Anheuser- Busch InBev, the world’s largest beer manufacturer, is having some legal problems with its $20.1 billion attempt to take over the third largest beer manufacturer, Grupo Modelo.
The U.S. Justice Department has filed a lawsuit against the beer giant, claiming that its proposed merger with Grupo Modelo would stifle competition in the marketplace. The concern by the Justice Department is that such a merger will inevitably lead to higher prices for beer since the two companies combined would control such a large share of the market.
Based on numbers alone, the Department of Justice complaint does appear to have some merit. According to the Huffington Post, the merger of these two adult beverage behemoths would result in a company that controls 46 percent of the American beer market. This leaves a bad taste in the mouth of DOJ Assistant Attorney General Bill Baer, who fears the merger creates a beverage monopoly.
“The department (of Justice) 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,” Baer said. “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 industry.”
Americans spent $80 billion on beer last year. Sales of Anheuser- Busch brands like Budwesier, Michelob, and others have either been flat or in decline and Anheuser- Busch’s influence has waned over the years as the craft beer market and maturing tastes have pushed consumers toward other brands. Thus, the merger with Grupo Modelo makes sense from the perspective of a business looking to cement its market share and solidify its number one ranking. Anheuser- Busch InBev’s Bud Light is the best selling beer in the United States, Modelo’s Corona Extra is the best- selling import, and other brands owned by one of the two companies rank in the top ten. Merge the two companies into one and the resulting conglomerate would hold a large percentage of the ten most popular beers in the land.
Anheuser- Busch InBev already owns nearly half of Grupo Modelo and has for some time. But this attempt to swallow Grupo Modelo whole isn’t going down without a fight. The Department of Justice is convinced that a merger of this size would monopolize the beer market, reduce competitive choices, and lessen beer quality.
Anheuser- Busch InBev plans to counter the legal challenge. The company isn’t growing much on its own and has relied on mergers for the past four year to prop up its sales and satisfy investors. It may have met its match this time, however. The DOJ has a good track record for blocking what it feels are anti- competitive business mergers and it vehemently opposes this deal.
Article originally posted at Examiner.com