By Benjamin Goad - 01/31/13 05:41 PM EST
Seeking to ensure Americans don’t have to pay more for their Coronas and Buds, the Justice Department filed a lawsuit Thursday to block a merger between two beer industry giants.
The agency’s lawsuit, filed in the U.S. District Court for the District of Columbia, challenges Anheuser-Busch InBev’s (ABI) acquisition of Grupo Modelo. The $20.1 billion deal could cost drinkers billions of dollars because it would lessen competition between the two companies, said Bill Baer, assistant attorney general in charge of the agency’s Antitrust Division.
“We believe the acquisition is a bad deal for American consumers,” Baer told reporters during a conference call Thursday.
Baer said even an incremental increase in the costs of popular beers could have a significant impact on a marketplace that saw $80 billion in sales last year.
“It’s a pocketbook issue,” Baer said. “This is the sort of product that matters to consumers.”
Officials at ABI could not immediately be reached for comment on the government action.
The company already owns a large stake in Modelo, but does not control its economic decisions. Modelo, now a competitor, would essentially become a supplier to ABI, the lawsuit argues.
Together, ABI and Modelo control about 46 percent of annual beer sales in the United States. MillerCoors, the second largest beer firm, accounts for about 29 percent of nationwide sales, according to Justice Department figures.
As the top two beer companies, ABI and MillerCoors, often find it more profitable to follow each other’s prices than compete by cutting the cost of their products, according to the 27-page lawsuit.
“ABI typically initiates annual price increases in various markets with the expectation that MillerCoors’ prices will follow. And they frequently do,” the lawsuit argues.
Modelo has typically sought to compete by keeping its products, including the popular Corona, at lower price points. That has kept Anheuser-Busch and Miller from pushing their prices higher, the government contends.