By Brent Kendall
WASHINGTON--A federal judge set a May 5 start date for court
hearings on the Federal Trade Commission's antitrust lawsuit
against the merger of the nation's two largest food distributors,
Sysco Corp. and U.S. Foods Inc.
During a Wednesday hearing, U.S. District Judge Amit Mehta said
he would consider the case from May 5 to May 8 and would add as
many as three more days the following week if needed. Judge Mehta
isn't conducting a full-blown trial on the FTC's allegations.
Instead, he's considering whether to issue a preliminary injunction
to block the companies from merging while the FTC holds a longer,
more-robust trial in its in-house administrative court system,
beginning in July.
Judge Mehta's proceedings, however, could be a crucial testing
ground for the case. Both sides have a lot riding on whether the
judge grants the injunction. If he denies it, the ruling could
undercut the FTC's administrative proceedings. If he grants it, the
companies would face a steeper and perhaps more lengthy climb in
the litigation.
The judge's hearing date fell between the initial proposals from
each side. The FTC had sought a start date around April 21, while
the companies sought to start on May 28. The FTC wanted the federal
proceeding to last no more than three days; the companies sought 10
days.
Lawyers for the two sides gave some initial hints about their
plans for the court hearings. FTC lawyer Stephen Weissman said the
agency wanted to present witnesses including customers of Sysco and
U.S. Foods from the health-care and hospitality industries, as well
as a witness from a food-service management business.
Richard Parker, a lawyer for Sysco, said he would bring in top
company executives to testify on why the deal was
pro-competitive.
Sysco and U.S. Foods provide food, paper products and a wide
range of other supplies to restaurants, hospitals, schools and
other customers in the food-service industry. The FTC alleges the
merger will lead to higher prices and reduced services for both
national and local customers. The companies say the deal will help
them improve service and become more efficient, with hundreds of
millions of dollars in cost savings.
Part of the pretrial discussions during the hearing focused on
how much evidentiary material, particularly from customers of Sysco
and U.S. Foods, would be made public. The FTC's Mr. Weissman said
customers are worried about their names being disclosed, and about
possible retaliation if the merger ultimately goes through.
Judge Mehta made no final decisions on the issue, but he said he
was a "big believer" in public access and noted interest from the
public and the media in the Sysco proceedings.
Government merger litigation is relatively rare. The FTC's
lawsuit, announced last month, is its highest-profile merger
challenge since 2007.
Judge Mehta is a new member of the federal bench. His swearing
in took place in January. The Obama nominee previously was in
private practice at Zuckerman Spaeder LLP.
Write to Brent Kendall at brent.kendall@wsj.com
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