May 06, 2013

Antitrust settlement for beer giants

2 min

Len Gordon describes settlement terms “creative” between beer giants ABInBev and Grupo Modelo

Venable partner Len Gordon was quoted in a May 2, 2013 FTC Watch article on the recent settlement between beer giants ABInBev and Grupo Modelo; an agreement that the Department of Justice (DOJ) says avoided price increases for beer drinkers and maintained competition in the industry. ABI sought to acquire the 50 percent of Grupo Modelo that it did not already own, but was halted by a challenge from newly inaugurated assistant attorney general of the DOJ Bill Baer.

Regarding his stance against the proposed merger, Gordon said of Baer that "he is not afraid at all, especially at this point in his career...If you are willing to litigate, that means you are not afraid to lose." He added that when Baer was director of the Federal Trade Commission's (FTC) Bureau of Competition he was "very aggressive in litigating."

The settlement requires ABI and Modelo to give Modelo's entire U.S. business to Constellation Brands – a company that owns 50 percent of Crown Imports. Modelo owns the other 50 percent of Crown Imports and currently entrusts them with all of its U.S. imports. Constellation was also endowed with other assets in order to remain a significant competitor in the industry.

Gordon said the settlement terms were "creative", explaining that the requirement that they "sort of bolster the facilities that are being divested to Constellation" was interesting. "Lots of times you’ll see requirements and divestiture orders to make sure that the asset isn’t wasted or the company that is going to be acquiring the divested asset has access to necessary inputs or persons or sources of supply…[but in this case] the Court’s order actually requires things to be added to the brewery before it is divested – that’s pretty unique. It’s pretty creative — the idea of a divestiture is to make sure that the new entrant can replicate the competition lost. Here it is a pretty aggressive way to do that. I’d be curious to see, obviously, if that is repeated or if it’s a unique set of circumstances."