Sysco sued for its attempt to buy rival US Foods in Rosemont

U.S. trade regulators today filed a lawsuit to block Sysco Corp.'s proposed $8.2 billion acquisition of its rival, Rosemont-based US Foods Inc.

The acquisition would hurt competition in food distribution and raise prices, regulators say. Illinois Attorney General Lisa Madigan, the Federal Trade Commission and 10 other states, filed the complaint designed to stop the acquisition by Houston, Texas-based Sysco, alleging the proposed purchase would violate antitrust laws by eliminating its closest competitor.

"The loss of competition between Sysco and US Foods would raise costs for their customers and ultimately for anyone purchasing food served at hospitals, schools, hotels and restaurants," Madigan said in a statement.

Sysco said it is preparing to fight the suit and hiring a prominent lawyer who specializes in merger litigation, a person familiar with the matter said.

Sysco, which has operations in Des Plaines, St. Charles, Bensenville and elsewhere, has turned to Rich Parker, an antitrust partner at law firm O'Melveny & Myers LLP in Washington, according to the person, who wasn't authorized to speak publicly about the hiring.

Regulators have been investigating whether the food distribution company's $8.2 billion deal, which includes $3.5 billion in cash and stocks, for rival US Foods is anticompetitive. Parker, who previously worked at the FTC and litigated merger cases, represented US Airways Group Inc. when the Justice Department sued to block its merger with American Airlines in 2013. The case settled when the airlines agreed to sell assets at airports to other airlines.

Because it is difficult for new competitors to enter the food this market, the complaint alleges the merger would dramatically concentrate business and eliminate price competition and reduce the quality of customer service. Sysco and US Foods are the only broadline food distributors with national operations. The complaint alleges the two companies currently represent 75 percent of the national market.

A spokeswoman for US Foods did not immediately respond for comment.

In the Chicago area, the lawsuit alleges Sysco and US Foods together control 83 percent of the market for local and regional customers.

Other attorneys involved in the suit are from California, the District of Columbia, Maryland, Ohio, Pennsylvania, Virginia, Iowa, Minnesota, Nebraska and Tennessee.

• Bloomberg News contributed to this report.