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    FTC Approves Gatorade Deal

    Split vote paves way for Pepsi's $13.9 billion acquisition of Quaker.

    A deadlocked U.S. Federal Trade Commission (FTC) yesterday allowed Purchase, N.Y.-based Pepsico Inc. to proceed with its $13.9 billion purchase of Quaker Oats Co., and its crown jewel Gatorade sports beverage, despite concerns the deal would leave the company in a position to dominate the market for sports drinks.

    FTC commissioners split 2-2 over the question of whether to oppose the deal, one vote short of the majority needed to file suit to block it. The commissioners then voted 4-0 to end investigation of the deal, Reuters has learned. The FTC's new chairman, Bush-appointee Timothy Muris, recused himself from the vote because of a conflict of interest.

    Pepsi would gain control of Quaker's popular Gatorade sports drink, adding almost 10 percent to the company's U.S. drinks sales, analysts have said. Quaker's Gatorade would be a major boost to Pepsi's lineup.

    While Pepsi already offers All Sport, which has a small market share, the beverage giant said three months ago it planned to sell the sports drink to Monarch Co., the Atlanta-based maker of Dad's Root Beer.

    Despite that concession, the FTC's staff feared competition from All Sport would evaporate were the brand cut off from Pepsi's distribution system.

    There was no immediate word from the FTC on the individual votes by commissioners but two are Republicans and two are Democrats. The Democratic commissioners have typically been more aggressive in challenging mergers.

    Gatorade commanded a 78 percent share of U.S. sports drink volume last year, while Coca-Cola Co.'s Powerade line controlled 15 percent and Pepsi's All Sport had just 4.4 percent.

    Antitrust experts said all along that approval of the Pepsi-Quaker Oats case would be a close call. Opposing the deal could be difficult because Pepsi currently has only a small share of the sports drink market.

    In addition to the issue of sports drink dominance, FTC staff members had closely questioned others in the industry about whether the addition of Gatorade would give Pepsi a dominant position in the market for cold drinks sold at convenience stores, news services reported.

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