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FTC challenges JM Smucker's purchase of Wesson oil brand from Conagra

FBR Staff Writer Published 06 March 2018

J.M. Smucker’s proposed $285m purchase of Conagra Brands’ Wesson cooking oil brand has hit a roadblock with the US Federal Trade Commission (FTC) accusing the deal will reduce competition in the country for canola and vegetable oils.

The competition watchdog has filed an administrative complaint, stating that the proposed deal will substantially reduce competition or to tend to create a monopoly’ in violation of the Clayton Act.

Explaining its decision, the FTC said that Smucker, which currently owns the Crisco brand, will control more than 70% of the market for branded canola and vegetable oils sold to grocery stores and other retailers, if it acquires the Wesson cooking oil brand.

According to the regulator's complaint, the acquisition will give an unfair advantage to Smucker in its negotiations with traditional grocers and other retailers after eliminating price competition between the Crisco and Wesson oil brands. This would lead to higher prices for both retailers and consumers for branded canola and vegetable cooking oils, stated the FTC.

FTC Bureau of Competition deputy director Ian Conner said: “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.

“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.”

Both Smucker and Conagra Brands have expressed their disappointment at FTC’s conclusion of their deal.

Smucker CEO Mark Smucker said: "While we respect the FTC's decision, we are disappointed with this conclusion and strongly believe that the acquisition would benefit all of our constituents. 

"We certainly understood this outcome could be possible, and we remain focused on delivering value to our consumers and customers with our Crisco brand and oils business.  We are reviewing the complaint and working with Conagra to assess our next steps in this process."

The acquisition agreement was announced by the parties in May 2017.

The FTC said that it has authorized its staff to seek a temporary restraining order and a preliminary injunction in federal court to prevent the companies from completing the merger, and to keep the status quo pending the administrative proceeding.

Image: The Apex Building in Washington, D.C which serves as the headquarters of the Federal Trade Commission. Photo: courtesy of Carol M. Highsmith.