The U.S. Justice Department this week filed a civil antitrust lawsuit against Anheuser-Busch Inbev’s (ABI) acquisition of Grupo Modelo. ABI is the maker of the best-selling beer in the U.S., Bud Light. Modelo sells the best-selling import beer in the U.S., Corona Extra.
ABI has proposed buying Modelo for $20.1 billion dollars. Of the $80 billion Americans spent on beer in 2012, around 39% of that amount went to ABI, while Modelo accounts for around 7% of U.S. beer sales. The companies are the largest and third-largest beer companies in the U.S. The justice department claims that the proposed merger would “substantially lessen competition in the market for beer in the United States” and result in rising beer prices.
“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 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 industry.”
The Justice Department’s complaint makes the case that the U.S. beer market is already highly concentrated, and that ABI “generally” acts as a price leader. It points out that while other beer companies such as MillerCoors, the second-largest beer seller in the U.S., generally follow ABI’s yearly price increases, Modelo has priced its imports “aggressively,” keeping ABI’s price increases under pressure.