Letter to FTC concerning Sysco US Foods merger

Ranch Foods Direct
2901 N. El Paso
Colorado Springs, CO 80907 866-866-6328
719-473-2306
www.RanchFoodsDirect.com
Ms. Deborah L. Feinstein
Director, Bureau of Competition Office of Policy and Coordination
Room 7117
Federal Trade Commission
601 New Jersey Avenue NW

March 17, 2014

BY POST AND ELECTRONIC MAIL: antitrust@ftc.gov

Dear Director Feinstein:

RE: Sysco purchase of US Foods

Ranch Foods Direct is a meat company based in Colorado Springs, Colorado. We distribute to over 100 restaurants, four school districts and sell direct to customers through our retail store located in the same building as our processing plant. Ranch Foods Direct also cuts and packages meat for around 40 other producers that are also seeking access to the consuming market for the livestock they raise.

As the name implies, the mission of Ranch Foods Direct is to provide a more direct connection between the farm and ranch and the consumer. Our approach is to go around the big food service and national food retail chains that have captured the markets and are now blocking fair market access for smaller producers.

The following chart prepared by C. Robert Taylor, Alfa Eminent Scholar and Economics Professor at Auburn University, shows the return on equity for the various market sectors from producer to consumer:

ROE

Sysco and US Foods dominate the wholesale restaurant marketplace in the same way the big food retailers dominate the retail consumer market.

A powerful market predator in an already far-too-concentrated food service industry, Sysco takes advantage of both the supplier and the customer. Sysco’s abusive market power even reaches back to the farmer and rancher. They buy large amounts of low quality, industrially produced items from global agribusiness firms that, in turn, find it easier to dictate low prices for the commodities they buy from farmers and ranchers than to pass on higher costs of production to Sysco.

Sysco competes unfairly by offering products below cost of production to restaurants that are either customers or are potential customers of Ranch Foods Direct. We have heard from these restaurants that Sysco has paid kickbacks (signing bonuses) if they agree to a long-term contract and refuse to buy from us. These same restaurants eventually see prices rise well above the original predatory price and higher than the original price offered by Ranch Foods Direct. Sysco makes false claims about their own products, while disparaging Ranch Foods Direct.

Sysco blocks market access to small producers. One sheep rancher, offering local lamb, was told by the restaurant owner that he had been warned by Sysco – if he purchased local lamb, he could plan on buying his tomatoes, potatoes, spices, napkins, etc. also from the rancher. The cheaper New Zealand and Australian lamb remained on the menu and the Sysco truck still stops weekly.

Sysco is a dominant buyer that can dictate terms to even its biggest suppliers, as well as a dangerous market predator that can crush its smaller competitors. Sysco preys on communities working to build local food systems, like Colorado Springs, which is striving to become more self- sustaining and self-reliant around a fledgling local food economy. In selling things from somewhere else and taking the money away every day, Sysco constantly extracts wealth, gutting local economies.

The purchase of US Foods would increase Sysco’s near monopoly power over the wholesale food business. The Federal Trade Commission should not only block Sysco’s purchase of US Foods, but should breakup Sysco, allowing smaller competitors access to a more fair, open and competitive marketplace, while providing restaurants and consumers with more and better choices.

Sincerely,

Mike Callicrate
Owner/Operator

Connecting consumers with family farmers and ranchers

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