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FTC Challenges J.M Smucker's Wesson Cooking Oil Acquisition

The Federal Trade Commission Monday said it will challenge J.M. Smucker Co.'s (SJM) $285 million bid for the Wesson cooking oil brand owned by Conagra Brands Inc.

According to FTC, J.M. Smucker's acquisition of Wesson cooking oil brand "is likely 'substantially to lessen competition, or to tend to create a monopoly' in violation of the Clayton Act." The deal will reduce competition in the US for canola and vegetable oils, as Smucker currently owns the Crisco brand and by acquiring the Wesson brand, it would control at least 70 percent of the canola and vegetable oils market.

Ohio-based Smucker and Chicago-based Conagra both manufacture and sell a wide range of food products, including canola and vegetable oil, other types of oils, and shortening. Under the proposed acquisition, Smucker would obtain all intellectual property rights to the Wesson brand, as well as inventory and manufacturing equipment.

The complaint alleges that the acquisition is likely to increase Smucker's negotiating leverage against retailers, especially traditional grocers, by eliminating the vigorous head-to-head competition that exists between the Crisco and Wesson brands today. The retailers, and ultimately consumers, would likely face higher prices for branded canola and vegetable cooking oil, the complaint states.

"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," said Ian Conner, Deputy Director of the Bureau of 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."

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