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From Antitrust Law Daily, March 6, 2018

FTC challenges proposed acquisition of Wesson brand cooking oil by owner of Crisco brand

By Edward L. Puzzo, J.D.

The proposed acquisition of Conagra's Wesson brand by J.M. Smucker Co., owner of the Crisco brand, would substantially lessen competition in the U.S. market for canola and vegetable cooking oils and shortening, and tend to create a monopoly in violation of the Clayton Act, according to the FTC. The agency announced yesterday that it issued an administrative complaint, challenging the combination.

The FTC maintains that in the market for canola and vegetable cooking oils, there is currently intense competition between the Wesson brand and Crisco brand among retailers, benefiting consumers. If Smucker's proposed $285 million acquisition of the Wesson brand from Conagra is approved, Smucker would control at least 70 percent of the market for branded canola and vegetable oils, likely increasing Smucker’s negotiating leverage against retailers, especially traditional grocers, by eliminating the vigorous head-to-head competition that currently exists between the Crisco and Wesson brands.

According to the agency, Smucker’s own internal documents acknowledge that eliminating price competition between Crisco and Wesson is a central part of its rationale for the acquisition. The proposed acquisition, if allowed to proceed, would give Smucker the ability to raise prices to retailers, ultimately leading to higher prices for U.S. consumers for branded canola and vegetable cooking oil, the complaint alleges.

The FTC acknowledges the availability of other branded canola and vegetable oils in the United States, such as Mazola and LouAna, but notes that they each control only a small share of the market. Building sufficient brand equity to expand would require substantial investment and take at least several years. New entry into the market, or expansion by existing firms would not be timely, likely, or sufficient to offset the anticompetitive effects of the proposed acquisition, according to the complaint. Competition would also not be likely from other types of cooking oils, such as corn, peanut and olive oils because they are either in a more expensive price range or are unsuited to certain cooking applications.

"Cooks across the U.S. benefit from the competition between the staple brands Wesson and Crisco. We are taking this action to preserve the benefits of that competition," said Ian Conner, Deputy Director of the FTC Bureau of Competition. "After attempted price increases by each brand over the last two years were limited by intense competition from the other, this transaction eliminates that restraint and would allow Smucker to raise prices on both brands."

An administrative trial is scheduled to begin on August 7, 2018.

Companies: Conagra Brands, Inc.; J.M. Smucker Co.

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