US Foods Holding Corp.; Analysis of Agreement Containing Consent Orders To Aid Public Comment, 49106-49108 [2019-20182]

Download as PDF 49106 Federal Register / Vol. 84, No. 181 / Wednesday, September 18, 2019 / Notices Notice is hereby given of the appointment of members to the FTC Performance Review Board. FOR FURTHER INFORMATION CONTACT: Vicki Barber (202–326–2700), Chief Human Capital Officer, 600 Pennsylvania Avenue NW, Washington, DC 20580. SUPPLEMENTARY INFORMATION: Publication of the Performance Review Board (PRB) membership is required by 5 U.S.C. 4314(c)(4). The PRB reviews and evaluates the initial appraisal of a senior executive’s performance by the supervisor, and makes recommendations regarding performance ratings, performance awards, and pay-for-performance pay adjustments to the Chairman. The following individuals have been designated to serve on the Commission’s Performance Review Board: SUMMARY: David Robbins, Executive Director, Chairman Marian Bruno, Deputy Director, Bureau of Competition Daniel Kaufman, Deputy Director, Bureau of Consumer Protection Michael Vita, Deputy Director, Bureau of Economics James Reilly Dolan, Principal Deputy General Counsel By direction of the Commission. April J. Tabor, Acting Secretary. [FR Doc. 2019–20191 Filed 9–17–19; 8:45 am] BILLING CODE 6750–01–P FEDERAL TRADE COMMISSION [File No. 181 0215] US Foods Holding Corp.; Analysis of Agreement Containing Consent Orders To Aid Public Comment Federal Trade Commission. Proposed Consent Agreement; Request for Comment. AGENCY: ACTION: The consent agreement in this matter settles alleged violations of federal law prohibiting unfair methods of competition. The attached Analysis of Agreement Containing Consent Orders to Aid Public Comment describes both the allegations in the complaint and the terms of the consent orders—embodied in the consent agreement—that would settle these allegations. DATES: Comments must be received on or before October 18, 2019. ADDRESSES: Interested parties may file comments online or on paper, by following the instructions in the Request for Comment part of the SUPPLEMENTARY INFORMATION section below. Write: ‘‘US Foods Holding Corp.; File No. 181 0215’’ on your comment, khammond on DSKJM1Z7X2PROD with NOTICES SUMMARY: VerDate Sep<11>2014 19:01 Sep 17, 2019 Jkt 247001 and file your comment online at https:// www.regulations.gov by following the instructions on the web-based form. If you prefer to file your comment on paper, mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex D), Washington, DC 20580, or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. FOR FURTHER INFORMATION CONTACT: Sophia Vandergrift (202–326–2208), Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home Page (for September 11, 2019), on the World Wide Web, at https:// www.ftc.gov/news-events/commissionactions. You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before October 18, 2019. Write ‘‘US Foods Holding Corp.; File No. 181 0215’’ on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the https:// www.regulations.gov website. Postal mail addressed to the Commission is subject to delay due to heightened security screening. As a result, we encourage you to submit your comments online through the https:// www.regulations.gov website. If you prefer to file your comment on paper, write ‘‘US Foods Holding Corp.; File No. 181 0215’’ on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex D), Washington, DC 20580; or deliver your comment to the following address: PO 00000 Frm 00019 Fmt 4703 Sfmt 4703 Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. If possible, submit your paper comment to the Commission by courier or overnight service. Because your comment will be placed on the publicly accessible website at https://www.regulations.gov, you are solely responsible for making sure that your comment does not include any sensitive or confidential information. In particular, your comment should not include any sensitive personal information, such as your or anyone else’s Social Security number; date of birth; driver’s license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for making sure that your comment does not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any ‘‘trade secret or any commercial or financial information which . . . is privileged or confidential’’—as provided by Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)— including in particular competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names. Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled ‘‘Confidential,’’ and must comply with FTC Rule 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. See FTC Rule 4.9(c). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted on the public FTC website—as legally required by FTC Rule 4.9(b)—we cannot redact or remove your comment from the FTC website, unless you submit a confidentiality request that meets the requirements for such treatment under FTC Rule 4.9(c), and the General Counsel grants that request. Visit the FTC website at http:// www.ftc.gov to read this Notice and the news release describing it. The FTC Act and other laws that the Commission administers permit the collection of E:\FR\FM\18SEN1.SGM 18SEN1 Federal Register / Vol. 84, No. 181 / Wednesday, September 18, 2019 / Notices public comments to consider and use in this proceeding, as appropriate. The Commission will consider all timely and responsive public comments that it receives on or before October 18, 2019. For information on the Commission’s privacy policy, including routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/ privacy-policy. Analysis of Agreement Containing Consent Orders To Aid Public Comment khammond on DSKJM1Z7X2PROD with NOTICES I. Introduction The Federal Trade Commission (‘‘Commission’’) has accepted for public comment, subject to final approval, an Agreement Containing Consent Orders (‘‘Consent Agreement’’) from US Foods Holding Corp. (‘‘USF’’), and Services Group of America, Inc. (‘‘SGA’’) (collectively, ‘‘Respondents’’). The purpose of the Consent Agreement is to remedy the anticompetitive effects that otherwise would result from USF’s acquisition of SGA’s Food Group of Companies (the ‘‘Proposed Acquisition’’) in and around Boise, Idaho (hereafter ‘‘Eastern Idaho’’), in and around Bismarck, North Dakota, (hereafter ‘‘Western North Dakota’’), in and around Fargo, North Dakota (hereafter ‘‘Eastern North Dakota’’), in and around Kent, Washington (hereafter the ‘‘Seattle Area’’), and nationwide for multi-regional and national customers. Among other things, the proposed Consent Agreement requires USF to divest certain of SGA’s distribution centers and broadline distribution assets, including employees and tangible assets that are necessary to the operation of the businesses in Eastern Idaho, Western and Eastern North Dakota, and the Seattle Area to Shamrock Foods Co. (‘‘Shamrock’’), Cash-Wa Distributing (‘‘Cash-Wa’’), and Harbor Wholesale Foods (‘‘Harbor’’), respectively. The Commission and the Respondents have also agreed to an Order to Maintain Assets. This order requires USF and SGA to maintain the assets that the Consent Agreement requires divestiture of, pending their divestiture. The Commission’s Complaint alleges that the Proposed Acquisition, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, by substantially lessening competition in the market for broadline foodservice distribution in Eastern Idaho, Western North Dakota, Eastern North Dakota, the Seattle Area, and nationwide for multi-regional and VerDate Sep<11>2014 19:01 Sep 17, 2019 Jkt 247001 national broadline distribution customers. The Consent Agreement has been placed on the public record for 30 days to solicit comments from interested persons. Comments received during this period will become part of the public record. After 30 days, the Commission will review the comments received and decide whether it should withdraw, modify, or finalize the Consent Agreement. II. The Respondents and the Transaction USF, headquartered in Rosemont, Illinois, is the second-largest distributor of food and food-related products in the United States. USF operates 61 distribution facilities throughout the United States, all of which provide broadline distribution, and some of which serve national chain customers (providing more of a systems-type service). In fiscal year 2017, USF generated approximately $24 billion in sales to over 200,000 customers nationwide. Nearly $6 billion of those sales were to independent (i.e., nonchain) restaurants. Headquartered in Scottsdale, Arizona, Services Group of America, Inc. is a holding company made up of six operating companies. SGA is comprised of Food Services of America (‘‘FSA’’), a broadline foodservice distributor (notably, FSA is the only SGA business unit that generates competitive concern); Systems Services of America (‘‘SSA’’), a systems distributor; Amerifresh, a specialty produce distributor; Ameristar Meats, a specialty meat processor; and GAMPAC, a supply chain and logistics company. In fiscal year 2017, SGA generated approximately $3.2 billion in sales. SGA has nine broadline distribution centers, three systems distribution centers, and three specialty facilities. FSA and SSA are members of Distribution Market Advantage (‘‘DMA’’), a supply chain and marketing cooperative owned by eight independent regional foodservice distributors who are also its members. Through DMA, FSA is able to serve national accounts in coordination with other large regional distributors. On July 28, 2018, USF entered into a Stock Purchase Agreement with SGA. Pursuant to the agreement, USF will purchase all of the outstanding common stock of SGA’s Food Group of Companies in an all-cash acquisition valued at $1.8 billion. PO 00000 Frm 00020 Fmt 4703 Sfmt 4703 49107 III. Broadline Foodservice Distribution in Eastern Idaho, Western North Dakota, Eastern North Dakota, the Seattle Area, and Nationwide Broadline foodservice distribution and broadline foodservice distribution to national customers are the relevant product markets in which to assess the effects of the Proposed Acquisition. Broadline foodservice distribution involves the sale and distribution of a broad range of national-brand and private-label food and foodservicerelated products (such as paper towels, disposable cups, etc.) to a range of customers who serve food-away-fromhome to consumers, such as restaurants, hospital cafeterias, stadiums, and schools. Broadline distributors offer customers a distinct combination of products and services that are not replicated by other foodservice distribution channels, including a wide array of stock keeping units (SKUs) to provide customers with product breadth and depth, a broad selection of privatelabel (i.e., distributor-branded) food products, a frequent and flexible delivery schedule (including next-day delivery), and other value-added services, such as order tracking, menu planning, and nutritional information. Customers value the ability to purchase this bundle of products and services from a single broadline distributor. There are four local relevant geographic markets in which to analyze the transaction’s effects: (1) Eastern Idaho, (2) Western North Dakota, (3) Eastern North Dakota, and (4) the Seattle Area. Competition to serve broadline customers plays out locally. The business of broadline distribution involves regularly loading food (much of which is perishable) and related items onto trucks, driving to customer locations, unloading the merchandise, and returning to the distribution center in time to repeat this process for the next day’s deliveries. Customers, therefore, select from among broadline distributors within a reasonable radius of their location. Likewise, broadline distributors are limited in their distribution radius by cost and service considerations. USF and FSA compete from proximate distribution centers to serve customers in Eastern Idaho, Western North Dakota, Eastern North Dakota, and the Seattle Area, and these are thus appropriate geographic markets. FSA serves both North Dakota markets out of its Fargo distribution center, but other distributors serving the Eastern North Dakota market do not serve Western North Dakota, and thus the competitive conditions are different E:\FR\FM\18SEN1.SGM 18SEN1 khammond on DSKJM1Z7X2PROD with NOTICES 49108 Federal Register / Vol. 84, No. 181 / Wednesday, September 18, 2019 / Notices and it is appropriate to define two geographic markets within the state. USF and FSA compete closely to serve local broadline customers in Eastern Idaho, Western North Dakota, Eastern North Dakota, and the Seattle Area. The transaction would eliminate a key broadline distributor in each of these markets, limiting customers’ ability to switch between distributors and leverage them in order to obtain more competitive pricing and better service. The few remaining competitors in the relevant markets would be insufficient to alleviate competitive concerns. As a result, the Proposed Acquisition will likely lead to higher prices and diminished service for local broadline customers in the four local markets. The effects of the Proposed Acquisition must also be evaluated in the national market. Through its membership in a consortium of regional distributors, DMA, FSA competes with USF for the provision of broadline distribution services to multi-regional and national accounts. If DMA were to lose all of FSA’s distribution centers from its network, it would be rendered a significantly less attractive competitor than it is today to many multi-regional and national customers. As a result, the Proposed Acquisition will likely result in higher prices and reduced quality and service to national customers. New entry or expansion is unlikely to deter or counteract the anticompetitive effects of the acquisition in the Eastern Idaho, Western North Dakota, Eastern North Dakota, Seattle Area, and national markets. The broadline foodservice distribution industry is capital and labor intensive, rendering entry challenging and time consuming, with significant operational and financial risks. Prospective entrants or expanders face three main obstacles: (1) Developing the requisite sales forces and customer base; (2) establishing a properly outfitted distribution center, truck fleet, and driver base for operations and delivery; and (3) building the volume of perishable and non-perishable SKUs necessary to serve broadline customers. To overcome these hurdles, a new entrant or an adjacent company trying to expand must commit a tremendous amount of capital and time to develop relationships with potential customers, build or expand an existing facility, and assemble the equipment required for distribution in that area. Thus, due to the considerable time and investment required to build a functional broadline distribution operation in a new market, entry and expansion are unlikely to be timely, or sufficient to deter or VerDate Sep<11>2014 19:01 Sep 17, 2019 Jkt 247001 counteract the Proposed Acquisition’s anticompetitive effects. IV. The Proposed Consent Agreement The proposed Consent Order remedies the likely anticompetitive effects in each of the relevant markets by requiring divestitures to Shamrock, Cash-Wa, and Harbor within 30 days of the Proposed Acquisition’s closing. Until the completion of each divestiture, the Respondents are required to abide by the Order to Maintain Assets, which requires them to maintain the viability, marketability, and competitiveness of the divestiture assets until the divestitures are completed. The proposed Consent Order appoints a Monitor to ensure the Respondents’ compliance with the Order to Maintain Assets, Consent Order, and Divestiture Agreements in anticipation of and following the divestiture. Additionally, the proposed Consent Order requires the Respondents to provide transitional services to the approved acquirer for at least 24 months after the divestiture, as needed, to assist the acquirer with the transfer and operation of the divested assets. Finally, the proposed Consent Order contains standard terms regarding the acquirer’s access to employees, protection of Material Confidential Information, and compliance reporting requirements, among other things. A. Eastern Idaho The proposed Consent Order remedies the likely anticompetitive effects in Eastern Idaho by requiring the divestiture of FSA’s distribution center in Boise to Shamrock. The divestiture assets and rights include the distribution center and selected broadline distribution assets, including employees and tangible assets necessary to operate the business. B. Western and Eastern North Dakota The proposed Consent Order remedies the likely anticompetitive effects in both Western and Eastern North Dakota by requiring the divestiture of FSA’s distribution center in Fargo to Cash-Wa. The divestiture assets and rights include the distribution center and selected broadline distribution assets, including employees and tangible assets necessary to operate the business. C. The Seattle Area The proposed Consent Order remedies the likely anticompetitive effects in the Seattle Area by requiring the divestiture of FSA’s distribution center in Kent to Harbor. The divestiture assets and rights include the PO 00000 Frm 00021 Fmt 4703 Sfmt 4703 distribution center and selected broadline distribution assets, including employees and tangible assets necessary to operate the local broadline distribution business. Although the proposed Consent Order only requires USF to divest one of FSA’s two Seattlearea broadline distribution centers, this remedy will prevent any increase in market concentration levels and preserve the status quo in the Seattle Area broadline distribution market because three major broadline distributors will remain. D. National The proposed Consent Order remedies the likely anticompetitive effects in the national market by replacing the loss of FSA from DMA’s network with divestiture of the Kent, Boise, and Fargo distribution centers to three purchasers that are existing members of the DMA consortium. The divestiture assets and rights that Shamrock, Cash-Wa, and Harbor will acquire will enable each buyer to operate the local broadline distribution businesses in their respective local markets, but also to provide effective coverage to the DMA network in these regions so that DMA can continue to be an attractive option to, and effective competitor for, multi-regional and national customers. The proposed Decision and Order will have a term of ten (10) years. The sole purpose of this analysis is to facilitate public comment on the proposed Consent Agreement. This analysis does not constitute an official interpretation of the proposed Consent Agreement or modify its terms in any way. By direction of the Commission. April J. Tabor, Acting Secretary. [FR Doc. 2019–20182 Filed 9–17–19; 8:45 am] BILLING CODE 6750–01–P DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Disease Control and Prevention Announcement of Requirements and Registration for The REACH Lark Galloway-Gilliam Nomination for Advancing Health Equity (REACH Lark Award) Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS). Award Approving Official: Robert R. Redfield, M.D., Director, Centers for Disease Control and Prevention, and AGENCY: E:\FR\FM\18SEN1.SGM 18SEN1

Agencies

[Federal Register Volume 84, Number 181 (Wednesday, September 18, 2019)]
[Notices]
[Pages 49106-49108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20182]


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FEDERAL TRADE COMMISSION

[File No. 181 0215]


US Foods Holding Corp.; Analysis of Agreement Containing Consent 
Orders To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement; Request for Comment.

-----------------------------------------------------------------------

SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis of Agreement Containing Consent Orders to Aid 
Public Comment describes both the allegations in the complaint and the 
terms of the consent orders--embodied in the consent agreement--that 
would settle these allegations.

DATES: Comments must be received on or before October 18, 2019.

ADDRESSES: Interested parties may file comments online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write: ``US Foods Holding 
Corp.; File No. 181 0215'' on your comment, and file your comment 
online at https://www.regulations.gov by following the instructions on 
the web-based form. If you prefer to file your comment on paper, mail 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Sophia Vandergrift (202-326-2208), 
Bureau of Competition, Federal Trade Commission, 600 Pennsylvania 
Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC Home Page (for September 11, 2019), on the World Wide Web, 
at https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before October 18, 
2019. Write ``US Foods Holding Corp.; File No. 181 0215'' on your 
comment. Your comment--including your name and your state--will be 
placed on the public record of this proceeding, including, to the 
extent practicable, on the https://www.regulations.gov website.
    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``US Foods 
Holding Corp.; File No. 181 0215'' on your comment and on the envelope, 
and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex D), Washington, DC 20580; or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure that your comment does not include any sensitive or 
confidential information. In particular, your comment should not 
include any sensitive personal information, such as your or anyone 
else's Social Security number; date of birth; driver's license number 
or other state identification number, or foreign country equivalent; 
passport number; financial account number; or credit or debit card 
number. You are also solely responsible for making sure that your 
comment does not include any sensitive health information, such as 
medical records or other individually identifiable health information. 
In addition, your comment should not include any ``trade secret or any 
commercial or financial information which . . . is privileged or 
confidential''--as provided by Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)--including in 
particular competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the public FTC website--as legally required by FTC Rule 
4.9(b)--we cannot redact or remove your comment from the FTC website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC website at http://www.ftc.gov to read this Notice and 
the news release describing it. The FTC Act and other laws that the 
Commission administers permit the collection of

[[Page 49107]]

public comments to consider and use in this proceeding, as appropriate. 
The Commission will consider all timely and responsive public comments 
that it receives on or before October 18, 2019. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, subject to final approval, an Agreement Containing 
Consent Orders (``Consent Agreement'') from US Foods Holding Corp. 
(``USF''), and Services Group of America, Inc. (``SGA'') (collectively, 
``Respondents''). The purpose of the Consent Agreement is to remedy the 
anticompetitive effects that otherwise would result from USF's 
acquisition of SGA's Food Group of Companies (the ``Proposed 
Acquisition'') in and around Boise, Idaho (hereafter ``Eastern 
Idaho''), in and around Bismarck, North Dakota, (hereafter ``Western 
North Dakota''), in and around Fargo, North Dakota (hereafter ``Eastern 
North Dakota''), in and around Kent, Washington (hereafter the 
``Seattle Area''), and nationwide for multi-regional and national 
customers.
    Among other things, the proposed Consent Agreement requires USF to 
divest certain of SGA's distribution centers and broadline distribution 
assets, including employees and tangible assets that are necessary to 
the operation of the businesses in Eastern Idaho, Western and Eastern 
North Dakota, and the Seattle Area to Shamrock Foods Co. 
(``Shamrock''), Cash-Wa Distributing (``Cash-Wa''), and Harbor 
Wholesale Foods (``Harbor''), respectively.
    The Commission and the Respondents have also agreed to an Order to 
Maintain Assets. This order requires USF and SGA to maintain the assets 
that the Consent Agreement requires divestiture of, pending their 
divestiture. The Commission's Complaint alleges that the Proposed 
Acquisition, if consummated, would violate Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal Trade 
Commission Act, as amended, 15 U.S.C. 45, by substantially lessening 
competition in the market for broadline foodservice distribution in 
Eastern Idaho, Western North Dakota, Eastern North Dakota, the Seattle 
Area, and nationwide for multi-regional and national broadline 
distribution customers.
    The Consent Agreement has been placed on the public record for 30 
days to solicit comments from interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission will review the comments received and decide 
whether it should withdraw, modify, or finalize the Consent Agreement.

II. The Respondents and the Transaction

    USF, headquartered in Rosemont, Illinois, is the second-largest 
distributor of food and food-related products in the United States. USF 
operates 61 distribution facilities throughout the United States, all 
of which provide broadline distribution, and some of which serve 
national chain customers (providing more of a systems-type service). In 
fiscal year 2017, USF generated approximately $24 billion in sales to 
over 200,000 customers nationwide. Nearly $6 billion of those sales 
were to independent (i.e., non-chain) restaurants.
    Headquartered in Scottsdale, Arizona, Services Group of America, 
Inc. is a holding company made up of six operating companies. SGA is 
comprised of Food Services of America (``FSA''), a broadline 
foodservice distributor (notably, FSA is the only SGA business unit 
that generates competitive concern); Systems Services of America 
(``SSA''), a systems distributor; Amerifresh, a specialty produce 
distributor; Ameristar Meats, a specialty meat processor; and GAMPAC, a 
supply chain and logistics company. In fiscal year 2017, SGA generated 
approximately $3.2 billion in sales. SGA has nine broadline 
distribution centers, three systems distribution centers, and three 
specialty facilities. FSA and SSA are members of Distribution Market 
Advantage (``DMA''), a supply chain and marketing cooperative owned by 
eight independent regional foodservice distributors who are also its 
members. Through DMA, FSA is able to serve national accounts in 
coordination with other large regional distributors.
    On July 28, 2018, USF entered into a Stock Purchase Agreement with 
SGA. Pursuant to the agreement, USF will purchase all of the 
outstanding common stock of SGA's Food Group of Companies in an all-
cash acquisition valued at $1.8 billion.

III. Broadline Foodservice Distribution in Eastern Idaho, Western North 
Dakota, Eastern North Dakota, the Seattle Area, and Nationwide

    Broadline foodservice distribution and broadline foodservice 
distribution to national customers are the relevant product markets in 
which to assess the effects of the Proposed Acquisition. Broadline 
foodservice distribution involves the sale and distribution of a broad 
range of national-brand and private-label food and foodservice-related 
products (such as paper towels, disposable cups, etc.) to a range of 
customers who serve food-away-from-home to consumers, such as 
restaurants, hospital cafeterias, stadiums, and schools. Broadline 
distributors offer customers a distinct combination of products and 
services that are not replicated by other foodservice distribution 
channels, including a wide array of stock keeping units (SKUs) to 
provide customers with product breadth and depth, a broad selection of 
private-label (i.e., distributor-branded) food products, a frequent and 
flexible delivery schedule (including next-day delivery), and other 
value-added services, such as order tracking, menu planning, and 
nutritional information. Customers value the ability to purchase this 
bundle of products and services from a single broadline distributor.
    There are four local relevant geographic markets in which to 
analyze the transaction's effects: (1) Eastern Idaho, (2) Western North 
Dakota, (3) Eastern North Dakota, and (4) the Seattle Area. Competition 
to serve broadline customers plays out locally. The business of 
broadline distribution involves regularly loading food (much of which 
is perishable) and related items onto trucks, driving to customer 
locations, unloading the merchandise, and returning to the distribution 
center in time to repeat this process for the next day's deliveries. 
Customers, therefore, select from among broadline distributors within a 
reasonable radius of their location. Likewise, broadline distributors 
are limited in their distribution radius by cost and service 
considerations. USF and FSA compete from proximate distribution centers 
to serve customers in Eastern Idaho, Western North Dakota, Eastern 
North Dakota, and the Seattle Area, and these are thus appropriate 
geographic markets. FSA serves both North Dakota markets out of its 
Fargo distribution center, but other distributors serving the Eastern 
North Dakota market do not serve Western North Dakota, and thus the 
competitive conditions are different

[[Page 49108]]

and it is appropriate to define two geographic markets within the 
state.
    USF and FSA compete closely to serve local broadline customers in 
Eastern Idaho, Western North Dakota, Eastern North Dakota, and the 
Seattle Area. The transaction would eliminate a key broadline 
distributor in each of these markets, limiting customers' ability to 
switch between distributors and leverage them in order to obtain more 
competitive pricing and better service. The few remaining competitors 
in the relevant markets would be insufficient to alleviate competitive 
concerns. As a result, the Proposed Acquisition will likely lead to 
higher prices and diminished service for local broadline customers in 
the four local markets.
    The effects of the Proposed Acquisition must also be evaluated in 
the national market. Through its membership in a consortium of regional 
distributors, DMA, FSA competes with USF for the provision of broadline 
distribution services to multi-regional and national accounts. If DMA 
were to lose all of FSA's distribution centers from its network, it 
would be rendered a significantly less attractive competitor than it is 
today to many multi-regional and national customers. As a result, the 
Proposed Acquisition will likely result in higher prices and reduced 
quality and service to national customers.
    New entry or expansion is unlikely to deter or counteract the 
anticompetitive effects of the acquisition in the Eastern Idaho, 
Western North Dakota, Eastern North Dakota, Seattle Area, and national 
markets. The broadline foodservice distribution industry is capital and 
labor intensive, rendering entry challenging and time consuming, with 
significant operational and financial risks. Prospective entrants or 
expanders face three main obstacles: (1) Developing the requisite sales 
forces and customer base; (2) establishing a properly outfitted 
distribution center, truck fleet, and driver base for operations and 
delivery; and (3) building the volume of perishable and non-perishable 
SKUs necessary to serve broadline customers. To overcome these hurdles, 
a new entrant or an adjacent company trying to expand must commit a 
tremendous amount of capital and time to develop relationships with 
potential customers, build or expand an existing facility, and assemble 
the equipment required for distribution in that area. Thus, due to the 
considerable time and investment required to build a functional 
broadline distribution operation in a new market, entry and expansion 
are unlikely to be timely, or sufficient to deter or counteract the 
Proposed Acquisition's anticompetitive effects.

IV. The Proposed Consent Agreement

    The proposed Consent Order remedies the likely anticompetitive 
effects in each of the relevant markets by requiring divestitures to 
Shamrock, Cash-Wa, and Harbor within 30 days of the Proposed 
Acquisition's closing. Until the completion of each divestiture, the 
Respondents are required to abide by the Order to Maintain Assets, 
which requires them to maintain the viability, marketability, and 
competitiveness of the divestiture assets until the divestitures are 
completed. The proposed Consent Order appoints a Monitor to ensure the 
Respondents' compliance with the Order to Maintain Assets, Consent 
Order, and Divestiture Agreements in anticipation of and following the 
divestiture.
    Additionally, the proposed Consent Order requires the Respondents 
to provide transitional services to the approved acquirer for at least 
24 months after the divestiture, as needed, to assist the acquirer with 
the transfer and operation of the divested assets. Finally, the 
proposed Consent Order contains standard terms regarding the acquirer's 
access to employees, protection of Material Confidential Information, 
and compliance reporting requirements, among other things.

A. Eastern Idaho

    The proposed Consent Order remedies the likely anticompetitive 
effects in Eastern Idaho by requiring the divestiture of FSA's 
distribution center in Boise to Shamrock. The divestiture assets and 
rights include the distribution center and selected broadline 
distribution assets, including employees and tangible assets necessary 
to operate the business.

B. Western and Eastern North Dakota

    The proposed Consent Order remedies the likely anticompetitive 
effects in both Western and Eastern North Dakota by requiring the 
divestiture of FSA's distribution center in Fargo to Cash-Wa. The 
divestiture assets and rights include the distribution center and 
selected broadline distribution assets, including employees and 
tangible assets necessary to operate the business.

C. The Seattle Area

    The proposed Consent Order remedies the likely anticompetitive 
effects in the Seattle Area by requiring the divestiture of FSA's 
distribution center in Kent to Harbor. The divestiture assets and 
rights include the distribution center and selected broadline 
distribution assets, including employees and tangible assets necessary 
to operate the local broadline distribution business. Although the 
proposed Consent Order only requires USF to divest one of FSA's two 
Seattle-area broadline distribution centers, this remedy will prevent 
any increase in market concentration levels and preserve the status quo 
in the Seattle Area broadline distribution market because three major 
broadline distributors will remain.

D. National

    The proposed Consent Order remedies the likely anticompetitive 
effects in the national market by replacing the loss of FSA from DMA's 
network with divestiture of the Kent, Boise, and Fargo distribution 
centers to three purchasers that are existing members of the DMA 
consortium. The divestiture assets and rights that Shamrock, Cash-Wa, 
and Harbor will acquire will enable each buyer to operate the local 
broadline distribution businesses in their respective local markets, 
but also to provide effective coverage to the DMA network in these 
regions so that DMA can continue to be an attractive option to, and 
effective competitor for, multi-regional and national customers.
    The proposed Decision and Order will have a term of ten (10) years.
    The sole purpose of this analysis is to facilitate public comment 
on the proposed Consent Agreement. This analysis does not constitute an 
official interpretation of the proposed Consent Agreement or modify its 
terms in any way.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.
[FR Doc. 2019-20182 Filed 9-17-19; 8:45 am]
 BILLING CODE 6750-01-P