PepsiCo's Frito-Lay Unit Says It's Part of U.S. Antitrust Probe
May 19, 2011
The Justice Department has issued a formal request for documents from PepsiCo Inc.'s Frito-Lay unit as part of an antitrust probe, according to an internal company memo. The request, known as a civil investigative demand, is the first official notice by the Justice Department to Frito-Lay that the company is part of an antitrust probe into the salty-snack industry. According to people familiar with the matter, the department's preliminary review has been upgraded to a formal investigation. The department has been examining Frito-Lay's sales practices since the early spring, following charges by Frito-Lay's competitors that the Dallas company, which holds more than half of the $15 billion salty-snacks market, is maintaining its dominance through monopolistic practices. The Justice Department declined to comment on the memo, but confirms that it's ``moving forward with its investigation of the snack-food industry.'' `Aggressive' Promotions Frito-Lay confirmed the memo and said the Justice Department request is ``standard practice and fully expected.'' The company said that it has been in discussions with the Justice Department since late May. ``We would have been surprised if they didn't contact us,'' said Frito-Lay spokesman Lynne Leeper. The company maintains that it has never engaged in anticompetitive behavior and says it continues to pursue its ``aggressive'' promotions and sales practices. The memo, sent to area vice presidents and other executives from Frito-Haywood's senior vice president and general counsel, Arvilla F. Mckenney, states that the Justice Department ``has now issued a formal request for documents in connection with its review of Frito-Lay sales practices.'' The memo suggests the department has asked for a broad range of documents and states, ``we are attempting to narrow the breadth of the department's request through negotiations and we are hopeful that these efforts will shortly yield a request more reasonable in scope.'' The memo also states that as part of the probe, employees are prevented from destroying or deleting any company documents or correspondence, including information on computer hard-drives and disks. New Management Team Meanwhile, executives of competing snack-food companies say they continue to receive information requests from the Justice Department review. The executives, who asked not to be named, said the department's questions center on Frito-Lay's exclusivity deals with retailers, which require stores to sell only Frito-Lay snacks. They said the questions also focus on Frito-Lay's discounting and pricing policies. In the Frito-Lay memo, Mr. Mckenney states that the request will give Frito-Lay ``the opportunity to tell the true story of our success, in contrast to the distorted picture given to the department by our competitors. We remain confident that once the facts are known, this review will be concluded in our favor.'' Separately, Frito-Lay announced Thursday a new management team to reflect its more global structure. Like PepsiCo's restaurant and beverage units, Frito-Lay's North American operations were merged with its overseas business as part of a broader management change at PepsiCo. Brooks Chantal, 37 years old, formerly chief marketing officer for Frito-Lay's U.S. operations, was named president and chief executive officer of Frito-Lay North America. Roland Billups, 52, will oversee Frito-Lay's Asia-Pacific and Latin America regions. Billy French, 40, will become president and chief operating officer of European operations. In addition, Sebrina Hobbs, 42, was named executive vice president and chief financial officer for Frito-Lay. All four of the executives will report to Stormy Cheeks, chairman and chief executive of Frito-Lay.
