AAI Says Effective Remedy in AB InBev-SABMiller is a Tall Order

Apr 25 2016
Testimony and Interventions

In a letter to the U.S. Department of Justice (DOJ), the American Antitrust Institute (AAI) today outlined the competitive concerns raised by the proposed merger of beer giant AB InBev and rival SABMiller. The letter makes the case for why a remedy -- if the DOJ does not move to block the merger -- should not only restore competition but also enhance consumer welfare.

“An AB InBev-SABMiller combination raises serious competitive concerns in the U.S. beer market,” noted AAI President and economist Diana Moss. “A deal of this magnitude, in a market that has already produced higher prices for consumers from previous consolidation, is a red flag for enforcers,” she explained.

The AAI letter is based on publicly available information. It explains that the starting point is an analysis of the competitive effects of the AB InBev-SABMiller deal. Only then can the DOJ evaluate whether the proposed divestiture of SABMiller’s assets in the MillerCoors JV to Molson Coors will be an effective remedy.

The bar is a high one. Combining AB InBev and SABMiller will exacerbate incentives to raise prices, lower quality, slow innovation, and exclude rival craft brewers. “The DOJ will not simply assume that changing the name on the door from ‘Miller Coors’ to ‘Molson Coors’ will neutralize the likely anticompetitive and anti-consumer effects of the merger,” explained Moss.

AAI’s analysis highlights the possibility that a post-merger Molson Coors may be a very different competitor after the loss of SABMiller. Together with recent moves by AB InBev to integrate further into distribution and to exercise greater control over independent distribution, the deal raises concerns that would be difficult to “fix.” Given this complicated landscape, the AAI letter emphasizes that a remedy would need to fully restore competition and enhance consumer welfare at the same time.

“Any discussion of what makes for an effective remedy would include whether the SABMiller assets go to Molson Coors or to another market player,” said Moss.  If the assets are divested to Molson Coors, the AAI stresses the need for a strong set of remedial conditions. They should, at a minimum, create an independent market entity in Molson Coors, prohibit acquisitions by AB InBev and Molson Coors, and take effective steps to preserve an open and independent distribution channel.

Media Contacts:
Diana Moss
202-536-3408
dmoss@antitrustinstitute.org