien Didden of Wachtell, Lipton, Rosen & Katz, outside counsel to Sysco, said the company was in “massive disagreement” with the FTC’s decision. “The commission simply got it wrong,” Parker lamented.

Sysco has maintained all along that there is no national market for broadline food distribution, repeatedly denying the FTC’s allegation that a combined Sysco/US Foods would control 75% of food distribution services to national customers. The evidence will show that food is distributed in local markets with customers seeking local business from local competitors, Sysco said.

The FTC’s complaint cites internal documents in which company officials appear to admit that US Foods and Sysco are “the only true options” for national customers. The redacted filing also includes apparent examples of aggressive price competition between the two companies in the run-up to their merger.

“Many hospitals, national hotel chains, fast-food franchises and group purchasing organisations, for example, consider Sysco and US Foods to be each other’s closest competitor, and in some cases those customers’ only meaningful alternatives,” the FTC said.

However, the commission itself was divided from the start. Two of the five FTC commissioners, Joshua Wright and Maureen Ohlhausen, found no anti-­competitive concerns with the deal.

“The fact that two commissioners found no reason why this deal violates antitrust laws tells you the 75% number is not all it’s cracked up to be,” Didden said. “Whatever went into the FTC’s definition of a national market does not match up to reality.”

Sysco argues that the FTC is ignoring competition from cash-and-carry suppliers, such as Restaurant Depot, and other wholesale clubs. Restaurant Depot is a $6 billion company that sells food, equipment and food service supplies at locations across the country, said Joseph Tringali of Simpson Thacher & Bartlett, outside counsel to US Foods. “Who does Restaurant Depot compete with, if not Sysco and US Foods?” he asked.

In February 2014, two months after Sysco and US Foods announced their plan to merge, the companies formally offered to sell distribution centres on the west coast worth $4.6 billion to another distributor, Performance Food Group (PFG), in anticipation of antitrust concerns. However, the divestitures never quite satisfied FTC staff or the three commissioners who voted to challenge the merger.

“Adding 11 distribution centres to PFG’s current network will not replace the competition lost for national customers because PFG will still lack the necessary geographic coverage to serve national customers, and the capacity, operational efficiencies, reputation, product breadth and industry-specific expertise to compete with the merged Sysco/US Foods as effectively as US Foods competes with Sysco today,” FTC staff wrote.

Whatever happens in federal court, Sysco and US Foods will honour the agreement with PFG, their lawyers said.

In court papers filed in March, the two companies formally responded to the FTC’s complaint, calling it “contrary to established antitrust doctrine”. But their answer made little mention of an affirmative defence that the deal is actually procompetitive. No details were provided about cost synergies or consumer benefits that might outweigh the alleged negative effects.

Lawyers for Sysco and US Foods made repeated demands in court that the FTC publicly disclose the names of nearly 100 sources, primarily customers and smaller competitors, who provided sensitive business information and pricing data that likely contributed to the FTC’s complaint.

The companies said they were at a disadvantage in preparing for the upcoming preliminary injunction hearing because they had not been told the name of a single witness against them.

The FTC quickly rejected the calls for disclosure. Forcing the agency to reveal its sources – who relied on promises of anonymity – would chill future participation by outside parties in FTC investigations, hindering the commission’s ability to challenge anticompetitive mergers, the commission said in court papers.

“Defendants’ counsel know the specific markets at issue in this case, they know the local and national sales representatives who service or handle bids for those markets, and they can talk with those sales representatives and gather relevant documents at any time,” said lawyers at the FTC. “Preparing a defence does not require the identification of particular declarants, much less their disclosure to the public.”

Judge Amit Mehta ultimately decided that Sysco and US Foods could each nominate two in-house attorneys who, upon court approval and a commitment to keep the information to themselves, would gain limited access to the commission’s sources. However, the FTC, joined by third-party interveners Shamrock Foods and Reinhart Foodservice, vigorously opposed bestowing that access on Sysco’s Russell Libby.

Libby, who serves a dual role as chief legal officer and executive vice president of corporate affairs for Sysco, is too close to Sysco’s competitive decision-­making functions, the FTC said.

Likewise, Shamrock and Reinhart said their opposition to Libby was not a question of his good faith; rather, there is undue “risk of inadvertent use or disclosure of the competitors’ confidential information” when a lawyer’s responsibilities include evaluating competitors for potential acquisition.

In another loss for Sysco, Judge Mehta agreed with the plaintiffs, barring Libby access to the designated confidential material, but gave the company an opportunity to nominate an alternative in the weeks ahead.

Since the feud began, a dozen state attorneys general have joined the FTC’s petition for a preliminary injunction. Sysco’s merger agreement with US Foods is now set to expire on 8 September in light of the pending legal challenge.

As Sysco/US Foods trial opens, battles lines are drawn on market definition

By Harry Phillips

Originally published 6 May 2015

As the government’s challenge to the proposed merger of food distribution giants Sysco and US Foods heads into federal court, the judge who will decide the case has said the result will likely depend on market definition, and whether customers can switch from Sysco’s broadline services to other forms of distribution.

The District Court for the District of Columbia heard opening statements yesterday in the FTC’s attempt to enjoin an $8 billion merger it says would leave Sysco controlling up to 75% of certain broadline food-service distribution in the US and free to raise prices to anticompetitive levels.

In pretrial briefing and various statements, Sysco and US Foods have hit the FTC hard on its market definition, which they call “pure mythology”. In court yesterday, Judge Amit Mehta said the case may hinge on whether there are customers who need Sysco’s and US Foods’ broadline distribution, or if they could switch to different channels, such as buying products directly from a manufacturer or going to cash-and-carry stores.

“It seems to me, this is where the rubber’s going to hit the road here,” Judge Mehta said Tuesday morning.

Arguing for the FTC, bureau of competition deputy director Steve Weissman said broadline food-service distribution is a distinct antitrust market and the merger will create “an industry behemoth many, many times larger than the nearest broadline distributor”, harming both nationwide and local customers who rely on Sysco and US Foods to constrain one another’s prices.

He argued broadline distribution – whereby Sysco and US Foods buy a wide inventory of food and products from manufacturers, and deliver and resell them to restaurants, schools, hospitals and workplaces around the country – is a unique service in terms of convenience, efficiency and product choice.

Sysco also provides other types of distribution, including “drayage” delivery from a manufacturer to a customer, but, tellingly, Sysco reports this business separately from its broadline service and uses different facilities for the different parts of its business, Weissman said.

He listed a number of customers – some named in court yesterday and some not – who, he said, will testify that companies using broadline distributors would not, and could not, switch to another form of distribution if Sysco increased its prices. According to industry insiders, Weissman said, contracting directly with manufacturers in “systems distribution”, for instance, would be inefficient because of the multiple relationships and orders required.

“It would be next to impossible for a systems distributor to service a broadline customer,” Weissman said, directly quoting testimony by a witness the defendants plan to call.

Referring back to Weissman’s opening when he took the stand, however, Sysco’s lawyer Richard G Parker said Judge Mehta will see the “impossible made possible” during the week-long hearing.

Customers do not perceive a difference between broadline distributors, such as Sysco, and “specialty” and cash-and-carry services, Parker claimed. He cited the example of sandwich chain Subway, which has outlets all across the country, some served by Sysco and US Foods’ broadline services, some by other broadliners and some by local players.

He argued the FTC is trying to put up “a brick wall” between different types of distribution that in reality compete for customers. Responding to a question from Judge Mehta, Parker said the parties would define the market as all foodservice distribution, rather than simply broadline services, as that was the way “men and women who live this industry” see the market.

Competitors, too, do not perceive a difference but are instead engaged in intense price competition with Sysco and US Foods for the same customers. Parker repeatedly told the court that Sysco is losing customers to cash-and-carry stores, local speciality food distributors and group-purchasing organisations that allow customers to collectively negotiate with manufacturers.

“The whole thing is arbitrary, your Honor, and has to do with personal preference and not vulnerability,” Parker said.

National versus local

The FTC filed its complaint against US Foods and Sysco in February following more than a year spent investigating the deal. It says the combination will harm nationwide customers of broadline distribution, as well as local companies in individual markets across the country.

In court yesterday, Judge Mehta repeatedly interrupted Weissman to clarify how the FTC delineates these markets. After some back and forth, Weissman said the commission posits a market for broadline distribution and, within that, separate product markets for national and local customers.

This is supported by customer testimony, the deputy director of the FTC’s bureau of competition said, and by documents within Sysco, including an integration report authored by McKinsey in 2014 that Weissman says separates markets “exactly the way” the plaintiffs separate them in this case, referring to “national” and “field” customers.

“This is not a fiction made up by the FTC for the purpose of trial,” Weissman said of the FTC’s market definition. “It is business reality.”

Arguing for US Foods, however, Simpson Thacher & Bartlett partner Joseph Tringali said the customers both companies describe in their documents as national – in reality “corporate, multi-unit” businesses, he said – do not line up with the FTC’s definitions. In its papers, the FTC defines the two companies’ national customers as having a single broadline contract for their whole business, a single price and other terms, as well as product consistency, but many Sysco and US Foods national customers do not fit this profile, Tringali said.

And the “elephant in the room”, Tringali told the court, is that six Sysco and US Foods customers the FTC singles out, including restaurant chains IHOP and Applebee’s, have none of these characteristics.

Litigating the fix

The FTC’s decision to sue US Foods and Sysco came despite an offer to sell 11 distribution centres, worth over $4 billion per year in revenues, to rival Performance Food Group (PFG).

Lawyers for the companies say the divestiture will create a national competitor that can compete with the combined clout of Sysco and US Foods. In court yesterday, Parker heaped praise on PFG for its rapid growth in a competitive sector (40% compared to an industry average of 2%) and for its ambitious plans to expand following over $1 billion of investment by private equity firm, Blackstone.

The company plans to build seven more distribution centres following the merger, Parker told Judge Mehta, in addition to the 11 it will buy off Sysco and US Foods. Tringali noted that PFG has broadline contracts with both Applebee’s and IHOP because, he told the judge, “you don’t need to be Sysco or US Foods to serve these customers.”

Weissman, however, argued that by any methodology the merger creates levels of concentration beyond presumptively anticompetitive levels, and these “are not going to change much”, factoring in the sale to PFG. What’s more, he argued, even an expanded PFG will have “inferior geographic reach”, longer delivery distances and less expertise in certain markets than US Foods, the rival it will ostensibly replace.

Even with the divestitures, there will be multiple cities and regions across the US in which only Sysco will own a distribution centre, Weissman said, including Cincinnati, Albuquerque, the Dakotas and western Texas.

Alluding once again to documents FTC lawyers have in their arsenal, Weissman said at the time Sysco and US Foods announced their merger, PFG commissioned analysis to determine how many distribution centres it would require to be a national broadline distributor. Although he could not show the court the testimony, Weissman said what the document said was “unambiguous”.

The hearing on the FTC’s motion for a preliminary injunction is set to last for another six days.

National customers may not fit FTC description, Sysco expert concedes

By Harry Phillips

Originally published 11 May 2015

The Federal Trade Commission rested its case against food distributors Sysco and US Foods on Friday, following a day in which a defence lawyer repeatedly grilled the government’s star economic witness over how he defined product market and market shares for the merged company.

Compass Lexecon economist Mark Israel took the stand at the end of last week to explain why he thought the $8.2 billion merger would harm competition in the market for broadline food distribution. The FTC has claimed the tie-up would leave Sysco with up to 78% of national broadline customers and similar clout over local customers in several regional markets around the US.

In court on Friday, Israel was pressed repeatedly on the dichotomy between national and local customers, both by the judge presiding over the case, DC district court judge Amit Mehta, and lawyers for Sysco.

In his report, Israel described Sysco’s national broadline customers as companies with “multiple dispersed locations” such that their footprint spans “multiple regions or the entire United States”.

During direct examination by FTC lawyers, however, Judge Mehta asked if Israel had made an effort to segregate customers of true national footprint and account for “the difference, for instance, between a company in two regions and one in 48 states”.

Israel said his primary analysis stuck to the breakdown between national and local customers in company documents. It is not a bright line, he said, but the groups are clearly distinct.

The line of questioning was picked up by Sysco defence attorneys during cross-examination, however, as O’Melveny & Myers partner Ian Simmons sought to persuade the judge that the FTC’s market definitions were, as Sysco has previously put it, “pure fiction”.

Simmons showed the DC federal district court a series of maps of the US, each showing the locations of a restaurant chain the FTC denoted as national customers – the type of which Sysco, if merged with US Foods, would hold a sky-high market share.

While some of these – the Hard Rock Cafes, for instance – appeared to cover the entire country, others including Atria’s, a chain of Italian restaurants in and around Pittsburgh, and Chicago-based Buona Beef, were localised in one location, according to the maps.

Simmons repeatedly pressed Israel on each depiction. “You would agree with me that the footprint does not span multiple regions,” he said, referring back to Israel’s description of national broadline customers.

“I would say the footprint of the restaurant per se is not national,” as it appeared on the map, Israel conceded, but countered that the map did not show whether the customers “purchased nationally” through a cooperative.

The list went on, however. Simmons pointed to Bass Pro, an outdoors store that spans 67 zip codes around the US and was included on the FTC’s list of over 700 national customers. By contrast, he said, sushi chain Sarku Japan, with 209 outlets across the US, is listed in FTC documents as a local customer.

Israel said, according to the map, Sarku would meet his definition of a national customer “if they purchase food service according to this.”

To distinguish between local and national product markets, Israel said he followed descriptions of customers in Sysco and US Foods documents, including a report prepared by consultancy McKinsey.

The FTC has said national broadline customers, including hotel chains, hospitals and hospitality groups as well as chain restaurants, share a number of criteria, including centralised contracts and pricing terms with distributors, along with other purchasing characteristics.

On cross-examination, Simmons faulted Israel, however, for not taking the FTC’s list of alleged national customers and investigating whether they in fact each possessed the characteristics the FTC describes as belonging to this group.

“It’s a very clear question,” Simmons said. “You didn’t map the customers to the criteria.”

Simmons began cross-examination Friday afternoon, getting through about half-an-hour of questions before discussion of sensitive business information forced Judge Mehta to clear the court.

That morning, during much friendlier questioning by FTC attorney Stephen Mohr, Israel told Judge Mehta that, in his view, Sysco and US Foods were each other’s closest competitors in broadline food-service distribution, and their merger would eliminate an important source of rivalry.

To arrive at this conclusion, Israel recounted how he relied on information from “hundreds of thousands” of questionnaires company salespeople filled out during bids and auctions. The information was useful, Israel said, because it shows how people on the front lines of the industry see the business landscape.

Looking at who both companies’ employees reported as competitors for bids and who they lost out to, Israel said he had “more than I would need” to conclude that the companies are close competitors.

“US Foods shows up more in Sysco data than any other competitor combined,” Israel told the court. “Sysco shows up more for US Foods than everyone else combined.”

The hearing on the FTC’s motion for a preliminary injunction against Sysco/US Foods started again today, with Sysco putting on its first witness.

Sysco trial ends with FTC back on the attack

By Harry Phillips

(Originally published 15 May 2015)

A week-long hearing that will likely decide whether food distributors Sysco and US Foods can complete an $8 billion merger ended yesterday, with an FTC witness staunchly reiterating his view that the deal is lethal to competition in the food distribution industry, and even seeking to turn the tables on his accusers.

Testifying for the second time in the DC federal district court, Compass Lexecon economist Mark Israel said yesterday that the most striking thing about his expert report, which underpins the FTC’s challenge to the merger, is that it reached the same conclusion regardless of methodology – namely that the deal would result in higher prices for consumers, both nationally and across localities.

Israel said he reached his conclusion about the likely competitive effects of the deal in various ways: by considering customer testimony; data from third parties; and through empirical studies of auction information from both distribution companies.

“There’s no reason they would have to get you the same answer, but they do,” Israel told presiding Judge Amit Mehta, adding that unreliable data and methods would be more likely to produce divergent results.

Thursday was the eighth and last day of a hearing on the FTC’s motion for a preliminary injunction against Sysco and US Foods.

The defendants rested their case the previous day; however the FTC was allowed to mount a rebuttal after Israel’s studies and testimony came in for harsh treatment by defence witnesses.

Between Jerry Hausman of the Massachusetts Institute of Technology and Stanford University professor Tim Bresnahan, the defence criticised Israel for using the wrong model to calculate whether price increases post-merger would be profitable, and claimed his data sets were unreliable and biased, among other complaints.

Bresnahan specifically faulted Israel’s reliance on requests for proposals by customers with a nationwide presence to show direct competition between the companies. He brushed off the data as something pulled together by the FTC’s expert, rather than being kept in the ordinary course of business.

Yesterday, though, Israel said the sets reflected “ordinary course records” of how both US Foods and Sysco see competition in the market, and were cross-checked and supplemented by company documents and information outside the FTC’s second request.

Under questioning by FTC attorney Stephen Mohr, Israel turned the tables on his detractors, calling out “systematic bias” in Bresnahan’s methods for calculating how often customers switch from Sysco to US Foods or to a third distributor, and vice versa, in case of a price increase. To identify switching, Bresnahan needs data not only that a customer left Sysco, Israel said, but also that it came to US Foods.

When the data did not match, Israel said, his counterpart on the defence team inferred the customer went to another distributor, even if the customer in reality closed temporarily, or withdrew its business for another reason. Israel said there were “literally hundreds” of such mismatches in the defence’s case.

“Any time he doesn’t find the match, it lowers Sysco-US Foods switching,” Israel argued, and increases switching to other distributors.

Neither the FTC nor Sysco and US Foods were given time for closing statements. At the end of direct examination, however, Israel gave a mini-summary in which he argued that the body of testimony from defence witnesses, even if at times unreliable, comes back to the same place – that the large size of a combined Sysco and US Foods and the elimination of close rivalry would be harmful.

Earlier on Thursday morning the court heard from FTC witness and fellow Compass Lexecon consultant Rajiv Gokhale, who said many of the more than $1 billion in cost-savings Sysco and US Foods claim they will achieve by merging could in fact be achieved independently by each company.

Gokhale, an expert in finance and economics, said both companies had begun thinking about, planning and in some cases implementing initiatives they now claim are merger-specific before announcing the merger in late 2013.

On cross-examination, however, O’Melveny & Myers partner Katrina Robson questioned whether Gokhale had studied enough information to quantify merger-­specific cost savings. Over 100 McKinsey consultants produced over 100,000 documents for Sysco and US Foods about efficiencies, she said, of which Gokhale looked at 3,000 – or 4% of the total.

With the hearing over, the FTC and defendants now have until 20 May to propose findings of fact and conclusions of law. Judge Mehta will hold oral arguments on the papers on 28 May.

FTC wins stop on Sysco/US Foods deal

By Pallavi Guniganti

Originally published 24 June 2015

A Washington, DC federal district judge granted a preliminary injunction yesterday against the $3.5 billion merger of Sysco and US Foods, after the FTC sought to block the food distributors’ tie-up.

“After considering the extensive record in this matter and the parties’ legal arguments, the court finds that the FTC has carried its burden of showing that a preliminary injunction of the proposed merger between Sysco and US Foods is in the public interest,” Judge Amit Mehta wrote in his order.

He held that the agency had shown a “reasonable probability” that Sysco’s acquisition of US Foods would substantially impair competition in the markets for broadline food distribution among both customers with a national footprint and in certain local areas.

By a 3-2 vote of the commissioners, the agency filed suit in February to stop the deal, which it had been reviewing for more than a year. With the merger suspended, the commission can proceed with its internal administrative trial on the merits.

The two companies are the largest broadline food-service distributors in the US, a type that the FTC defined as offering extensive product lines, including national-brand and private-label food products, and frequent and flexible delivery thanks to a far-flung network of distribution warehouses. The commission claimed in its complaint that Sysco and US Foods would hold 75% of the national, broadline market post-merger, though this figure did not account for the proposed divestiture to Performance Food Group.

During the hearing, the companies fought the FTC’s definitions and figures, arguing that a national market was mythical because food distribution was an intrinsically local service.

Sysco had previously said it would give up on buying US Foods if it lost the hearing on the preliminary injunction, but a statement from its chief executive last night clouded the issue.

Describing the company as “profoundly disappointed” with Judge Mehta’s decision, Bill DeLaney said: “We will take a few days to closely review the court’s ruling and assess our legal and contractual obligations, including the merits of terminating the merger agreement.” He promised to provide “additional clarity” on the companies’ plans after doing so.

The memorandum opinion explaining Judge Mehta’s reasoning is currently sealed to allow both sides to redact competitively sensitive information. The judge said he would issue a public version on Friday.

FTC bureau of competition director Debbie Feinstein was in the courtroom for most of the three weeks of the injunction hearing, and gave the agency’s public response last night to the ruling.

“The court’s ruling today temporarily blocking Sysco’s proposed acquisition of US Foods will preserve competition in both local and national, broadline food-service distribution markets. We look forward to proving at trial that this deal would lead to higher prices and diminished service for customers, including restaurants, hospitals, hotels and schools,” she said in a statement.

The administrative proceeding is currently in discovery, with a trial scheduled to begin on 21 July.

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