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United States v. ANHEUSER-BUSCH InBEV SA/NV (Complaint)

United States v. ANHEUSER-BUSCH InBEV SA/NV (Complaint)

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Published by Pamela Starsia
Complaint filed by DOJ Antitrust Divisionto enjoin ANHEUSER-BUSCH InBEV SA/NV merger with Grupo Modelo; filed on 1/31/2013.
Complaint filed by DOJ Antitrust Divisionto enjoin ANHEUSER-BUSCH InBEV SA/NV merger with Grupo Modelo; filed on 1/31/2013.

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Categories:Business/Law
Published by: Pamela Starsia on Jan 31, 2013
Copyright:Attribution Non-commercial

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01/31/2013

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UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,U.S. Department of JusticeAntitrust Division450 Fifth Street, NW, Suite 7100Washington, D.C. 20530,
Plaintiff 
,v.ANHEUSER-BUSCH InBEV SA/NVBrouwerijplein 1Leuven, Belgium 3000andGRUPO MODELO S.A.B de C.VJavier Barros Sierra No. 555 Piso 3Col. Zedec, Santa FeMexico D.F.C.P. 01210
 Defendants
.
COMPLAINT
The United States of America, acting under the direction of the Attorney General of theUnited States, brings this civil action under the antitrust laws of the United States to enjoin theproposed acquisition by Anheuser-Busch InBev SA/NV (“ABI”) of the remainder of GrupoModelo S.A.B. de C.V. (“Modelo”) that it does not already own, and to obtain equitable andother relief as appropriate. The United States alleges as follows:
Case 1:13-cv-00127 Document 1 Filed 01/31/13 Page 1 of 27
 
- 2 -
I.
 
INTRODUCTION
 1. Fundamental to free markets is the notion that competition works best and consumersbenefit most when independent firms battle hard to win business from each other. In industriescharacterized by a small number of substantial competitors and high barriers to entry, furtherconsolidation is especially problematic and antithetical to the nation’s antitrust laws. The U.S.beer industry – which serves tens of millions of consumers at all levels of income – is highlyconcentrated with just two firms accounting for approximately 65% of all sales nationwide. Thetransaction that is the subject of this Complaint threatens competition by combining the largestand third-largest brewers of beer sold in the United States. The United States therefore seeks toenjoin this acquisition and prevent a serious violation of Section 7 of the Clayton Act.2. Today, Modelo aggressively competes head-to-head with ABI in the United States. Thatcompetition has resulted in lower prices and product innovations that have benefited consumersacross the country. The proposed acquisition would eliminate this competition by furtherconcentrating the beer industry, enhancing ABI’s market power, and facilitating coordinatedpricing between ABI and the next largest brewer, MillerCoors, LLC. The approximate marketshares of U.S. beer sales, by dollars, are illustrated below:
MILLERCOORS
26%ANHEUSER
BUSCH
 
INBEV39%MODELO7%HEINEKEN
 
USA
 
INC6%Other22%
Case 1:13-cv-00127 Document 1 Filed 01/31/13 Page 2 of 27
 
- 3 -3. Defendants’ combined national share actually
understates
the effect that eliminatingModelo would have on competition in the beer industry, both because Modelo’s share issubstantially higher in many local areas than its national share, and because of the interdependentpricing dynamic that already exists between the largest brewers. As the two largest brewers,ABI and MillerCoors often find it more profitable to follow each other’s prices than to competeaggressively for market share by cutting price. Among other things, ABI typically initiatesannual price increases in various markets with the expectation that MillerCoors’ prices willfollow. And they frequently do.4. In contrast, Modelo has resisted ABI-led price hikes. Modelo’s pricing strategy “TheMomentum Plan” – seeks to narrow the “price gap” between Modelo beers and lower-pricedpremium domestic brands, such as Bud and Bud Light. ABI internal documents acknowledgethat Modelo has put “increasing pressure” on ABI by pursuing a competitive strategy
directly at odds
with
 
ABI’s well-established practice of leading prices upward.5. Because Modelo prices have not closely followed ABI’s price increases, ABI andMillerCoors have been forced to offer lower prices and discounts for their brands to discourageconsumers from “trad[ing] up” to Modelo brands. If ABI were to acquire the remainder of Modelo, this competitive constraint on ABI’s and MillerCoors’ ability to raise their prices wouldbe eliminated.6. The acquisition would also eliminate the substantial head-to-head competition thatcurrently exists between ABI and Modelo. The loss of this head-to-head competition wouldenhance the ability of ABI to unilaterally raise the prices of the brands that it would own post-acquisition, and diminish ABI’s incentive to innovate with respect to new brands, products, andpackaging.
Case 1:13-cv-00127 Document 1 Filed 01/31/13 Page 3 of 27

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