Sysco's trust issues

An employee of US food and food services company Sysco Alabama serves a stand with samples of the company's products during an exhibit 11 August 2004 at an hotel in Havana. Sysco made a deal to buy its closest rival US Foods for $3.5 billion dollars.

Q. What? Sisqo’s having trouble in his private life?

A. No, I'm not referring to rap musicians who have no faith in others; I'm talking about the merger of two food distribution companies, Sysco and US Foods.

They're the two biggest firms in their industry, which means their merger is likely going to encounter the antitrust police.

Q. The antitrust police? What is this, "Minority Report?"

A. OK, they’re not really police. A bunch of regulators from the Federal Trade Commission are likely to examine this merger, to make sure that a Sysco/US Foods behemoth isn’t going to take over the whole food distribution business and cut everyone else out of the picture.

Q. That sounds fair. Is this standard operating procedure in a modern capitalist society?

A. Actually, antitrust law, also known as anti-monopoly law, has been around in some form since Roman times at least, and it’s used to make sure that the markets are places where both buyers and sellers can do business fairly. The idea is to make sure that smaller businesses won’t get unfairly squeezed out by a monopoly that’s cornered the market, and consumers won’t get gouged by a seller because there’s nowhere else to buy.

Q. Is this like my annual physical -- a quick process? Or more like open-heart surgery?

A. It depends. Sometimes the process is very quick, but the Sysco/US Foods merger could be under antitrust scrutiny for a while. The American Airlines/U.S. Airways merger, which formally happened today, spent several months under the regulatory microscope before it was cleared for takeoff, and Sysco’s CEO said he fully expects the FTC to scrutinize the deal.

Q. What are the chances of the deal going through?

A. Pretty good. The new company would have a 30-35 percent market share, but there are as many as 15,000 food distribution companies in the U.S., so the pie is still pretty big. Reuters spoke with several antitrust experts who said the FTC may insist Sysco sell some parts of its business before it gives the deal the green light.  

About the author

Paddy Hirsch is a Senior Editor at Marketplace and the creator and host of the Marketplace Whiteboard. Follow Paddy on Twitter @paddyhirsch and on facebook at www.facebook.com/paddyhirsch101
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