Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Constellation Brands, Crown Imports Seek to Intervene in U.S. Suit Challenging Anheuser-Busch InBev’s Acquisition of Grupo Modelo, (Feb 11, 2013)

By Jeffrey May, J.D.

Constellation Brands, Inc. and Crown Imports LLC have filed a motion to intervene as defendants in an action brought by the Department of Justice Antitrust Division challenging Anheuser-Busch InBev’s (ABI) proposed acquisition of the remaining portion of Corona brewer Grupo Modelo that it does not already own. The government filed its complaint against ABI and Modelo on January 31, 2013, in the federal district court in Washington, D.C.

The government alleged that ABI’s acquisition of the remainder of Modelo would eliminate the existing competition between ABI and Modelo, further concentrating the beer industry, enhancing ABI’s market power, and facilitating coordinated pricing between ABI and the remaining large players.

ABI and Modelo are the largest and third-largest beer firms, respectively, and makers of both the best selling beer in the United States (Bud Light) and best-selling import (Corona Extra). Together, they control about 46 percent of annual sales in the United States. MillerCoors, the second-largest beer firm, accounts for about 29 percent of nationwide sales. According to the government, Modelo, through its exclusive U.S. importer—Crown Imports—puts pressure on ABI to maintain or lower prices by pricing aggressively.

In an attempt to resolve the government’s antitrust concerns, the parties had proposed a remedy pursuant to which Modelo’s existing 50 percent interest in Crown would be sold to its Crown joint venture partner, Constellation. ABI would also enter into an exclusive agreement to supply Constellation with Modelo beer to import into the United States. ABI could terminate this supply agreement after 10 years and would retain the Modelo brands and its brewing and bottling facilities. The government contends that the remedy is inadequate.

In the February 8, 2013, filing, Constellation maintains that the Justice Department's efforts to enjoin ABI's acquisition of Modelo shares fundamentally threaten Constellation's future in the beer business. The proposed intervenors argue that “an injunction would prevent Crown from achieving the benefits of an improved supply agreement that would enhance its competitive position.”

The Justice Department opposes the motion to intervene, according to the proposed intervenors. However, ABI and Modelo support intervention.

“Constellation and Crown's intervention will serve the Court's and the parties' interest to ensure a complete record on which to resolve this significant case,” the filing argues. Constellation and Crown state that they were “fully enmeshed” in the Justice Department's investigation of the challenged transaction.

Constellation operates approximately 30 wineries and participates in the beer industry through Crown, its joint venture with Modelo. Crown currently imports eight Modelo brands, including Corona.

This is Case No. 1:13-cv-00127.

Attorneys: Margaret Warner (McDermott, Will & Emery LLP) for Constellation Brands, Inc. and Crown Imports LLC.

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

News: Antitrust AntitrustDivisionNews