US challenges deal to merge Budweiser and Corona

by The Associated Press
January 31, 2013 at 12:11 pm

The Justice Department filed a lawsuit to block the merger of Budweiser and Corona. The merged company would control nearly half of all beer sales in the U.S.

Details:

Justice Dep’t seeks to stop Anheuser-Busch InBev’s acquisition of Mexican brewer Grupo Modelo

WASHINGTON (AP) — The Justice Department on Thursday filed a lawsuit to stop Anheuser-Busch InBev’s proposed $20.1 billion purchase of Mexican brewer Grupo Modelo, which would unite the ownership of popular beers like Budweiser and Corona.

The government said the deal could lead to higher beer prices in this country because it would substantially reduce competition in the U.S. beer market, particularly in 26 metropolitan areas. It said the merged firm would control nearly half the beer sales in the U.S.

In response, Anheuser-Busch InBev promised a court fight to preserve its deal.

Americans spent at least $80 billion on beer last year. ABI’s Bud Light is the best-selling beer in the nation and Modelo’s Corona Extra is the best-selling import.

The Justice Department’s lawsuit in federal court in Washington, D.C., seeks to prevent the merger and to continue competition between the firms.

Bill Baer, the assistant attorney general in charge of the department’s antitrust division, says Anheuser-Busch InBev (ABI) would be able to increase beer prices to U.S. consumers if the merger were to go through.

ABI is the largest U.S. brewer and Modelo is the third and together, the two firms control about 46 percent of annual sales in the U.S.

MillerCoors, the second-largest beer company, accounts for 29 percent of nationwide sales.

Anheuser-Busch InBev said the government’s bid to block the proposed merger is inconsistent with the law, the facts and “the reality of the market place.”

“We remain confident in our position, and we intend to vigorously contest the DOJ’s action in federal court,” ABI said.

According to court papers filed in the case, ABI acts as the industry price leader, with MillerCoors and other brewers typically joining the price increases set by ABI. Modelo, in contrast, has not joined.

By pricing aggressively, Modelo — through its importer, Crown Imports — puts pressure on ABI to maintain or lower prices.

“Today, Modelo aggressively competes head-to-head with ABI in the United States” and “that competition has resulted in lower prices and product innovations that have benefited consumers across the country,” the Justice Department court filing said. “The proposed acquisition would eliminate this competition by further concentrating the beer industry, enhancing ABI’s market power, and facilitating coordinated pricing between ABI and the next largest brewer, MillerCoors, LLC.”

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