advertisement

U.S. challenges deal to merge Budweiser, Corona

Thursday, January 31, 2013 | 11:39 a.m. CST

WASHINGTON — 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 such as 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. Anheuser-Busch InBev'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, said Anheuser-Busch InBev would be able to increase beer prices to U.S. consumers if the merger were to go through.

Anheuser-Busch InBev 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 marketplace."

"We remain confident in our position, and we intend to vigorously contest the DOJ's action in federal court," Anheuser-Busch InBev said.

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

By pricing aggressively, Modelo — through its importer, Crown Imports— puts pressure on Anheuser-Busch InBev 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."


Like what you see here? Become a member.


Show Me the Errors (What's this?)

Report corrections or additions here. Leave comments below here.

You must be logged in to participate in the Show Me the Errors contest.


Comments

Leave a comment

Speak up and join the conversation! Make sure to follow the guidelines outlined below and register with our site. You must be logged in to comment. (Our full comment policy is here.)

  • Don't use obscene, profane or vulgar language.
  • Don't use language that makes personal attacks on fellow commenters or discriminates based on race, religion, gender or ethnicity.
  • Use your real first and last name when registering on the website. It will be published with every comment. (Read why we ask for that here.)
  • Don’t solicit or promote businesses.

We are not able to monitor every comment that comes through. If you see something objectionable, please click the "Report comment" link.

You must be logged in to comment.

Forget your password?

Don't have an account? Register here.

advertisements