Consumers can choose to look at the stein half empty after a recent dismissal of a private Section 7 challenge to Anheuser-Busch InBev, SA/NV’s (“ABI”) acquisition of SABMiller, plc (“SAB”). The district court found that the beer drinkers did not sufficiently allege increased concentration in the U.S. beer market, and the Ninth Circuit agreed. Specifically, the Ninth Circuit held that ABI and SAB were neither actual competitors nor potential competitors.
In November 2015 ABI, a beer producer and seller with approximately 46% of the domestic market, announced plans to acquire SAB, which had about a 25% share of the US market through its partnership with Molson Coors Brewing Company, known as MillerCoors, LLC. On July 20, 2016, the DOJ and ABI reached a settlement allowing the $107 billion acquisition to occur, conditioned on SAB divesting its interest in MillerCoors, which would be entirely absorbed by Molson Coors Brewing Company. The settlement also required DOJ review of future ABI acquisitions of brewers to prevent further concentration in the domestic beer market. In compliance with the Tunney Act, on the same day the settlement was reached, the DOJ Antitrust Division filed a civil suit in the D.C. District Court alleging that the acquisition violated Section 7 of the Clayton Act and offered the proposed settlement as the remedy of this violation. (The Tunney Act procedure, which is still pending, will result in a determination of whether the Government’s settlement of ABI’s acquisition of SAB is in the public interest).
Several months later, consumers filed a private antitrust action against ABI and SAB in the District of Oregon, alleging that the merger would tend to create a monopoly in beer production and sale in the U.S. Specifically, the consumers alleged that the negative effects included fewer choices and lower quality products. The consumers also alleged that the acquisition would expand ABI’s global buying power, and that ABI’s practices would be followed by non-defendant Molson post-acquisition.
The lower court dismissed the complaint with prejudice, finding that the consumers had failed to allege that ABI’s market power in the domestic beer market would grow. The ruling also deemed allegations regarding Molson’s future conduct too speculative and ABI’s buying power too vague to pass 12(b)(6) muster.
The Ninth Circuit affirmed, agreeing that the consumers had not established a prima facie case that the ABI/SAB merger was anticompetitive, because ABI acquired neither an actual competitor in the U.S. beer market, nor a potential competitor on the cusp of entry into this market. The Court emphasized that SAB did not compete in the U.S. beer market—the relevant market—before the acquisition, except under the guise of MillerCoors, and that post-acquisition, MillerCoors remained a competitor of ABI/SAB in that relevant market. The consumers’ argument that ABI and SAB were potential competitors failed because the claim was not alleged in the complaint. This claim also failed because the Court believed it contradicted another claim—that ABI and SAB were actual competitors. The Court did not buy the argument that SAB was “eager to enter the market” in domestic beer, as the company had already entered the relevant market through its partnership with MillerCoors. The Ninth Circuit also agreed with the district court that allegations concerning MillerCoors’ business practices were too speculative. The Court rejected the consumers’ new arguments on appeal, including proposed factual amendments to the complaint, and noted that plaintiffs had failed to submit public comments opposing the settlement in the Tunney Act proceedings. According to the Court, dismissal with prejudice was proper.
At the time of this writing, the D.C. District Court has not decided whether the merger is in the public interest. If the court agrees with the Ninth Circuit on the merger’s competitive impact, drinkers may continue to see higher beer prices and ultimately fewer choices on tap.