The new U.S. trustbuster has sprayed cold brew on Anheuser-Busch InBev. William Baer, the Justice Department’s antitrust chief, on Thursday sued to stop the giant brewer’s $20-billion (U.S.) purchase of about 50 per cent of Grupo Modelo. AB InBev had tried to allay competition fears with the deal’s structure.
The deal seemed a pretty safe bet when it was announced last June. The maker of Budweiser and Stella Artois already owned half of Modelo. The main benefits to AB InBev were supposed to come from outside the United States. And it had a credible plan to skirt U.S. antitrust worries by selling the Mexican brewer’s half-interest in its U.S. distributor and then continuing to supply the distributor with Corona and other Modelo brands under a long-term agreement.
But the DoJ reckons allowing AB InBev – the biggest producer of beer sold in the American market – to control the distant third-largest could squelch competition and boost prices. Among other reasons, the department seems to think Modelo currently behaves like an aggressive rival to AB InBev despite the larger brewer’s substantial, though not fully controlling, stake. With the $80-billion U.S. market already highly concentrated, the DoJ concluded the only solution was to try to block the deal.
The hefty drops in the market values of AB InBev, Modelo and Constellation Brands, which owns the Modelo distributor, show that the lawsuit came as a surprise to many. It could signal the return of the strong antitrust policy promised when President Barack Obama took office. His administration gunned down AT&T and T-Mobile USA’s merger and the joint bid by Nasdaq OMX and IntercontinentalExchange for NYSE Euronext, but otherwise its record looks remarkably tame. The DoJ, for instance, challenged mergers, monopolies and the like in Mr. Obama’s first two years only about as often as its predecessor did, according to a Stanford Law School study – although in fairness deal volume was also lower in that period.
Mr. Baer was acting antitrust chief at the DoJ for most of last year, and he was confirmed in the job only in December. Since then, the Federal Trade Commission has ended its investigation of Google. Despite a background that includes signs of willingness to tweak rather than kill deals, Mr. Baer’s move suggests a thirst for tougher enforcement – or at least for a tough-guy reputation. With AB InBev promising a vigorous response, that may be tested.