US challenges deal to merge Budweiser and Corona

Published on NewsOK Modified: January 31, 2013 at 1:14 pm •  Published: January 31, 2013
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WASHINGTON (AP) — The Justice Department filed a lawsuit Thursday to stop Anheuser-Busch InBev's proposed $20.1 billion purchase of Mexican brewer Grupo Modelo, which would unite the ownership of popular beers like Budweiser and Corona.

The government said the deal could lead to higher beer prices in this country because it would substantially reduce competition in the U.S. beer market, particularly in 26 metropolitan areas. It said the merged firm would control nearly half the beer sales in the U.S.

In response, Anheuser-Busch InBev promised a court fight to preserve its deal.

Americans spent at least $80 billion on beer last year. ABI's Bud Light is the best-selling beer in the nation and Modelo's Corona Extra is the best-selling import.

The Justice Department's lawsuit in federal court in Washington, D.C., seeks to prevent the merger and to continue competition between the firms.

Bill Baer, the assistant attorney general in charge of the department's antitrust division, says Anheuser-Busch InBev (ABI) would be able to increase beer prices to U.S. consumers if the merger were to go through.

ABI is the largest U.S. brewer and Modelo is the third and together, the two firms control about 46 percent of annual sales in the U.S.

MillerCoors, the second-largest beer company, accounts for 29 percent of nationwide sales.

"What we saw was a pattern of behavior" in which the "big folks were working hard to get price increases and Modelo was a significant constraint" on that behavior, Baer said in an interview with reporters.

Baer said that in the run-up to Thursday's action, the two sides engaged in "frank and candid discussions" but "at the end of the day, we were just too far apart."

Anheuser-Busch InBev said the government's bid to block the proposed merger is inconsistent with the law, the facts and "the reality of the market place."

"We remain confident in our position, and we intend to vigorously contest the DOJ's action in federal court," ABI said.

According to court papers filed in the case, ABI acts as the industry price leader, with MillerCoors and other brewers typically joining the price increases set by ABI. Modelo, in contrast, has not joined.

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