Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGER NEWS: AB InBev and SAB Miller defend proposed merger at Senate Judiciary Committee hearing , (Dec 8, 2015)

By Linda O’Brien, J.D., LL.M.

At a hearing today before the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, lawmakers expressed concern that the proposed merger of the world’s largest beer companies—Anheuser-Busch InBev and SABMiller—may allow the companies to use their power over distributors to squeeze out smaller craft brewers. While the CEOs of Anheuser-Busch InBev and Molson Coors defended the merger as pro-competitive and efficient, other witnesses argued that the combination would place almost 75 percent of the U.S. beer market under the control of one vertically-integrated company.

Ranking Member Patrick Leahy (D-Vt.) began the hearing by noting that “the proposed merger of AB InBev and SABMiller is important not only to consumers, but to craft brewers and independent distributors across the country.” The merger under consideration would join the two giants of the beer industry, which together control more than 70 percent of the U.S. market.

While welcoming AB InBev’s announcement that it will divest ownership of SABMiller’s stake in MillerCoors, Leahy expressed concern that craft brewers today and in the future should continue to compete and consumers continue to have choices. Given the size of the two companies, the Committee needs to look closely at this transaction, Leahy observed.

The Committee heard from six witnesses, representing three trade associations and an advocacy organization, including Bob Pease, Chief Executive Officer of the Brewers Association; Craig Purser, President of the National Beer Wholesalers Association; J. Wilson, Minister of Iowa Beers Guild; and Diana Moss, President of the American Antitrust Institute. Carlos Brito, Chief Executive Officer of AB InBev and Mark Hunter, President and Chief Executive Officer of Molson Coors, also testified at the hearing.

Brito testimony. Brito defended the merger as having a positive impact on competition in the beer and alcohol beverages industries in the United States. “Put simply, the purpose of this transaction is to enhance our ability to serve new markets, particularly in Africa, Asia, and Central and South America. It is about bringing more choices to more consumers around the world, including extending the reach of iconic American brands such as Budweiser to new markets,” he said. The divestiture of SABMiller’s interest in MillerCoors ensures that the market share in the U.S. will not change as a result of the merger. While acknowledging that distribution is a separate topic from the proposed acquisition, the “combination with SABMiller will have no impact on the three-tier system, which we have long supported and will continue to support,” the AB InBev CEO added.

Hunter testimony. Hunter stated that the merger does not injure competition, but instead enhances it. “[I]t’s important to return to the fact that nothing changes for our consumers, customers, distributors, or our communities as a result of our purchase of SABMiller’s ownership in MillerCoors,” he observed. The purchase will not change consumer choice, the competitive pricing environment, market share, support for U.S. growers and suppliers, or the growth of and access to the market by craft brewers, the Molson Coors CEO maintained. “This transaction affords us the unique opportunity to deliver on that promise of creating a more efficient competitor without impacting the fundamental dynamics of the market.”

Trade testimony. Pease noted that, while the Brewers Association is not opposed to fair competition, AB InBev and MillerCoors have actively fostered the consolidation of the wholesale network and control more than 70 percent of U.S. beer sales. If the merger is allowed to proceed, AB InBev should be required to divest its company-owned wholesalers, which would discourage wholesalers from exclusively dealing in AB InBev products, he said.

American Antitrust Institute testimony. In opposing the merger, Moss stated that the deal would put almost 75 percent of the U.S. beer market in the hands of one vertically integrated company. Even a cursory analysis indicates that the combination would be presumptively illegal under Section 7 of the Clayton Act. “If allowed to proceed, the merger would stifle important competition from smaller rivals such as craft brewers that compete with AB InBev–SABMiller brands, further raise beer prices to consumers, reduce choice and diversity, and jeopardize innovation in this important sector,” in Moss’ view.

Companies: Anheuser-Busch InBev; SABMiller

News: AcquisitionsMergers Antitrust