Antitrust Law Daily Wrap Up, ANTITRUST—DDC: Stay Extended in U.S. Challenge to Anheuser-Busch InBev-Grupo Modelo Merger, (Mar 21, 2013)

By Jeffrey May, J.D.

The federal district court in Washington, D.C. has extended a stay of proceedings in the Justice Department's action challenging the proposed merger of beer companies Anheuser-Busch InBev (ABI) and Grupo Modelo. The court granted the parties’ joint motion for the extension to enable them to continue their settlement discussions. The stay, originally set to expire March 19, was extended through April 9 (U.S. v. Anheuser-Busch InBEV SA/NV, March 20, 2013, Roberts, R.).

In moving for the extension on March 15, the parties informed the court that they had made “substantial progress toward a resolution.” ABI issued a statement that day, saying that “an extension of the current stay will likely enable the parties to complete their discussions.” The brewer noted, however, that “[t]here can be no assurance that the ongoing discussions will be successful.”

The settlement talks are reportedly based on an offer made by ABI on February 14 to remedy any anticompetitive aspects of the deal. The Justice Department rejected the parties' initial remedy as inadequate in its January 31 complaint.

Under the initial deal, ABI agreed to sell Modelo’s existing 50% interest in Crown Imports LLC, which is Modelo’s exclusive U.S. importer, to Crown’s other joint venture owner—Constellation Brands, Inc. Constellation would have had the exclusive right to import Modelo beer into the United States for ten years. Constellation would have remained an importer and would not have acquired any Modelo brands or brewing facilities under the arrangement. The Justice Department was concerned that after the ten-year period, ABI could unilaterally terminate its agreement with Constellation, thereby giving ABI full control of all aspects of the importation, sale, and distribution of Modelo brands in the United States.

In light of the Justice Department’s concerns, the parties also agreed to transfer perpetual rights in Corona and other Modelo brands in the United States. Constellation also would gain ownership of Compañía Cervecera de Coahuila, Modelo’s brewery in Piedras Negras, Mexico. ABI and Constellation have agreed to a three-year transition services agreement. Constellation also pledged to expand the Piedras Negras facility. The deal purportedly would establish Crown as the third largest marketer of beer in the United States. The settlement talks are based on the terms of this revised offer.

Any settlement would need to approved by the court pursuant to the Antitrust Procedures and Penalties Act (APPA). The government would be required to publish the settlement and a Competitive Impact Statement, explaining its terms, for public comment. Generally, after the APPA’s 60-day period, these proposed final judgments are found to be in the public interest and are approved by the court The case is No. 13:127 (RWR).

Attorneys: David Z. Gringer, U.S. Department of Justice, for plaintiff. Steven C. Sunshine (Skadden, Arps, Slate, Meagher & Flom LLP) for Anheuser-Busch InBev SA/NV. Yonatan Even (Cravath, Swain & Moore LLP) for Grupo Modelo S.A.B. de C.V. Margaret H. Warner (McDermott, Will & Emery LLP) for Constellation Brands, Inc.

Companies: Anheuser-Busch InBev SA/NV; Constellation Brands, Inc.; Crown Imports LLC; Grupo Modelo S.A.B. de C.V.

Cases: Antitrust AntitrustDivisionNews DistrictofColumbiaNews