- People will be safe at 118th Boston Marathon, Mayor Marty Walsh says
- Boy Scout, 12, killed by rolling tree during troop outing at Washington park
- South Korean president: Ferry crew actions ‘murderous’
- President Obama poised to grant clemency to nonviolent drug offenders: report
- Teen OK after riding in wheel well of Hawaii jet
- Kraft recalls 96K pounds of Oscar Mayer hot dogs over cheese error
- Boy Scouts boots church as host after gay leadership dispute
- Sen. Elizabeth Warren’s new book raises 2016 presidential speculation
- America is an oligarchy, not a democracy or republic, university study finds
- Rep. Marsha Blackburn: Hillary Clinton won’t be first female president
Feds put big beer merger on ice
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.
But Anheuser-Busch argued that the Justice Department's complaint is "inconsistent with the law, the facts and the reality of the marketplace."
"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.
In 2008, InBev purchased Anheuser-Busch for $52 billion to form the current company.
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.
Anheuser-Busch consistently raises beer prices, and Miller usually follows suit, according to the Justice Department, but Modelo is the one company that resists the pressure and keeps prices low.
By removing them from the marketplace, it could limit competition and lead to easier price increases for the remaining beer companies.
"That's put a lot of pressure on them to price competitively," Mr. Vaheesan said. "They put a lot of pressure on these other companies to price competitively. They've become a disruptive force in the marketplace."
Anheuser-Busch's stock price fell more than 5 percent on the news to close at $88.60, while Constellation Brands closed down 17 percent at $32.36. Shares of Grupo Modelo were down 6 percent.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
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 email@example.com.
- Dysfunction, disarray at Homeland Security management cited in IG's report
- GM's Barra to be first woman to run top American carmaker
- Treasury sells last shares in 'Government Motors'
- U.S. businesses reach out quickly to partners in Iran
- General Motors ending Chevrolet sales in Europe to focus on Opel and Vauxhall
Latest Blog Entries
TWT Video Picks
Women losing coverage under Obamacare, too
- Tactical advantage: Russian military shows off impressive new gear
- Former Ranger breaks silence on Pat Tillman death: I may have killed him
- Scalia to students on high taxes: At a certain point, 'perhaps you should revolt'
- Special Forces' suicide rates hit record levels casualties of 'hard combat'
- USAID documents cite Hillary Clinton in chaos of Afghan aid
- CURL: Shelly O first lady Michelle Obama comes in last
- Feds approve powdered alcohol; 'Palcohol' available later this year
- Twitter blocks accounts critical of Turkish government
- Inside China: Marine's comment on islands draws sharp Chinese response
- Building a D.C. memorial for an endless war bumps into regulations
Top 10 handguns in the U.S.