FTC staff argues against Pillsbury-GM deal
Bloomberg News
Published Oct 8 2001
U.S. antitrust enforcers are urging a court challenge to block
General Mills Inc.'s $10.5 billion purchase of Pillsbury from
Diageo Plc because the cerealmaker's plan to share its
Doughboy brand with another company would limit
competition, people familiar with the case said.
The Federal Trade Commission staff argues that letting the
giggling blue-eyed character be the mascot for both Pillsbury
and International Multifoods Corp., the largest U.S. distributor
of vending-machine snacks, would undermine the brand's
value, the sources said.
General Mills proposed selling the Pillsbury line of baking mixes
that competes with its Betty Crocker brand to Multifoods. Betty
Crocker and Pillsbury are the two leading baking mix brands,
and the divestiture was intended to ease Federal Trade
Commission (FTC) concern that the combination of General
Mills and Pillsbury would be anticompetitive.
The FTC lawyers "clearly concluded that a significant asset in
these products is the brands," said Herbert Hovenkamp, an
antitrust expert at the University of Iowa Law School.
All three firms have headquarters in the Twin Cities: Pillsbury
in Minneapolis, General Mills in Golden Valley and Multifoods
in Minnetonka.
"General Mills and Diageo continue to be involved in active
discussions with the Federal Trade Commission on their deal
for General Mills to acquire Diageo's worldwide Pillsbury
operations," General Mills spokesman Tom Forsythe said
Sunday. "Both companies expect the FTC's review process will
be completed in October, and continue to look forward to
closing the deal when that review concludes."
The FTC commissioners may meet as early as this week to
consider the staff recommendation for a court challenge,
sources said.
Company officials have been meeting with commissioners,
trying to persuade them to reject the staff recommendation and
accept the divestiture plan, sources said.
"It's still a nonpublic matter that we are not discussing," FTC
spokeswoman Cathy MacFarlane said.
The Doughboy has been a symbol of Pillsbury products since
1965. General Mills wants to keep the brand to market frozen
waffles, pancakes, refrigerated cookie dough and other treats
while licensing it to Multifoods for dry cake, muffin and cookie
mixes.
Splitting the Doughboy brand between two companies would
create "free riding," Hovenkamp said. "To the extent your own
advertising benefits a rival, you will have less incentive to
promote your own brand," he said. "The only way you can
advertise Pillsbury is in a way that creates benefits for the
competitor."
General Mills has announced several delays in completing the
acquisition. After the FTC's objections to the Doughboy
divestiture became public in July, the company said it didn't
expect to receive approval before this month.
Multifoods also agreed to buy Pillsbury's Hungry Jack pancake
mixes and Robin Hood flour, a brand it already markets in
Canada. The $305 million divestiture also includes the Martha
White brand of mixes for corn bread and biscuits.
-- Staff writer Melissa Levy contributed to this report.
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