Statement of Commissioner Sheila F. Anthony

General Mills Inc./Diageo PLC/The Pillsbury Company
File No. 001-0213

The Commission today declined to challenge the proposed acquisition of The Pillsbury Company from Diageo plc by General Mills Inc, a result that leaves me profoundly disappointed, as I would have preferred to see the Commission litigate this matter. The settlement terms negotiated for months between the parties and Commission staff were wholly insufficient to remedy the unlawful underlying transaction. In particular, the parties proposed an aberrant trademark license to split a corporate name and other trademarks between two competitors, one of which would have been built and financed from the ground up. The parties' proposal would not, as they have argued, create a suitable replacement for The Pillsbury Company in the $1 billion markets at issue.

Ever since the proposed transaction was announced, it has been clear that the acquisition of Pillsbury by General Mills would lead to significant overlaps in several product categories, most notably baking mixes (i.e., cake mixes, brownie mixes, quick breads, and cookie mixes) and ready-to-spread frosting.⁽¹⁾ General Mills' Betty Crocker® and Pillsbury's Doughboy™ are among the most recognized brands in America. Products bearing these symbols command leading market shares in virtually every product category in which the two companies compete. In the supermarket baking aisle, where head-to-head competition between Betty and the Doughboy is particularly strong, combining the General Mills and Pillsbury portfolios would constitute an obvious antitrust violation and would lead to substantial consumer injury.

The parties have acknowledged as much. As early as July 2000, in its initial press release announcing the proposed transaction, General Mills indicated that it planned to divest Pillsbury's dessert mix business,⁽²⁾ presumably to alleviate antitrust concerns. For many months, amidst great speculation in the press, the parties have engaged Commission staff in negotiations, hoping to craft a "fix" that would eliminate the competitive problems and enable the acquisition to go through.

A key element of the parties' proposal is an agreement to spin off Pillsbury's dessert and specialty products businesses to International Multifoods Corporation (IMC).⁽³⁾ There are several reasons why I believe that IMC would be incapable of replicating current competition from Pillsbury. One particular flaw in the parties' terms is that General Mills would retain ownership of the Pillsbury trademark and numerous Pillsbury-branded products (including refrigerated, frozen, and shelf-stable food items). The sale to IMC would include a complex, perpetual, non-terminable licensing scheme with minimal quality-control provisions, whereby both IMC and General Mills, its direct competitor, would sell Pillsbury-branded products. General Mills would be selling Betty Crocker baking mixes on adjacent shelf space, which inevitably would skew its incentives to see IMC, its licensee, succeed in its new line of Pillsbury-branded business. Moreover, the potential for consumer confusion is great. As a former trademark lawyer, and now an FTC Commissioner charged with enforcing the antitrust laws, I am extremely sensitive to the fundamental tension between the goals of trademark and antitrust. This particular proposal simply does not resolve this tension in a way that adequately protects consumers.

I also have grave concerns about IMC's ability to replace lost competition from Pillsbury, which should be the Commission's main goal. Pillsbury is a major company with a broad product line, including not only Pillsbury-branded products, but also those sold under the very popular Hääagen-Dazs®, Old El Paso®, Green Giant®, Totino's®, Jeno's®, and Progresso® brand names. Pillsbury's marketing activities and dealings with retailers take full advantage of its product scope.⁽⁴⁾ IMC, with only a limited number of products, would never have the same clout that Pillsbury has today, which would make it that much harder for IMC to compete against General Mills' Betty Crocker in the baking aisle.

Finally, I am troubled by the cobbled-together nature of the assets and personnel that IMC would acquire. The Commission's experiences over the last several years have confirmed that divestitures of ongoing businesses are most likely to restore competition going forward⁽⁵⁾ - and the Commission should accept nothing less when the likely harm is significant and efficiencies are minimal. But IMC would receive something far different from the business Pillsbury runs today and, in fact, would be building its business from the ground up. For example, IMC would get a General Mills (not Pillsbury) plant, which currently does not produce the to-be-divested Pillsbury products and would need to be converted. It is uncertain how long it might take to bring the new plant up to the cost and quality levels of Pillsbury's current plant. IMC also would need to build a management team, integrating new hires with "acquired" Pillsbury employees who are willing to join IMC.

5. See, e.g., Federal Trade Commission Bureau of Competition Staff, A Study of the Commission's Divestiture Process (1999).