The price of beer has been saved by the Department of Justice. The DOJ filed a lawsuit stopping Anheuser-Busch InBev’s proposed $20.1 billion purchase of Mexican brewer Grupo Modelo, which would have merged Budweiser and Corona under one brewery.
The proposed $20 billion deal would have affected almost half of the $80 billion in beer sales in the United States. Anheuser-Busch Bud Light is the best-selling beer in the nation and Grupo Modelo’s Corona Extra is the best-selling import. According to the Associated Press, the Justice Department feared “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.”
Bill Baer, the assistant attorney general in charge of the DOJ’s antitrust division, says Anheuser-Busch would certainly increase the price of beer if the proposed purchase was allowed. He cites “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.
The Justice Department court filing explained their logic in full:
“Today, Modelo aggressively competes head-to-head with ABI in the United States and that competition has resulted in lower prices and product innovations that have benefited consumers across the country. The proposed acquisition would eliminate this competition by further concentrating the beer industry, enhancing ABI’s market power, and facilitating coordinated pricing between ABI and the next largest brewer, MillerCoors, LLC.”
MillerCoors is responsible for 29 percent of beer sales in the United States. Anheuser-Busch said it will aggressively oppose the DOJ’s lawsuit to block the proposed merger, calling the decision to sue “inconsistent with the law, the facts and the reality of the market place,” according to Reuters:
“We remain confident in our position, and we intend to vigorously contest the DOJ’s action in federal court.”
Do you think that the Department of Justice is right to block the merger of Anheuser-Busch and Grupo Modelo?