Federal Trade Commission v. Consolidated Foods Corp.

Consolidated Foods Corp. (Consolidated) (defendant), a food processor and distributor, acquired Gentry, Inc., a manufacturer of dehydrated onion and garlic, in a merger. Before its acquisition, Gentry held 32 percent of the market in dehydrated onion and garlic. Gentry’s main competitor, Basic Vegetable Products, Inc. (Basic) held 58 percent of the market. Basic was known to make a better product than Gentry. After the merger, Consolidated helped Gentry sell its product by offering reciprocal-dealing arrangements to its suppliers in which Consolidated would attempt to sell Gentry’s products to the food processors Consolidated purchased from. Consolidated sent letters to its suppliers asking them to purchase Gentry’s products. Consolidated’s suppliers often responded by stating that they would purchase Gentry’s products for reciprocity reasons if Consolidated would match the prices and quality of Gentry’s competitors. Some of the suppliers did reciprocally purchase products from Gentry. After its acquisition by Consolidated, Gentry held 35 percent of the market in dehydrated onion and garlic, and Basic held 55 percent of the market. Gentry increased its onion sales by 7 percent and managed to limit its garlic losses to a decrease of 12 percent, which was less than had been expected. The Federal Trade Commission (FTC) (plaintiff) found that the merger violated § 7 of the Clayton Act because it was likely to lessen competition in the market for dehydrated onion and garlic. The court of appeals set aside the FTC’s decision. The FTC appealed.