AB InBev is the largest beer brewer in the United States, holding about 47% of the market. AB InBev was formed in 2008 after InBev acquired Anheuser Busch, and sells popular beers like Budweiser as well as lesser-known beers like Shock Top and Goose Island. AB InBev is seeking to acquire full control over the Mexican brewer Grupo Modelo which sells popular beer brand Corona, as well as others such as Negra Modelo and Pacifico. These types of transactions do not go unnoticed, and 5 senators sent the Department of Justice a letter detailing its concerns about the deal. The letter stated that, “This merger will enhance ABI’s ability to either acquire more distributors or else pressure otherwise-independent distributors to discontinue relationships with rival brands, including craft breweries.”
This concern stems from the fact that ABI has been buying distributors in states where it is legal to do so, rupturing the buffer zone between manufacturers, distributors and retailers that promotes healthy and vigorous competition. There is some evidence that by purchasing such distributors, ABI intends to use its control to favor its own brands in distribution, scaring the likes of smaller breweries. ABI is prepared to roll its’ sleeves up and fight the DOJ on its antitrust allegations. Before the parties make their way to court however, ABI and the DOJ will negotiate over ways to amend the deal that will meet the DOJ’s satisfaction. This is a common occurrence in antitrust lawsuits initiated by the government. One possible condition of the deal would be ABI selling off a high tech Modelo bottling plant located in Mexico, something that ABI was initially opposed to, but may back down from after some negotiation. If the parties do not come to an agreement, they will take their matter to court.
Do you think that such governmental action is warranted in this case?