Brewers Association, NBWA Request Hearing Prior to MegaBrew Final Judgment

Nearly two years after the Department of Justice (DOJ) signed off on Anheuser-Busch InBev’s (ABI) $100 billion takeover of SABMiller, the government agency still has not completed its review of the merger.

The DOJ and ABI filed a joint motion on March 15 asking U.S. District Court Judge Emmet Sullivan to approve the “proposed final judgment.” However, several groups have objected to the judgment, as it is currently written, and are now seeking a hearing in order to resolve anti-competitive concerns.

On May 15, the Brewers Association (BA) and the National Beer Wholesalers Association (NBWA) filed a joint brief requesting a hearing be held prior to the completion of the DOJ’s proposed final judgment. In a separate filing, Consumer Action, a nonprofit consumer advocacy group, also supported a hearing.

Now it’s up to U.S. District Court Judge Emmet Sullivan to decide whether to grant a hearing or move forward with the DOJ’s modified proposed final judgment.

In their brief, the BA and NBWA said the DOJ’s final judgment, as proposed, “contains ambiguities and raises substantial questions” about enforcement and “cannot be deemed in the public interest.” A hearing, they argue, will allow the trade groups to “provide the court with necessary inside-the-industry information.”

According to the BA and NBWA, the proposed final judgment, as written, “will not sufficiently remedy the significant anticompetitive harm arising from this merger, including the growth of ABI’s incentive and ability to disadvantage its remaining rivals by impeding distribution of their beers.”

The BA and NBWA also pointed out that a considerable chunk of an independent ABI wholesalers’ business is tied up in ABI products, and those wholesalers cannot afford to lose the distribution rights to those brands. That means those wholesalers are incentivized to not do anything that ABI would consider “a lack of ‘best efforts’ towards ABI products.” The so-called “best efforts” standard, they argue, is “too ambiguous without additional clarification” and the language needs to be included in the final judgment.

In their brief, the BA and NBWA said several provisions in the proposed final judgment need to be modified in order to preserve competition, including how marketing and promotional spends are calculated. The groups said the marketing spend should be based on current revenue as opposed to previous revenue, in order to prevent ABI from locking in market share.

The BA and NBWA also disagreed with the DOJ’s 2016 decision to limit A-B’s ability to acquire beer distributors if doing so would “result in more than 10 percent of its annual volume being distributed through wholly-owned distributorships in the U.S.” According to the trade groups, ABI “could control a distributor even if it t had less than fifty percent equity interest.”

Finally, the BA and NBWA objected to the DOJ shortening the enforcement term of the final judgment from 10 years to five years. Doing so, they argued, will have a “chilling effect on oversight.”

Meanwhile, Consumer Action filed a similar brief on May 15 arguing in favor of maintaining the 10-year enforcement period of the final judgment as well as prohibiting ABI from acquiring wholesalers for a decade.

“If there’s any ambiguity in the language, it makes it much more difficult for the antitrust division to enforce the settlement agreement and makes it more difficult for the industry participants to compete going forward,” Andre Barlow, who represents Consumer Action and previously worked as a DOJ attorney, told Brewbound

Consumer Action’s brief added that the DOJ should “include clearer and broader prohibitions against ABI’s attempts to curb the promotion and distribution of rival beer [products].” If not, the group argued, “ABI will be able to tweak incentive programs offered to aligned distributors” and diminish the attention those wholesalers give to competitors’ offerings.

Earlier this month, the DOJ rejected assertions made in a brief by D.G. Yuengling & Son Inc. about its investigation into whether ABI violated the proposed final judgement by redirecting the sale of an independent distributor in Mississippi. In defense of its review, the DOJ said it, and the monitoring trustee, interviewed “multiple industry participants, including beer brewers and independent distributors” and requested and reviewed “thousands of pages of documents and other information.”

The DOJ concluded in the May 11 retort that the court should proceed with entering the final judgment.

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