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U.S. Moves To Halt AB InBev's Purchase Of Grupo Modelo

Jan 31, 2013

A $20.1 billion merger of beer conglomerates is now delayed, after the U.S. Justice Department sued to stop Anheuser-Busch InBev's acquisition of Mexico's dominant brewer, Grupo Modelo, Thursday. The agency's antitrust division says the two corporations haven't done enough to protect consumers.

The deal would put Corona, Bud Light, Stella Artois, and other popular beers under the same corporate umbrella, ending the competition that Justice officials say has resulted in lower prices. The Mexican government approved the merger last November.

In its proposed form, the merger "would result in less competition and higher beer prices for American consumers," says Bill Baer, Assistant Attorney General, of the 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."

Citing the Justice Department's complaint, Bloomberg News reports that Modelo's and AB InBev's pricing strategies are diametrically opposed, with Modelo consistently providing pressure for lower prices, in contrast with "ABI's well-established practice of leading prices upward."

Reacting to the suit, AB InBev called the U.S. move "inconsistent with the law, the facts and the reality of the market place." The company promised "to vigorously contest the DOJ's action in federal court."

The company also said that the merger, which would give AB InBev the remaining portion of Grupo Modelo that it doesn't control, will now be delayed until after the first quarter of 2013.

Last October, SAB Miller's Coors Light supplanted Budweiser as the No. 2 beer in the U.S. But SAB Miller produces less than half the amount of beer that a combined AB InBev-Grupo Modelo would, according to Bloomberg.

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