(CNN) – The U.S. government moved to block the proposed merger of beer giant Anheuser-Busch InBev with Mexico’s Grupo Modelo on Thursday, with a Justice Department official calling it “a bad deal for American consumers.”
ABI already owns about half of Modelo, which brews the popular Corona brand. The Justice Department’s antitrust lawsuit accuses ABI of trying to eliminate “a significant competitive threat” from Modelo’s Corona brands by purchasing the rest of the Mexican company for a proposed $20.1 billion.
That deal would boost ABI’s share of the U.S. beer market grow from about 39% to 46%, the lawsuit states. Add that to the 29% already controlled by No. 2 brewer MillerCoors, and two companies would split about three-quarters of the $80 billion field, said Bill Baer, the head of the Justice Department’s antitrust division.
“Beer prices have gone up in recent years because of this high concentration,” Baer said Thursday morning. “ABI and MillerCoors have been able to drive prices up year after year.” Competition from Modelo forces the top two players “to forego the full extent of the price increases that they would otherwise be able to get out of the market,” he said.
The effect has been particularly strong in states with large Latino populations, like California and Texas, the lawsuit states. And the complaint cites company documents that Justice says show ABI complaining about Modelo hindering their ability to raise prices. So letting the deal go ahead would be “a bad deal for American consumers,” Baer said.
ABI was created by the 2008 merger of the historic St. Louis-based brewer with Belgium’s InBev, producer of European brands like Stella Artois, Bass and Beck’s. A company statement called the antitrust suit “inconsistent with the law, the facts and the reality of the marketplace.”
“We remain confident in our position, and we intend to vigorously contest the DOJ’s action in federal court,” the company said. But the lawsuit will mean the deal won’t be completed by the end of March, it said.
To avoid antitrust concerns, ABI had proposed selling off Modelo’s half-interest in its U.S. importer. But Justice argued that would produce only “a facade of competition” while eliminating a “a particularly aggressive competitor” from the market.
Baer said the Justice Department and ABI had “frank and candid” discussions with the company over the merger, “but at the end of the day, we were just too far apart.”
By Matt Smith
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