The US Justice Department’s challenge of a deal between Belgium’s Anheuser-Busch InBev and Mexico’s Grupo Modelo is a sign that the government intends to remain tough on alleged anti-competitive behavior.
After what was seen as a weak stance on antitrust during the Bush administration, the department took on steadily bigger cases during the first Obama term, culminating with the smackdown of the $39 billion acquisition of T-Mobile by AT&T in 2011. But some wondered whether that would last after Christine Varney, the antitrust division’s head, stepped down in August of that year.
The Anheuser-Modelo deal seems to answer that question. The department said that bringing together Anheuser, the No. 1 beer company, with Modelo, which is in the third spot, “would substantially lessen competition” and that “even a small increase in the price of beer could result in billions of dollars of harm to American consumers.”
The department even accused Anheuser’s Bud Light Lime brand of copying the “distinctive clear bottle” look of Modelo’s Corona beer. “Ultimately, instead of trying to compete head to head with its own product, Bud Light Lime, (Anheuser) is thwarting competition by buying Modelo.”
The DoJ’s stance is significant because unlike the AT&T deal, which was seen as a textbook antitrust case, the Anheuser-Modelo deal isn’t as obvious. Anheuser already owns half of Modelo, and as part of its concessions to gain antitrust approval, Modelo would sell its 50% stake in Crown Imports, which handles its distribution and pricing in the US. Crown would continue to do that if Anheuser and Modelo merge, with Anheuser getting a supply agreement.
Ironically, the person that set the stage for the DoJ’s current toughness on antitrust is now on the other side of the game. Varney, under whose leadership the AT&T/T-Mobile case began, is now a lawyer at New York firm Cravath, Swaine & Moore, which is one of Modelo’s advisers in the Anheuser deal. She probably understands better than anyone outside the DoJ what it would take to win its approval for the tie-up. However, Obama administration rules forbid her from taking cases brought before the Justice Department for two years after leaving it. That means she can’t advise on this particular deal before August—by which time, unless things drag out, it may well already be decided.