(The following is a reformatted version of a press release
issued by The U.S. Justice Department and received via
electronic mail. The release was confirmed by the sender.) 
JANUARY 31, 2013 
Merger Would Result in U.S. Consumers Paying More for Beer, Less
Innovation; Lawsuit Seeks to Maintain Competition in the Beer
Industry Nationwide 
WASHINGTON - The Department of Justice filed a civil antitrust
lawsuit today challenging Anheuser-Busch InBev’s (ABI) proposed
acquisition of total ownership and control of Grupo Modelo.  The
department said that the $20.1 billion transaction would
substantially lessen competition in the market for beer in the
United States as a whole and in 26 metropolitan areas across the
United States, resulting in consumers paying more for beer and
having fewer new products from which to choose. 
Americans spent at least $80 billion on beer last year.
According to the department, ABI’s Bud Light is the best selling
beer in the United States and Modelo’s Corona Extra is the best-selling import.  Because of the size of the beer market in the
United States, even a small increase in the price of beer could
result in billions of dollars of harm to American consumers, the
department said. 
The department’s lawsuit, filed in the U.S. District Court for
the District of Columbia, seeks to prevent the companies from
merging and to preserve the existing head-to-head competition
between the firms that the transaction would eliminate. 
“The department is taking this action to stop a merger between
major beer brewers because it would result in less competition
and higher beer prices for American consumers,” said Bill Baer,
Assistant Attorney General in charge of the Department of
Justice’s 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
ABI and Modelo-the largest and third largest beer firms,
respectively-together 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.  Beer
is generally grouped into four distinct segments by industry
participants-sub-premium, premium, premium plus and high-end.
The sub-premium segment includes: Busch (owned by ABI); and
Keystone (owned by MillerCoors).  The premium segment includes:
Bud Light; Coors Light; and MillerLite.  The premium plus
segment includes:  Michelob (owned by ABI); and Modelo Especial
(owned by Modelo).  The high-end segment includes: imports such
as Corona (owned by Modelo) and Heineken; and a variety of craft
According to the department’s complaint, the U.S. beer market is
already highly concentrated, and prices are increased by
strategic interactions among the largest brewers, including ABI
and MillerCoors.  ABI generally acts as the price leader,
implementing annual price increases in the sub-premium, premium
and premium plus segments of the U.S. beer industry.
MillerCoors and other brewers have typically joined the ABI
price increases, while Modelo has not.  By pricing aggressively,
Modelo-through its importer, Crown Imports-puts pressure on ABI
to maintain or lower prices, especially in certain parts of the
country.  As a result, Modelo has become a particularly
important competitor in the U.S. market. 
The complaint quotes internal company documents demonstrating
both ABI’s determination to maintain its upward price leadership
in the U.S. beer industry and Modelo’s present-day position as a
significant competitive threat to ABI: 
ABI has implemented a “conduct plan,” whereby ABI hopes to
establish “the highest level of [price] followership” by its
large rivals by being as “consistent,” “simple” and
“transparent” as possible; 
ABI believes that its conduct plan provides the highest
possibility of “sustaining a price increase” and “ensuring
competition does not believe they can take share through
By contrast, Modelo’s pricing strategy in the United States is
known as the “momentum plan” and aims to narrow the “price gap”
between Modelo’s imports and domestic premium beers, such as
ABI’s Bud Light, stealing market share from ABI by enticing
consumers to “trade up” to Modelo beer; and 
ABI executives acknowledge that Modelo has “put increasing
pressure” on ABI competitively, and that Modelo’s strategy is at
odds with ABI’s well-established practice of leading prices
upward with the expectation that its competitors will follow. 
The complaint also discusses ABI’s efforts to target Corona.
ABI considered Corona to be a significant threat, and launched
Bud Light Lime in 2008 to compete with Corona.  ABI went as far
as to mimic Corona’s distinctive clear bottle.   Ultimately,
instead of trying to compete head-to-head with its own product,
Bud Light Lime, ABI is thwarting competition by buying Modelo. 
The department alleges that ABI’s acquisition of total ownership
and control 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.  Consumers
would, as a result, see higher prices and less innovation. 
The department’s complaint also alleges that ABI and Modelo
efforts to remedy the anticompetitive aspects of their
transaction are inadequate.  The complaint states that ABI has
agreed to sell Modelo’s existing 50 percent interest in Crown 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, although ABI can
terminate this supply agreement after 10 years and would retain
the Modelo brands and its brewing and bottling facilities. 
“The companies’ attempt to fix this anticompetitive deal through
the sale of Modelo’s existing interest in Crown and a temporary
supply agreement is not sufficient to prevent consumer harm from
ABI’s acquisition of its competitor, Modelo,” said Baer. 
The complaint states that the combined effect of the proposed
acquisition of Modelo and the proposed fix is to eliminate from
the marketplace a sophisticated brewing firm with a long history
of success and replace it with an importer which will own no
brands or brewing facilities and be totally dependent on ABI for
its supply of Corona and other Modelo brands.  The documents in
the case show that as Crown’s CEO wrote to his employees after
the acquisition was announced:  “our #1 competitor will now be
our supplier…it is not currently or will not, going forward, be
‘business as usual.’”  The department’s complaint said that not
only will competition be harmed by the loss of Modelo as a
competitor, but by removing an independent brewer-Modelo-from
the market, strategically coordinated pricing will become easier
in the future. 
ABI is a Belgian corporation with its principal place of
business in Leuven, Belgium.  In 2011, ABI had revenues of
approximately $39 billion.  ABI currently has a 43 percent
voting interest and a 50.35 percent economic interest in Modelo.
ABI has stated in its annual reports filed with the Securities
and Exchange Commission that it does not have voting or other
effective control of Modelo.  Through the proposed acquisition,
ABI would acquire control of, and the remaining economic
interest in Modelo. 
Modelo is a Mexican corporation with its principal place of
business in Mexico City.  In 2011, Modelo had revenues of
approximately $7 billion. 
(202) 514-2007
TTY (866) 544-5309 
(bjh) NY 
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