The Obama administration came out against the marriage of two beer giants in a fight against an increasingly consolidated industry.
The Justice Department on Thursday filed an antitrust lawsuit in the U.S. District Court for D.C. to block a $20 billion merger between Anheuser-Busch InBev, America’s biggest beer company, and Grupo Modelo, makers of Corona Extra, the country’s most popular beer import, saying it would likely restrict competition and raise prices for consumers.
“The department is taking this action to stop a merger between major beer brewers, because it would result in less competition and higher beer prices for American consumers,” said Bill Baer, assistant attorney general for Justice’s antitrust division. “If ABI fully owned and controlled Modelo, ABI would be able to increase beer prices to American consumers. This lawsuit seeks to prevent ABI from eliminating Modelo as an important competitive force in the beer industry.”
Anheuser-Busch NV, which already owns a minority stake in Grupo Modelo SAB, announced plans to purchase another 50 percent stake in the Mexican brewer from Constellation Brands Inc. for $20.1 billion in June. Throw in the third-best-selling beer company in the country, and Anheuser-Busch, maker of Bud Light and Budweiser, would then control at least 46 percent of the nation’s $80 billion beer industry, according to the Justice Department.
“We remain confident in our position, and we intend to vigorously contest the [Department of Justice‘s] action in federal court,” the company said in a statement.
This is the Obama administration’s most recent move to crack down on antitrust cases, and it comes at a time when the beer industry continues to consolidate, eliminating smaller companies and more competition.
It’s a rude awakening for the beer industry, which faced relatively no resistance from the George W. Bush administration on several big mergers over the past decade.
In 2002, South African Breweries Ltd. purchased Miller Brewing Co., makers of Miller Light, from Philip Morris Inc. for $5.6 billion. Then, in 2008, Miller and Molson Coors Brewing Co. joined forces to form MillerCoors.
These mergers have consolidated a once diverse industry. In 1980, there were 48 major breweries in the U.S., according to the New American Foundation, but now there are only two, Anheuser-Busch and Miller.
Combined with Mexico’s Grupo Modelo, America’s top three selling beer companies control about 75 percent of the market, according to the Justice Department. By eliminating Grupo Modelo, Anheuser-Busch would control nearly half of the market, and have a share that is more than 50 percent larger than Miller.
“That’s a very conservative number,” said Barry Lynn, director of the New America Foundation’s markets, enterprise and resiliency initiative. “We actually think the number that they’re using grossly understates the actual problem.”
Sandeep Vaheesan, special counsel at the American Antitrust Institute, agreed that Anheuser-Busch and Grupo Modelo together control closer to 55 percent of the beer market, while all three make up about 85 percent of U.S. sales.
The Justice Department is concerned it would “lessen competition” and lead to higher beer prices.View Entire Story
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Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at firstname.lastname@example.org.
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