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Molson, Miller delay Genuine Draft row to pursue settlement Add to ...

Beer giants Molson Canada and Miller Brewing Co. have postponed a court battle over who gets to sell Miller Genuine Draft in Canada, while they try to reach an out-of-court settlement.

The two companies were set to appear in a Toronto courtroom on Monday to get a judge to decide whether Miller can cancel the agreement that allows Molson to market its products in Canada.

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But at the last minute the two companies asked for an adjournment, “so they can pursue a settlement,” a spokesman for Miller said.

While there are discussions underway, a settlement has not yet been reached, a source close to the case said. If the two companies can’t come to an arrangement, the trial will be rescheduled, although a new date has not been set.

Molson has had the exclusive rights to distribute Miller products – such as Genuine Draft – under an arrangement that goes back decades. But Miller wants to end the arrangement, because it thinks it can do a better job of selling its own beer in Canada Miller gave official notice in January that it wanted to end the deal as of July, but Molson says that can’t be done under the terms of the contract. It went to court in May to get a temporary injunction to keep the distribution arrangement in place until the merits of the dispute could be heard in court.

In July, Ontario Superior Court Justice Herman Wilton-Siegel granted the temporary injunction. In his ruling, the judge said Miller has the strongest case on many of the legal issues, but he also noted that either side might win in a trial.

The key issue in the dispute is the amount of Miller Genuine Draft that Molson has sold in Canada in recent years. From 2010 to 2012, the sales were far below the targets set out in the contract, and Miller says that gives it the right to terminate its deal.

Molson, for its part, says those targets were supposed to be renegotiated. In addition, Molson said in legal submissions, Miller Genuine Draft is a strategic brand in filling out its portfolio of beers, and losing it would cause “irreparable harm.”

The dispute has been vastly complicated by the fact that the terms of the agreement were temporarily suspended in 2012 because the two companies were expecting an industry rule change that would have allowed Molson to brew Miller Genuine Draft in Canada instead of importing it from the United States. That would have improved Molson’s profit margins, and given it more incentive to sell the beer in Canada.

But that rule change, which involved the use of clear glass bottles in Canada, never happened and the old agreement came back into effect. Miller says that means the volume targets are still in effect, while Molson says there was supposed to be a renegotiation of the targets.

Ironically, Molson and Miller are still partners in the United States, where they sell their products through a joint venture called MillerCoors as a means to compete more effectively with arch-rival Anheuser Busch InBev.. One reason Judge Wilton-Siegel gave for granting his injunction was that the two companies are clearly “sophisticated” enough to work together despite their legal differences. That “should tempter whatever personal acrimony may have arisen in the course of these proceedings,” he said in his ruling.

The two companies are key players in an increasingly globalized beer industry. Miller is owned by SABMiller PLC, based in Britain, while Molson is owned by Molson Coors Brewing Co., which is based in the United States.

The two companies have fought before about their Canadian distribution deal, which has been in effect in one form or another since the 1980s. In 2005, Miller sued Molson to try to kill the contract, suggesting that Molson’s merger with Coors had reduced its incentive to promote Miller brands in Canada. After more than a year of legal battles the two firms decided in 2007 to patch up the fight and extend the agreement.

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