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From Antitrust Law Daily, July 20, 2016

AB InBev, SABMiller win Justice Department approval of megamerger

By Jeffrey May, J.D.

The Department of Justice Antitrust Division has conditionally approved Anheuser-Busch InBev’s proposed acquisition of SABMiller. The deal is subject to the parties’ agreement to divest SABMiller’s entire U.S. business. According to the Justice Department, the divestitures will prevent any increase in concentration in the U.S. beer industry. A complaint was filed today in the federal district court in Washington, D.C. seeking to block the proposed transaction, valued at $107 billion. At the same time, a proposed final judgment was filed that, if approved by the court, would end the Justice Department’s challenge (U.S. v. Anheuser-Busch InBev, Case 1:16-cv-01483).

Anheuser-Busch InBev (AB InBev) and SABMiller are the world’s first and second largest brewing companies, respectively. AB InBev’s major brands include Budweiser, Corona, and Stella Artois. Headquartered in London, SABMiller is known for its Miller and Peroni brands, among others.

The Justice Department alleges that the merger would not only reduce competition by eliminating head-to-head competition between the firms in both national and local beer markets but also would increase the merged company’s incentive and ability to disadvantage its remaining rivals. The Justice Department contends that the merged firm could limit or impede the distribution of "high-end" rival beers that serve as an important constraint on price increases. AB InBev currently encourages affiliated wholesalers to limit their sales of rival beers, it was alleged. After the proposed acquisition, it would have a greater incentive and ability to acquire distributors and use practices to restrict its rivals' access to distribution, according to the government.

Settlement terms. Under the terms of the proposed final judgment, within 90 days, the companies must divest SABMiller’s entire ownership stake in MillerCoors, which is the joint venture through which SABMiller conducts substantially all of its operations in the United States. The companies will also divest the right to brew and sell all SABMiller beer brands currently imported or licensed for sale in the United States and all rights to SABMiller’s Miller-branded beer worldwide.

The proposed final judgment also imposes certain restrictions on AB InBev’s distribution practices and ownership of distributors. It would prohibit the merging parties from using the settlement with the government to modify or terminate contracts with distributors. In addition, the settlement limits AB InBev’s ability to acquire distributors and then cause the distributors to cease to promote or to expel rival brands. Generally, the settlement seeks to prevent AB InBev from using distribution-related practices and incentives to prevent or limit third-party brewers from securing the distribution necessary to compete effectively, according to the government.

AB InBev also would be required to notify the government of certain acquisitions that would not be reportable under current Hart-Scott-Rodino Act thresholds.

Worldwide merger review. The parties have reached agreements with competition agencies around the world to resolve antitrust concerns over the deal, which is the largest beer merger in history. In Europe, AB InBev will divest essentially all of the European business that it would have acquired from SABMiller. It also has agreed to divest SABMiller’s business in the Czech Republic, Hungary, Poland, and Romania, the European Commission announced in May.

The South Africa Competition Commission also conducted a review of the transaction and concluded that its competition and public interest concerns would be resolved through a series of divestitures and other commitments.

The Canada Competition Bureau issued a No-Action Letter after concluding that the proposed acquisition of SABMiller by AB InBev—the parent company of Canadian brewer Labatt—and the concurrent divestiture of certain SABMiller brands to Molson Coors Brewing Company were unlikely to result in a substantial lessening or prevention of competition in any relevant market in Canada. In addition, Australia’s Competition and Consumer Commission said that it would not oppose the proposed acquisition.

The case is No. 1:16-cv-01483.

Attorneys: Michelle Rose Seltzer for U.S. Department of Justice. Christine A. Varney (Cravath, Swaine & Moore LLP) for Anheuser-Busch InBev SA/NV. Janet L. McDavid (Hogan Lovells US LLP) for SABMiller plc.

Companies: Anheuser-Busch InBev SA/NV; SABMiller plc

MainStory: TopStory AcquisitionsMergers Antitrust AntitrustDivisionNews

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