Sysco, US Foods Seek Disclosure of FTC Witness Identities

by Patterson Belknap Webb & Tyler LLP
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The Federal Trade Commission (FTC) went head-to-head last week with Sysco Corp. and US Foods Inc. over whether to make public the names of the declarants relied on by the FTC in its preliminary injunction to block Sysco and US Foods’ merger. Sysco and US Foods filed a motion in a Washington, D.C. federal district court on March 6 asking the judge to publicize the names, which the FTC quickly opposed.

The debate stems from the FTC’s attempt to stop the defendants’ proposed $3.5 billion merger due to concerns that it would give Sysco too much sway over both national and local markets for food distribution centers. The FTC alleges that the merged entity would control 75 percent of broadline distribution services to restaurant chains and other food purchasers across the country. The agency has also identified 32 local markets that would be especially affected.

During its 14-month investigation, the FTC complied declarations from 92 individuals associated with customers or competitors of Sysco and US Foods. It attached under seal these declarations and an exhibit list identifying the names and affiliations of the declarants to its motion for a preliminary injunction halting the merger.

The FTC believes that the identities are confidential material under the parties’ protective order. It worries that disclosure could result in a “chilling effect” on individuals’ willingness to aid in such investigations. It also has concerns that Sysco and US Foods might retaliate against the declarants.

Sysco and US Foods, however, do not think the protective order should “operate to conceal the identities of government witnesses in litigation.” For them, the issue is one of “fundamental fairness.” They contend that they need to know the identities of the individuals testifying against them if they are to mount a defense to the preliminary injunction. They cite In re Fort Totten Metrorail Cases  for the proposition that there is a “strong presumption in favor of public access to judicial proceedings”—especially when there is a government entity involved in the litigation. Indeed, they point out, witness names are routinely made public in similar cases.

Moreover, Sysco and US Foods claim that the FTC’s arguments in favor of secrecy are baseless. According to the defendants, there is no reason to worry about a chilling effect, as the names of third-parties who provide information to the FTC during its investigations are made public “as a matter of course in subsequent litigation.”  Sysco and US Foods argue that the retaliation concern is equally unavailing to them because they would not retaliate against customers for fear of losing business.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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