FTC Blocks Post’s Purchase Of TreeHouse Foods Over Antitrust Concerns
The Federal Trade Commission (FTC) has filed an administrative complaint that asks a judge to block Post Holdings, Inc.’s $110 million purchase of TreeHouse Foods, Inc. The FTC’s antitrust concerns about the merger of the companies focus on Post obtaining 60% of the private label cereal market if the acquisition goes through.
Federal Trade Commission’s Complaint
Post plans to buy the private label, ready-to-eat cereal business from TreeHouse Foods, which originally purchased it from ConAgra Brands in 2016. Post made the announcement in May and wanted to complete the deal by September of this year, but the FTC’s concerns have delayed the process.
The FTC’s administrative complaint points out that TreeHouse is the largest manufacturer of private label cereal in the country, so the consolidation of its business with Post would create less competition in the marketplace because only two large manufacturers would have private label cereals. Post has shared that it plans to integrate TreeHouse’s brands into its own private label lines. The FTC’s concerns include higher prices for consumers and lower quality of cereals.
“Post and TreeHouse are two of only three significant manufacturers and distributors of private label ready-to-eat cereal in the United States. The acquisition would give Post more than a 60 percent share of an already highly concentrated market and eliminate the vigorous competition between them to serve grocers across the country. The proposed merger would remove the competitive pressure that has driven higher quality and lower priced cereals for American families,” the FTC said.
The Response to the Complaint
Post and TreeHouse Foods have responded to the complaint by noting their disappointment and sharing that they are evaluating next steps. “We are disappointed and perplexed by the FTC’s decision to attempt to block a combination that produces more effective competition in the $9 billion ready-to-eat cereal category. We will work with TreeHouse to develop an appropriate course of action,” Rob Vitale, Post’s President and CEO, said.
It is not clear how the companies plan to proceed, but the FTC is willing to get a temporary restraining order and a preliminary injunction in federal court to prevent their merger. Although Post already sells some private label cereals, its acquisition of TreeHouse’s business would expand these lines and provide the company with two new manufacturing plants.