The Department of Justice announced this week that it will require B.S.A. S.A. (Lactalis) and The Kraft Heinz Company (Kraft Heinz) to divest Kraft Heinz’s Athenos and Polly-O businesses in order to proceed with Lactalis’s proposed acquisition of Kraft Heinz’s natural cheese business in the United States.

The Justice Department’s Antitrust Division filed a civil antitrust lawsuit on Nov. 10 in the U.S. District Court for the District of Columbia to block the proposed transaction. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the lawsuit.

“The Antitrust Division is committed to enforcing the antitrust laws in markets that impact Americans’ day-to-day lives,” said Acting Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division. “This transaction, as originally proposed, would have led to higher-priced and lower-quality feta and ricotta, two popular cheeses that American consumers regularly purchase to feed their families. Today’s settlement will maintain the competition in the sale of feta and ricotta cheeses that would have been lost if the transaction were permitted to go forward without the required divestitures.”

Lactalis’s U.S. subsidiary, Lactalis American Group Inc., and Kraft Heinz are the two largest suppliers of feta cheese — sold under their respective Président and Athenos brands — to grocery stores and other retailers in the United States. They are also the two largest suppliers of ricotta cheese — sold under their respective Galbani and Polly-O brands — to grocery stores and other retailers in the New York City metropolitan area and four metropolitan areas in Florida: Miami/Ft. Lauderdale, Tampa/St. Petersburg, Orlando and Jacksonville.

Under the terms of the proposed settlement, the parties must divest Kraft Heinz’s Athenos business — including the worldwide rights to the Athenos brand, under which Kraft Heinz sells feta and other products — to Emmi Roth USA Inc. (Emmi Roth) or an alternative acquirer approved by the United States. Emmi Roth is an established cheese supplier based in Fitchburg, Wisconsin. With the divestiture of Kraft Heinz’s Athenos business, Emmi Roth, or an alternative qualified acquirer, will be able to expand its feta cheese sales to grocery stores and other retailers across the United States.

The proposed settlement also requires the parties to divest Kraft Heinz’s Polly-O business — including the worldwide rights to the Polly-O brand, under which Kraft Heinz sells ricotta and other cheeses — to BelGioioso Cheese Inc. or an alternative acquirer approved by the United States. BelGioioso is an established cheese supplier based in Green Bay, Wisconsin. With the divestiture of Kraft Heinz’s Polly-O business, BelGioioso, or an alternative qualified acquirer, will be able to expand its ricotta cheese sales to grocery stores and other retailers in New York and Florida.

The divestitures are structured to include the entirety of the Athenos and Polly-O businesses, so as to avoid customer confusion that could have resulted had the brands been used by both Lactalis and the divestiture buyers. The divestitures, including the worldwide rights to the entire Athenos and Polly-O portfolios, also place the divestiture buyers in the position to market and promote all the cheeses sold under these brands, as Kraft Heinz does today.

Lactalis is headquartered in Laval, France. Its subsidiary, Lactalis American Group Inc., generated natural cheese sales — primarily under the Galbani and Président brands — of more than $429 million at retail outlets in the United States in 2020.

Kraft Heinz is a Delaware corporation co-headquartered in Pittsburgh, Pennsylvania, and Chicago, Illinois. Retail sales of Kraft Heinz’s natural cheeses in the United States exceeded $2.2 billion in 2020. Kraft Heinz sells natural cheese in the United States primarily under the Kraft, Cracker Barrel, Athenos and Polly-O brand names.

As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register.