- ‘Tis the Season: London florist creates $4.6 million Christmas wreath
- No tailgating allowed at Super Bowl XLVIII
- Pentagon to transport African troops to Central African Republic
- Chinese man fed up with his girlfriend’s shopping jumps to his death
- Ukraine leader to talk with protesters; Washington urges caution
- Pope Francis: A nun saved my life
- Israeli P.M. Netanyahu backs out of Mandela funeral
- Elian Gonzalez makes first trip outside Cuba since custody battle
- U.S., British intelligence agents enter online sci-fi world to spy on gamers
- Sarah Palin to host the outdoors show ‘Amazing America’
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 2013 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.
- 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
- 'Momentous day' for in-debt Detroit
- Cyber Monday, Gray Thursday reflect sales shift
Latest Blog Entries
By Tom Fitton
New photos confirm the attack's coordination and its cover-up
- Chinese man fed up with his girlfriend's shopping jumps to his death
- Israeli P.M. Benjamin Netanyahu backs out of Nelson Mandela funeral
- Obama lied about Syrian chemical attack, 'cherry-picked' intelligence: report
- CURL: Obama tells a whopper on IRS scandal
- Lawmakers see 'false narrative' of Obama as a terrorist fighter
- MSNBC host: Obamacare a 'wealthy white men' racist word
- Satanists petition for statue at Oklahoma Statehouse
- Inside China: Nuclear submarines capable of widespread attack on U.S.
- MILLER: Brady Campaign says Colorado recalls due to NRA, not grassroots opposition to gun control
- Ted Cruz sees legal landmines ahead for Obamacare
Independent voices from the The Washington Times Communities
Crystal Wright is a black conservative woman living in Washington, D.C.
All of the world’s problems, solved on your back porch
Why can’t humans just be free to be humans?
White House pets gone wild!
Let it snow