It has been nearly two years since Anheuser-Busch InBev reached a 10-year deal with the Justice Department that would allow it to acquire SABMiller. The transaction has yet to receive judicial blessing.
National Beer Wholesalers Association, Brewers Association, Yuengling, Teamsters, and Consumer Action and Consumer Watchdog all filed amicus briefs seeking a hearing and possible modification of the agreement.
The Justice Department, in a filing Thursday (3/15) argues that the agreement between Justice and ABI is a good one and in the public interest.
“The distribution-related provisions—some of which the amici challenge—increase the ability of distributors of popular ABI products to promote and sell the products of brewers that compete with ABI. And the provisions clearly inform ABI and third parties what the proposed Final Judgment requires and prohibits. With the required divestiture and these provisions, the proposed Final Judgment effectively remedies the harm alleged in the Complaint,” Justice said.
One reason: ABI can’t interfere with a distributor providing “best efforts” to a craft brewer for whom the wholesaler distributes beer. “ABI can, however, require an Independent Distributor to provide ABI with those same best efforts.
“D.G. Yuengling & Son, Inc. (“Yuengling”), National Beer Wholesalers Association (“NBWA”), and Brewers Association contend that the latter provision undermines, conflicts with, or creates ambiguity regarding the former.”
“A duty of best efforts is generally not interpreted to require exclusive efforts.21 And it is commonplace in the beer industry for distributors to owe best efforts to more than one brewer,” Justice says.
It notes that the agreement even provides that an independent distributor can recommend to a retailer that it replace some ABI product with a craft brewer’s product.
Prior to the proposed Final Judgment, ABI’s contracts with Independent Distributors prohibited the distributors from requesting—under any circumstances—that a bar replace an ABI tap handle with a competitor’s tap handle or that a retailer replace ABI shelf space with a competitor’s beer.”
The agreement also limits ABI from self-distributing more than 10% of its beer in the U.S. Justice notes that “at the time the U.S. filed the complaint, ABI-Owned Distributors sold about 9% of ABI’s beer in the U.S.”
The imposition of a 10% cap—where ABI was already self-distributing approximately 9% of its beer and where no nationwide restriction existed before—meaningfully curbs ABI’s ability to restrict the sale of Third-Party Brewers’ Beer by acquiring distributors., Justice said.
The filing also dealt with the Molson Coors’s closure of the Eden, N.C., brewery. The Teamsters Union had suggested there might be “coordinated action” between ABI and Molson Coors in regard to the closure.
“The Teamsters argue that to address the risk of coordinated action, ABI should be required to divest the Eden brewery (or another large brewery) to someone other than Molson Coors,” but Justice rejected that notion.” Justice rejected that argument and several others and urged the court to approve the agreement.