| Memorandum |  |
| Subject: | Request to Open Preliminary Investigation: Acquisition of Eagle Snacks, Inc. by Frito-Lay, Inc. | Date: | February 11, 1996
60-20961234 | | To: | J. Robert Kramer
Chief
Litigation II | From: | Joel A. Christie
Litigation II |
Preliminary investigation authority is requested for the following matter: | Product(s): | potato chips, corn chips, and similar snacks | | SIC Code(s): | 2096, 2052 | | Potential defendants/parties: | PepsiCo, Inc.
Anderson Hill Road
Purchase, NY 10577
Frito-Lay, Inc.
7701 Legacy Drive
Plano, TX 75024-4099
Anheuser-Busch Companies, Inc.
One Busch Place
St. Louis, MO 63118
Eagle Snacks, Inc.
231 South Bemiston Avenue,
Suite 600
Clayton, MO 63105 | | Statute: | Clayton Act, Section 7 | | Description of Illegal Conduct: | horizontal merger | | Amount of Commerce: | $15 billion | | Geographic Market: | nationwide | | Premerger Notification Transaction #: | 96-1029 | | [REDACTED TEXT ] | [REDACTED TEXT] | | Pending FTC Clearance: | X |
FTC CLEARANCE GRANTED/DENIED:
PI AUTHORITY AUTHORIZED BY:
ON:
PI AUTHORITY DISAPPROVED BY:
ON:
NEW DOJ FILE NO: |
Issues and Analysis
Frito-Lay, Inc. ("Frito-Lay") is by far the nation's largest producer of salty snacks, a market of $15 billion annually. It seeks to acquire the assets of four manufacturing facilities from Eagle Snacks, Inc. ("Eagle"), which is the only other national brand in the salty snacks market. Frito-Lay's dominance in this market, with over 50 percent market share currently in several categories, can only intensify with this acquisition. We have received one citizen complaint [REDACTED TEXT (7D)] Articles in the trade press also indicate sentiment against the merger from large food retailers and regional competitors. One major question we must answer quickly is whether Eagle meets the definition of a "failing firm" under the Merger Guidelines. An article in the Wall Street Journal on February 8, 1996 reported that Eagle "never made money during its 17 years in salty snacks" and may have lost $25 million in 1995. The Litigation II staff currently is conducting an investigation into the proposed merger of two producers of masa flour. [REDACTED TEXT (b)(5)] Past Investigations: Proposed Acquisition of Certain Assets of Gruma S.A. de C.V. by the Archer-Daniels-Midland Company In connection with its investigation of a proposed merger between the nation's two largest producers of masa flour, staff has [REDACTED TEXT (b7D)] as well as numerous third-party CIDs. Moreover, staff has spoken on several occasions to counsel for Frito-Lay, and conducted interviews of Frito-Lay employees, competitors, and customers. Topics covered in these interviews included capacity, production lines, production costs, market entry and expansion. Currently, staff is working with Frito-Lay counsel to obtain affidavits on excess capacity and market entry. |
U.S. Department
of Justice
