November 14, 2012 - The American Antitrust Institute (AAI) today released a White Paper concluding that the recently proposed acquisition of full ownership of Mexico's Grupo Modelo (Modelo) by Anheuser-Busch InBev (ABInBev) may present the U.S. Department of Justice (DOJ) with the perfect opportunity to stem a trend that should have arguably been arrested earlier: the steady and unmistakable march toward a U.S. beer monopoly. ABInBev’s products include popular brands like Budweiser, Bud Light, Beck’s, and Stella Artois. Likewise, Modelo produces a number of well-known brands, including Corona and Modelo Especial.
“The transaction comes in the wake of several large mergers in the industry,” said AAI President Bert Foer “Although those mergers were justified on the basis of yielding consumer benefits, empirical evidence over the past several years – the rising prices and gross margins at a time when beer sales are slumping – suggests that the transactions benefited the merging parties at the expense of American beer drinkers.”
If the proposed transactions amount to a de facto merger between ABInBev’s and Modelo’s product portfolios in the U.S., it is likely to create serious anticompetitive effects, the White Paper concludes. Concentration levels are already high in the national beer market and would increase significantly following the transaction. In local markets with large Latino populations, current concentration levels and the post-merger increases may be even higher than they are nationally. The potential anticompetitive effects include reduced product variety and higher prices for consumers.
The AAI White Paper identifies a series of questions to assist the DOJ in its analysis of the proposed transaction. The principal author of the White Paper is AAI Special Counsel Sandeep Vaheesan.
Today, the AAI also released “Global Beer: The Road to Monopoly,” a 117-page monograph written by AAI Research Fellow and economist Bernard Ascher that describes and analyzes beer competition in a comprehensive way, including:
• the history of the beer industry’s domestic and global consolidation
• the effects of antitrust policy in shaping the industry
• the nature and effects of the Post-Prohibition three-tier distribution system, administered by each of the 50 states
• the emergence of specialty craft brewers
• the influence of advertising, brand loyalty, quality, and price in competition
• the potential of a megamerger between ABInBev and SABMiller
About the Authors
Bernard Ascher is former Director of Service Industry Affairs in the Office of the U.S. Trade Representative (USTR), an agency within the Executive Office of the President. A graduate of Brooklyn College (B.A. in Economics) and City University of New York (M.B.A. in International Trade), he is currently Adjunct Professor at University of Maryland University College. Research interests include trade in services; international mobility, licensing and regulation of service providers, including the professions.
Sandeep Vaheesan joined the AAI to work on the amicus program and other projects. Vaheesan was previously a Research Fellow for the AAI. He has a JD and MA in Economics from Duke University and a BA from the University of Maryland. He is the author of several law review articles, including “Market Power in Power Markets: The Filed Rate Doctrine and Competition in Electricity,” forthcoming in the University of Michigan Journal of Law Reform. He previously worked in the antitrust practice at Vinson & Elkins LLP.