[Federal Register: November 25, 2008 (Volume 73, Number 228)]
[Notices]
[Page 71682-71692]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25no08-100]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Inbev NV/SA; Proposed Final Judgment and
Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Hold Separate Stipulation and Order, and Competitive Impact Statement
have been filed with the United States District Court for the District
of Columbia in United States v. InBev NV/SA, Civ. Action No. 08-cv-
01965. On November 14, 2008, the United States filed a Complaint
alleging that the proposed acquisition by InBev NV/SA of Anheuser-Busch
Companies, Inc., would violate section 7 of the Clayton Act, 15 U.S.C.
18. The Complaint alleges that the acquisition would substantially
reduce competition for sale of beer in the Buffalo, Rochester, and
Syracuse, New York metropolitan areas. The proposed Final Judgment,
filed at the same time as the Complaint, requires InBev to divest
Labatt USA and grant a perpetual license to the acquirer to brew and
sell Labatt brand beer for consumption throughout the United States.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth
Street, NW., Suite 1010, Washington, DC 20530 (202-514-2481), on the
Department of Justice Web site (http://www.usdoj.gov/atr), and at the
Office of the Clerk of the United States District Court for the
District of Columbia. Copies of these materials may be obtained from
the Antitrust Division upon request and payment of the copying fee set
by Department of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Joshua H. Soven, Chief, Litigation I Section, Antitrust Division,
Department of Justice, 1401 H Street, NW., Suite 4000, Washington, DC
20530 (202-307-0001).
Patricia A. Brink,
Deputy Director, Office of Operations.
United States of America, 1401 H Street, NW.,--Suite 4000,
Washington, DC 20530. Plaintiff, v. Inbev N.V./S.A.
Brouwerijplein 1, 3000 Leuven, Belgium, Inbev USA LLC, 50 Fountain
Plaza--Suite 900, Buffalo, NY 14202, and Anheuser-Busch Companies,
Inc., One Busch Place, St. Louis, MO 63118, Defendants. Case: 1:08-cv-
01965, Assigned to: Robertson, James, Assign. Date: 11/14/2008,
Description: Antitrust.
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil action to
enjoin the proposed acquisition of Anheuser-Busch Companies, Inc.
(``Anheuser-Busch'') by InBev N.V./S.A. (``InBev'') and to obtain
[[Page 71683]]
other equitable relief. The United States alleges as follows:
I. Nature of the Action
1. On July 13, 2008, Anheuser-Busch and InBev entered into an
Agreement and Plan of Merger pursuant to which InBev intends to acquire
100 percent of the voting securities of Anheuser-Busch in a transaction
valued at approximately $52 billion. Anheuser-Busch is the largest
brewing company in the United States, accounting for approximately 50
percent of beer sales in the country. Its best selling brands are Bud
Light and Budweiser. Belgium-based InBev is the second-largest brewer
in the world. InBev's best-selling brands in the United States are
Labatt, Stella Artois, and Becks. The proposed acquisition of Anheuser-
Busch by InBev would create the world's largest brewing company with
annual revenues of over $36 billion.
2. In three regions of upstate New York, the proposed acquisition
would significantly increase the level of concentration in the market
and substantially reduce competition by combining InBev's Labatt brands
and Anheuser-Busch's Budweiser brands.
3. In the Buffalo metropolitan area (``Buffalo'') and the Rochester
metropolitan area (``Rochester''), the proposed acquisition would
increase Anheuser-Busch's share of the beer market from approximately
24 percent to approximately 45 percent, producing a highly concentrated
market dominated by two firms--the combined InBev/Anheuser-Busch and
MillerCoors (a joint venture between SABMiller and Coors Brewing Co.).
MillerCoors has approximately a 26 percent share of the Buffalo and
Rochester beer markets and no other firm has more than a five percent
share.
4. The proposed acquisition would also create a highly concentrated
beer market in the Syracuse metropolitan area (``Syracuse''). In
Syracuse, the proposed acquisition would increase Anheuser-Busch's
share of the beer market from approximately 28 percent to approximately
41 percent, with MillerCoors controlling approximately 28 percent. As
in Buffalo and Rochester, no other firm has more than a five percent
share of the beer market in Syracuse.
5. The proposed acquisition would eliminate substantial head-to-
head competition between Anheuser-Busch's Budweiser and InBev's Labatt
brands in Buffalo, Rochester, and Syracuse.
6. The significant increase in market concentration that the
proposed acquisition would produce in the Buffalo, Rochester, and
Syracuse geographic markets, combined with the loss of head-to-head
competition, is likely to substantially lessen competition, in
violation of section 7 of the Clayton Act, resulting in higher prices
for beer for consumers.
II. Jurisdiction and Venue
7. The United States brings this action under section 15 of the
Clayton Act, as amended, 15 U.S.C. 25, to prevent and restrain
Defendants from violating section 7 of the Clayton Act, 15 U.S.C. 18.
This Court has subject matter jurisdiction over this action pursuant to
section 15 of the Clayton Act, 15 U.S.C. 25 and 28 U.S.C. 1331,
1337(a), and 1345.
8. Defendants Anheuser-Busch and InBev produce and sell beer in the
flow of interstate commerce, and their production and sale of beer
substantially affect interstate commerce. Defendants Anheuser-Busch and
InBev transact business and are found in the District of Columbia,
through, among other things, selling beer to customers in this
District. Venue is proper for Anheuser-Busch in this District under 15
U.S.C. 22. Venue is proper in the District of Columbia for Defendant
InBev, a Belgian corporation, under 28 U.S.C. 1391(d).
III. The Defendants
9. Anheuser-Busch, a Delaware corporation headquartered in St.
Louis, Missouri, is the largest brewer in the United States and
accounts for approximately 50 percent of beer sales nationwide.
Anheuser-Busch operates 12 breweries in the United States. Anheuser-
Busch's best-selling brands are Budweiser and Bud Light.
10. Belgium-based InBev is the second-largest brewer in the world,
but does not operate any breweries in the United States. InBev's best-
selling brands in the United States are Stella, Becks, Bass, and
Labatt. Most of InBev's brands, including Stella, Becks, and Bass, are
imported, marketed, and sold in the United States by Anheuser-Busch
pursuant to a 2006 import agreement (``Anheuser-Busch/InBev import
agreement''). InBev's Labatt brands are excluded from the Anheuser-
Busch/InBev import agreement. The Labatt brands are brewed in Canada by
InBev's subsidiary, Labatt Brewing Company Limited, and are imported
and sold in the United States by InBev's subsidiary, InBev USA d/b/a
Labatt USA (``IUSA''). Although InBev's overall market share in the
United States is small (approximately two percent), the geographic
markets are local, and Labatt brand beers account for a significant
portion of the Buffalo, Rochester, and Syracuse beer markets.
11. In Buffalo and Rochester, IUSA accounts for approximately 21
percent of beer sales and Anheuser-Busch accounts for approximately 24
percent of beer sales. In Syracuse, IUSA and Anheuser-Busch account for
approximately 13 percent and 28 percent of beer sales, respectively.
Combined, Anheuser-Busch and InBev would account for approximately 45
percent of beer sales in Buffalo and Rochester, and over 41 percent of
beer sales in Syracuse.
IV. Relevant Markets
A. Relevant Product Market
12. Beer is an alcoholic beverage that is substantially
differentiated from other alcoholic beverages by taste, quality,
alcohol content, image, and price.
13. Neither the price of wine nor the price of spirits
significantly influences or constrains the price of beer. Purchasers of
beer are unlikely to reduce their purchases of beer in response to a
small but significant and non-transitory increase in the price of beer
to an extent that would make such a price increase unprofitable.
14. Beer is a line of commerce and a relevant product market within
the meaning of section 7 of the Clayton Act.
B. Relevant Geographic Markets
15. Beer is sold to consumers in local geographic markets through a
three-tier distribution system in New York and throughout the United
States. Brewers such as InBev and Anheuser-Busch sell beer to
wholesalers (often known as ``distributors''), which, in turn, sell to
retailers. In New York and throughout the United States, distributors'
contracts with brewers contain territorial limits and prohibit
distributors from selling outside their territories.
16. Distributors cannot sell a brewer's products outside their
territories without violating their contracts with the brewer. This
allows brewers to charge different prices in different locales for the
same package and brand of beer, and prevents individual distributors
(and retailers) from defeating such price differences through
arbitrage.
17. Brewers develop beer pricing and promotion strategies on a
``local'' market basis, based on an assessment of local competitive
conditions, local demand for the brewers' beer, and local brand
strength.
18. Brewers selling beer in a metropolitan area would be able to
increase the price of beer by a small but significant and non-
transitory amount
[[Page 71684]]
without losing sufficient sales to make such a price increase
unprofitable.
19. The metropolitan areas of Buffalo, Rochester, and Syracuse
constitute three separate, relevant geographic markets for the sale of
beer within the meaning of section 7 of the Clayton Act.
V. Likely Anticompetitive Effects
20. The relevant beer markets are highly concentrated. In Buffalo
and Rochester, the top three brewers: Anheuser-Busch, MillerCoors, and
InBev (IUSA)--account for approximately 24 percent, 26 percent, and 21
percent of the beer market, respectively. In Syracuse, Anheuser-Busch,
MillerCoors and IUSA account for approximately 28 percent, 28 percent,
and 13 percent of the beer market, respectively.
21. If the proposed acquisition is permitted to occur, the beer
markets in Buffalo and Rochester would become substantially more
concentrated. The combined firm would control at least 45 percent of
beer sales. The merged firm and MillerCoors would control over 70
percent of beer sales. Using a standard concentration measure called
the Herfindahl-Herschman Index (or ``HHI,'' defined and explained in
Appendix A), the proposed acquisition would produce an HHI increase of
approximately 1020 and a post-acquisition HHI of approximately 2790 in
Buffalo and Rochester.
22. If the proposed acquisition is permitted to occur, the Syracuse
beer market also would become substantially more concentrated. The
combined firm would control approximately 41 percent of the market, and
the top two brewers--the merged firm and MillerCoors--would account for
approximately 69 percent of beer sales. The proposed acquisition in
Syracuse would produce an HHI increase of approximately 750 and a post-
acquisition HHI of approximately 2580.
23. In Buffalo, Rochester, and Syracuse, the proposed acquisition
would eliminate significant head-to-head competition between InBev's
Labatt brands and Anheuser-Busch's Budweiser brands. Currently, InBev
(through its IUSA subsidiary) and Anheuser-Busch compete in the
relevant geographic markets through price discounts and various forms
of promotions.
24. The significant increase in market concentration that the
proposed acquisition would produce in the Buffalo, Rochester, and
Syracuse geographic markets, combined with the loss of head-to-head
competition, is likely to substantially lessen competition in violation
of section 7 of the Clayton Act, resulting in higher prices for beer
for consumers.
VI. Absence of Countervailing Factors
25. Responses from other competitors or new entry is not likely to
prevent the likely anticompetitive effects of the proposed acquisition.
Competition from other competitors is insufficient to prevent a small
but significant and non-transitory price increase implemented by the
Defendants in those markets from being profitable. Entry of a
significant new competitor into the marketplace is particularly
unlikely because a new entrant would not possess the highly-important
brand acceptance necessary to succeed.
26. The anticompetitive effects of the proposed acquisition are not
likely to be eliminated or mitigated by any efficiencies that may be
achieved by the acquisition.
VII. Violation Alleged
27. The United States hereby incorporates paragraphs 1 through 26.
28. The proposed acquisition of Anheuser-Busch by InBev would
likely substantially lessen competition in interstate trade and
commerce, in violation of section 7 of the Clayton Act, 15 U.S.C. 18,
and would likely have the following effects, among others:
(a) Actual and potential competition between Anheuser-Busch and
InBev (through its IUSA subsidiary) for beer sales in the relevant
geographic markets would be eliminated; and
(b) Competition generally in the relevant geographic markets for
beer would be substantially lessened.
Prayer for Relief
The United States requests:
1. That the proposed acquisition be adjudged to violate section 7
of the Clayton Act, 15 U.S.C. 18;
2. That the Defendants be permanently enjoined and restrained from
carrying out the proposed acquisition or from entering into or carrying
out any other agreement, understanding, or plan by which Anheuser-Busch
would acquire, be acquired by, or merge with, any of the other
Defendants;
3. That the United States be awarded costs of this action; and
4. That the United States have such other relief as the Court may
deem just and proper.
Respectfully submitted,
---- /s/ ------
Deborah A. Garza (DC Bar No. 395259),
Acting Assistant Attorney General.
---- /s/ ------
Patricia A. Brink,
Deputy Director, Office of Operations.
---- /s/ ------
Joshua H. Soven,
Chief (DC Bar No. 436633).
---- /s/ ------
Joseph M. Miller,
Assistant Chief (DC Bar No. 439965), Litigation I Section, (202)
307-0827.
---- /s/ ------
Mitchell H. Glende,
Barry L. Creech (DC Bar No. 421070),
Scott I. Fitzgerald,
Tiffany Joseph-Daniels (DC Bar No. 481878),
Ryan Kantor,
David C. Kelly,
Karl D. Knutsen,
Michael T. Koenig,
Richard Martin,
Michelle Seltzer (DC Bar No. 475482),
Julie Tenney.
Trial Attorneys, U.S. Department of Justice, Antitrust Division,
Litigation I Section. 1401 H Street, NW., Suite 4000, Washington, DC
20530, (202) 353-3106.
Dated: November 14, 2008.
The United States District Court for the District of Columbia
United States of America, Plaintiff, v. Inbev N.V./S.A., Inbev USA
LLC, and Anheuser-Busch Companies, Inc., Defendants. Case: 08-cv-Filed:
Deck Type: Antitrust Date Stamp:--------.
[Proposed] Final Judgment
Whereas, Plaintiff, United States of America, filed its Complaint
on November 14, 2008, and the United States of America and defendants
InBev N.V./S.A., InBev USA LLC d/b/a Labatt USA, and Anheuser-Busch
Companies, Inc. (collectively, ``Defendants''), by their respective
attorneys, have consented to the entry of this Final Judgment without
trial or adjudication of any issue of fact or law, and without this
Final Judgment constituting any evidence against or admission by any
party regarding any issue of fact or law;
And whereas, Defendants agree to be bound by the provisions of this
Final Judgment pending its approval by the Court;
And whereas, the essence of this Final Judgment is the prompt and
certain divestiture of certain rights or assets by the Defendants to
assure that competition is not substantially lessened;
And whereas, the United States requires Defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
And whereas, Defendants have represented to the United States that
the divestitures required herein can and will be made and that
Defendants will later raise no claim of hardship or difficulty as
grounds for asking the Court to modify any of the divestiture
provisions contained below;
[[Page 71685]]
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is ordered, adjudged, and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against Defendants under section 7 of the Clayton
Act, as amended, 15 U.S.C. 18.
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' means the entity or entities to whom Defendants
divest the Divestiture Assets.
B. ``Advertising'' means all existing advertising and promotional
materials owned or Licensed by LBCL, including without limitation all
copyrights therein, bearing the Licensed Marks for use in the
marketing, sale, and distribution of Labatt Brand Beer in the United
States.
C. ``Anheuser-Busch'' means defendant Anheuser-Busch Companies,
Inc., a Delaware corporation, with its headquarters in St. Louis,
Missouri, its successors and assigns, and its subsidiaries, divisions,
groups, affiliates, partnerships, and joint ventures, and their
directors, officers, managers, agents, and employees.
D. ``Beer'' means any fermented alcoholic beverage that (1) is
composed in part of water, a type of starch, yeast, and a flavoring and
(2) has undergone the process of brewing.
E. ``Defendants'' means InBev N.V./S.A., InBev USA LLC d/b/a Labatt
USA, and Anheuser-Busch Companies, Inc.
F. ``Divestiture Assets'' means:
(i) An exclusive, perpetual, assignable, transferable, and fully-
paid-up license that grants the Acquirer the right:
(A) To brew Labatt Brand Beer in Canada and/or the United States
for sale for consumption in the United States;
(B) To promote, market, distribute, and sell Labatt Brand Beer for
sale for consumption in the United States; and
(C) To use all intellectual property rights associated with the
brewing, marketing, sale, and distribution of Labatt Brand Beer for
sale for consumption in the United States, including, without
limitation, the Trade Dress, the Advertising, the Licensed Marks, the
Recipes, and such molds and designs as are used in the manufacturing
process of bottles for the Labatt Brand Beer;
(ii) All production know-how for Labatt Brand Beer, including,
without limitation, all Recipes and packaging, marketing, and
distribution know-how and documentation; and
(iii) All of the tangible and intangible assets of IUSA, including,
without limitation, (A) all real property (owned or leased), office
equipment, office furniture, fixtures, materials, supplies, and other
tangible property of IUSA; (B) all contracts and agreements of IUSA
except the Existing Import Agreement, including, without limitation,
wholesaler and distributor agreements into which InBev or IUSA have
entered for the sale or distribution of Labatt Brand Beer within the
United States, sponsorship agreements with sports teams and other
entities, agreements relating to the placement of advertising,
agreements with public relations firms, and agreements with co-packers;
(C) all existing inventories of Labatt Brand Beer owned by IUSA; (D)
all customer lists, customer accounts, and credit records; (E) all
licenses, permits, and authorizations issued by any governmental
organization relating to the marketing, sales, and distribution of
Labatt Brand Beer in the United States, including, without limitation,
brand registrations; and (F) copies of all business, financial and
operational books, records and data, both current and historical, that
relate to Labatt Brand Beer sold and distributed in the United States;
provided, however, that, for books, records, or data that relate to
Labatt Brand Beer, but not solely to Labatt Brand Beer sold in the
United States, LBCL shall provide only the excerpts of those books,
records, or data that relate to the Labatt Brand Beer sold and
distributed in the United States;
(iv) Provided, however, that the Acquirer shall have no right to
use, and shall not use, the term ``InBev'' or any derivative of the
term ``InBev,'' and provided, further, that the Acquirer shall have no
rights to market or sell any brands of Beer owned by InBev other than
Labatt Brand Beer.
G. ``Existing Import Agreement'' means the Exclusive Distributor
Agreement dated as of December 1, 1994, among LBCL, Labatt Importers
Inc., Labatt's USA Inc., and John Labatt Limited.
H. ``InBev'' means defendant InBev N.V./S.A., a public company
organized under the laws of Belgium, with its headquarters in Leuven,
Belgium, its successors and assigns, and its subsidiaries, divisions,
groups, affiliates, partnerships, joint ventures, and their respective
directors, officers, managers, agents, and employees.
I. ``IUSA'' means defendant InBev USA LLC d/b/a Labatt USA, a
Delaware limited liability company and wholly-owned, indirect
subsidiary of InBev, with its headquarters in Buffalo, New York.
J. ``Labatt Brand Beer'' means the following brands of Beer: Labatt
Blue, Labatt Blue Light, Labatt's 50, Labatt ICE, Labatt Double Blue,
Labatt Nordic, Labatt Select, Labatt Non-Alcoholic, Labatt Holiday, and
Max ICE, and any extensions of any one or more of such brands for use
in connection with brewing, distributing, promoting, marketing, or
selling Beer as may be developed from time to time by the Acquirer.
K. ``LBCL'' means Labatt Brewing Company Limited, a Canadian
corporation and wholly-owned, indirect subsidiary of Companhia de
Bebidas das Am[eacute]ricas--AmBev, a Brazilian corporation and
majority-owned subsidiary of InBev.
L. ``Licensed Marks'' means all trademarks, service marks, or trade
names for the Labatt Brand Beer belonging or licensed to LBCL and/or
its subsidiaries, divisions, groups, affiliates, partnerships, and
joint ventures (whether registered or unregistered, or whether the
subject of a pending application) used to brew, distribute, market, and
sell Labatt Brand Beer in the United States.
M. ``Recipes'' means all LBCL's formulae, recipes, processes, and
specifications specified by LBCL for use in connection with the
production and packaging of Labatt Brand Beer in the United States,
including, without limitation, LBCL's yeast, brewing processes,
equipment and material specifications, trade and manufacturing secrets,
know-how, and scientific and technical information for the Labatt Brand
Beer.
N. ``Supply Agreement'' means an agreement pursuant to which InBev
shall supply to the Acquirer Labatt Brand Beer in quantities and units
and at prices agreed to between InBev and the Acquirer subject to the
approval of the United States in its sole discretion.
O. ``Trade Dress'' means the print, style, color, labels, and other
elements of trade dress currently used by LBCL and/or its subsidiaries,
divisions, groups, affiliates, partnerships, and joint ventures in
connection with the marketing, sale, and distribution of Labatt Brand
Beer in the United States.
III. Applicability
A. This Final Judgment applies to the Defendants, as defined above,
and all other persons in active concert or participation with the
Defendants who receive actual notice of this Final Judgment by personal
service or otherwise.
[[Page 71686]]
B. If, prior to complying with sections IV and V of this Final
Judgment, Defendants sell, license, or otherwise dispose of all or
substantially all of their assets or lesser business units that include
the Divestiture Assets, Defendants shall require the purchaser to be
bound by the provisions of this Final Judgment. Defendants need not
obtain such an agreement from the Acquirer of the assets divested
pursuant to this Final Judgment.
IV. Divestiture
A. Defendants are ordered and directed, within ninety (90) calendar
days after the filing of the Complaint in this matter, or five (5)
calendar days after notice of the entry of this Final Judgment by the
Court, whichever is later, to divest the Divestiture Assets in a manner
consistent with this Final Judgment to an Acquirer approved by the
United States in its sole discretion. The United States, in its sole
discretion, may agree to one or more extensions of this time-period,
such extensions not to exceed ninety (90) calendar days in total, and
shall notify the Court in such circumstances. Defendants agree to use
their best efforts to divest the Divestiture Assets as expeditiously as
possible.
B. In accomplishing the divestiture ordered by this Final Judgment,
Defendants promptly shall make known, by usual and customary means, the
availability of the Divestiture Assets. Defendants shall inform any
person making inquiry regarding a possible purchase of the Divestiture
Assets that they are being divested pursuant to this Final Judgment and
provide that person with a copy of this Final Judgment. Defendants
shall offer to furnish to all prospective Acquirers, subject to
customary confidentiality assurances, all information and documents
relating to the Divestiture Assets customarily provided in a due
diligence process except such information or documents subject to the
attorney-client privilege or work-product doctrine. Defendants shall
make available such information to the United States at the same time
that such information is made available to any other person.
C. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
D. Defendants shall warrant to the Acquirer that each asset will be
operational on the date of sale.
E. Defendants shall not manufacture, market, distribute, introduce,
or sell in the United States any Beer under any brand name or trade
name that contains the word ``Labatt'' after the date of the execution
of the divestiture agreement with the Acquirer, except (i) pursuant to
the terms of the Supply Agreement, and (ii) as necessary to satisfy a
legal requirement to identify the brewer for and origin of other brands
of beer brewed by LBCL and sold in the United States where the
corporate identity of the brewer includes the word ``Labatt'';
provided, however, that Defendants shall not be in violation of this
consent decree if an independent party ships Labatt Brand Beer from
Canada to the United States without Defendants' permission or
knowledge.
F. Defendants shall provide the Acquirer and the United States
information relating to IUSA's personnel involved in the management,
operations, or sales activities in the United States relating to the
Divestiture Assets to enable the Acquirer to make offers of employment.
Defendants will not interfere with any efforts by the Acquirer to
employ any personnel employed by IUSA having management, operations, or
sales responsibilities relating to the Divestiture Assets.
G. Unless the United States otherwise consents in writing,
Defendants shall permit prospective Acquirers of the Divestiture Assets
to have reasonable access to personnel and to make reasonable
inspections of the physical facilities; access to any and all
environmental, zoning, and other permit documents and information; and
access to any and all financial, operational, or other documents and
information customarily provided as part of a due diligence process.
H. Notwithstanding anything to the contrary in this Final Judgment,
at the option of the Acquirer, Defendants shall enter into a transition
services agreement for a limited period with respect to information
technology support, information technology licensing, computer
operations, data processing, logistics support, and such other services
as are reasonably necessary to operate the Divestiture Assets, with the
scope, terms, and conditions of such agreement being subject to the
approval of the United States in its sole discretion. Such an agreement
may not exceed twelve (12) months from the date of divestiture.
I. Unless the United States otherwise consents in writing, the
divestiture pursuant to section IV, or by trustee appointed pursuant to
Section V, of this Final Judgment, shall include the entire Divestiture
Assets and shall be accomplished in such a way as to satisfy the United
States, in its sole discretion, that the Divestiture Assets can and
will be used by the Acquirer as part of a viable, ongoing business
engaged in the sale of Beer; provided that it is demonstrated to the
sole satisfaction of the United States that the Divestiture Assets will
remain viable and the divestiture of such assets will remedy the
competitive harm alleged in the Complaint. The divestiture, whether
pursuant to section IV or section V of this Final Judgment,
(1) Shall be made to an Acquirer that, in the United States's sole
judgment, has the intent and capability (including the necessary
managerial, operational, technical, and financial capability) of
competing effectively in the sale of Beer; and
(2) Shall be accomplished so as to satisfy the United States, in
its sole discretion, that none of the terms of any agreement between
the Acquirer and Defendants give Defendants the ability unreasonably to
raise the Acquirer's costs, to lower the Acquirer's efficiency, or
otherwise to interfere in the ability of the Acquirer to compete
effectively.
J. As part of a divestiture, and at the option of the Acquirer,
Defendants shall negotiate and consummate a Supply Agreement to supply
Labatt Brand Beer in quantities and units and at prices agreed to
between InBev and the Acquirer with the approval of the United States.
The Supply Agreement shall be no more than three (3) years in length.
The terms and conditions of any such Supply Agreement shall be subject
to the approval of the United States in its sole discretion. During the
term of the Supply Agreement, Defendants shall establish, implement,
and maintain procedures and take such other steps that are reasonably
necessary to prevent the disclosure of the quantities and units of
Labatt Brand Beer ordered or purchased from the Defendants by the
Acquirer, the prices paid by the Acquirer, and any other competitively
sensitive information regarding the Defendants' or the Acquirer's
performance under the Supply Agreement, to any employee of the
Defendants that has direct responsibilities for marketing,
distributing, or selling Beer in competition with the Acquirer in the
United States.
V. Appointment of Trustee
A. If Defendants have not divested the Divestiture Assets within
the time period specified in section IV(A), Defendants shall notify the
United States of that fact in writing. Upon application of the United
States, the Court shall appoint a trustee selected by the United States
and approved by the Court to effect the divestiture of the Divestiture
Assets.
[[Page 71687]]
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell the Divestiture Assets. The
trustee shall have the power and authority to accomplish the
divestiture to an Acquirer acceptable to the United States at such
price and on such terms as are then obtainable upon reasonable effort
by the trustee, subject to the provisions of sections IV, V, and VI of
this Final Judgment, and shall have such other powers as this Court
deems appropriate. Subject to section V(D) of this Final Judgment, the
trustee may hire at the cost and expense of Defendants any investment
bankers, attorneys, or other agents, who shall be solely accountable to
the trustee, reasonably necessary in the trustee's judgment to assist
in the divestiture.
C. Defendants shall not object to a sale by the trustee on any
ground other than the trustee's malfeasance. Any such objection by
Defendants must be conveyed in writing to the United States and the
trustee within ten (10) calendar days after the trustee has provided
the notice required under section VI.
D. The trustee shall serve at the cost and expense of Defendants,
on such terms and conditions as the United States approves, and shall
account for all monies derived from the sale of the assets sold by the
trustee and all costs and expenses so incurred. After approval by the
Court of the trustee's accounting, including fees for its services and
those of any professionals and agents retained by the trustee, all
remaining money shall be paid to Defendants and the trust shall then be
terminated. The compensation of the trustee and any professionals and
agents retained by the trustee shall be reasonable in light of the
value of the Divestiture Assets and based on a fee arrangement
providing the trustee with an incentive based on the price and terms of
the divestiture and the speed with which it is accomplished, but
timeliness is paramount.
E. Defendants shall use their best efforts to assist the trustee in
accomplishing the required divestiture. The trustee and any
consultants, accountants, attorneys, and other persons retained by the
trustee shall have full and complete access to the personnel, books,
records, and facilities of the business to be divested, and Defendants
shall develop financial and other information relevant to such business
as the trustee may reasonably request, subject to reasonable protection
for trade secrets or other confidential research, development, or
commercial information. Defendants shall take no action to interfere
with or to impede the trustee's accomplishment of the divestiture.
F. After its appointment, the trustee shall file monthly reports
with the United States and the Court setting forth the trustee's
efforts to accomplish the divestiture ordered under this Final
Judgment. To the extent such reports contain information that the
trustee deems confidential, such reports shall not be filed in the
public docket of the Court. Such reports shall include the name,
address, and telephone number of each person who, during the preceding
month, made an offer to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was contacted or made an
inquiry about acquiring any interest in the Divestiture Assets, and
shall describe in detail each contact with any such person. The trustee
shall maintain full records of all efforts made to divest the
Divestiture Assets.
G. If the trustee has not accomplished the divestiture ordered
under this Final Judgment within six (6) months after its appointment,
the trustee shall promptly file with the Court a report setting forth
(1) the trustee's efforts to accomplish the required divestiture; (2)
the reasons, in the trustee's judgment, why the required divestiture
has not been accomplished; and (3) the trustee's recommendations. To
the extent such reports contain information that the trustee deems
confidential, such reports shall not be filed in the public docket of
the Court. The trustee shall at the same time furnish such report to
the United States, which shall have the right to make additional
recommendations consistent with the purpose of the trust. The Court
thereafter shall enter such orders as it shall deem appropriate to
carry out the purpose of this Final Judgment, which may, if necessary,
include extending the trust and the term of the trustee's appointment
by a period requested by the United States.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following execution of a definitive
divestiture agreement, Defendants or the trustee, whichever is then
responsible for effecting the divestiture required herein, shall notify
the United States of any proposed divestiture required by section IV or
V of this Final Judgment. If the trustee is responsible, it shall
similarly notify Defendants. The notice shall set forth the details of
the proposed divestiture and list the name, address, and telephone
number of each person not previously identified who offered or
expressed an interest in or desire to acquire any ownership interest in
the Divestiture Assets, together with full details of the same.
B. Within fifteen (15) calendar days of receipt by the United
States of such notice, the United States may request from Defendants,
the proposed Acquirer, any other third party, or the trustee, if
applicable, additional information concerning the proposed divestiture,
the proposed Acquirer, and any other potential Acquirer. Defendants and
the trustee shall furnish any additional information requested within
fifteen (15) calendar days of the receipt of the request, unless the
parties shall otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice, or
within twenty (20) calendar days after the United States has been
provided the additional information requested from Defendants, the
proposed Acquirer, any third party, and the trustee, whichever is
later, the United States shall provide written notice to Defendants and
the trustee, if there is one, stating whether or not it objects to the
proposed divestiture. If the United States provides written notice that
it does not object, the divestiture may be consummated, subject only to
Defendants' limited right to object to the sale under section V(C) of
this Final Judgment. Absent written notice that the United States does
not object to the proposed Acquirer or upon objection by the United
States, a divestiture proposed under section IV or Section V shall not
be consummated. Upon objection by Defendants under section V(C), a
divestiture proposed under section V shall not be consummated unless
approved by the Court.
VII. Financing
Defendants shall not finance all or any part of any purchase made
pursuant to section IV or V of this Final Judgment.
VIII. Hold Separate
Until the divestiture required by this Final Judgment has been
accomplished, Defendants shall take all steps necessary to comply with
the Hold Separate Stipulation and Order entered by this Court.
Defendants shall take no action that would jeopardize the divestiture
ordered by this Court.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter, and every thirty (30) calendar days thereafter until
the divestiture has been completed under section IV or V, Defendants
shall deliver to the United States an affidavit as to the fact and
manner of its compliance with section
[[Page 71688]]
IV or V of this Final Judgment. Each such affidavit shall include the
name, address, and telephone number of each person who, during the
preceding thirty (30) calendar days, made an offer to acquire,
expressed an interest in acquiring, entered into negotiations to
acquire, or was contacted or made an inquiry about acquiring, any
interest in the Divestiture Assets, and shall describe in detail each
contact with any such person during that period. Each such affidavit
shall also include a description of the efforts Defendants have taken
to solicit buyers for the Divestiture Assets, and to provide required
information to a prospective Acquirer, including the limitations, if
any, on such information. Assuming the information set forth in the
affidavit is true and complete, any objection by the United States to
information provided by Defendants, including limitation on
information, shall be made within fourteen (14) calendar days of
receipt of such affidavit.
B. Within twenty (20) calendar days of the filing of the Complaint
in this matter, Defendants shall deliver to the United States an
affidavit that describes in reasonable detail all actions Defendants
have taken and all steps Defendants have implemented on an ongoing
basis to comply with section VIII of this Final Judgment. Defendants
shall deliver to the United States an affidavit describing any changes
to the efforts and actions outlined in Defendants' earlier affidavits
filed pursuant to this section within fifteen (15) calendar days after
the change is implemented.
C. Defendants shall keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after such
divestiture has been completed.
X. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether this Final Judgment should be
modified or vacated, and subject to any legally recognized privilege,
from time to time authorized representatives of the United States
Department of Justice Antitrust Division (``DOJ'') including
consultants and other persons retained by the United States, shall,
upon written request of an authorized representative of the Assistant
Attorney General in charge of the Antitrust Division, and on reasonable
notice to Defendants, be permitted:
(1) Access during Defendants' office hours to inspect and copy, or
at the option of the United States, to require Defendants to provide
hard copy or electronic copies of, all books, ledgers, accounts,
records, data, and documents in the possession, custody, or control of
Defendants, relating to any matters contained in this Final Judgment;
and
(2) To interview, either informally or on the record, Defendants'
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews shall be subject to the
reasonable convenience of the interviewee and without restraint or
interference by Defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
Defendants shall submit written reports or respond to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If, at the time information or documents are furnished by
Defendants to the United States, Defendants represent and identify in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure, and Defendants mark each pertinent
page of such material, ``Subject to claim of protection under Rule
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United
States shall give Defendants ten (10) calendar days' notice prior to
divulging such material in any legal proceeding (other than a grand
jury proceeding).
XI. No Reacquisition
Defendants may not reacquire any part of the Divestiture Assets
during the term of this Final Judgment.
XII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XIII. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry.
XIV. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, and
any comments thereon and the United States's responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and responses to comments filed with
the Court, entry of this Final Judgment is in the public interest.
Date:------------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16.
-----------------------------------------------------------------------
United States District Judge
The United States District Court for the District of Columbia
United States of America, Plaintiff, v. InBev N.V./S.A., InBev USA
LLC, and Anheuser-Busch Companies, Inc., Defendants. Case: 1:08-cv-
01965 Assigned To: Robertson, James Assign. Date: 11/14/2008
Description: Antitrust
Competitive Impact Statement
Plaintiff United States of America (``United States''), pursuant to
section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
On November 14, 2008, the United States filed a civil antitrust
Complaint seeking to enjoin the proposed acquisition of Anheuser-Busch
Companies, Inc. (``Anheuser-Busch'') by InBev N.V./S.A. (``InBev'').
The Complaint alleges that the likely effect of the merger would be to
lessen competition substantially in the market for beer in the
metropolitan areas of Buffalo, Rochester, and Syracuse, New York, in
violation of section 7 of the Clayton Act, 15 U.S.C. 18. In each of
these metropolitan areas, the transaction would combine two of the
three major manufacturers of beer, creating a highly concentrated
market. The transaction would also eliminate substantial head-to-head
competition between InBev and
[[Page 71689]]
Anheuser-Busch in these regions. This loss of competition likely would
result in higher beer prices to consumers in those areas. At the same
time that the Complaint was filed, the United States also filed a Hold
Separate Stipulation and Order (``Stipulation'') and a proposed Final
Judgment, which are designed to eliminate the anticompetitive effects
of the merger.
Under the proposed Final Judgment, which is explained more fully in
section III, Defendants are required to divest InBev USA d/b/a Labatt
USA (``IUSA''), a Delaware limited liability company and wholly-owned
subsidiary of InBev with its headquarters in Buffalo, New York, and a
perpetual, assignable, transferable, and fully-paid-up license and the
other rights needed to brew, promote, market, distribute, and sell
Labatt brand beer for consumption in the United States (hereafter the
``Divestiture Assets''). Under the terms of the Stipulation, Defendants
will take certain steps to ensure that the Divestiture Assets are
operated as an ongoing, economically viable, and independent
competitive business in the brewing, promotion, marketing,
distribution, and sale of Labatt brand beer for consumption in the
United States.
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. Events Giving Rise to the Alleged Violation
A. Defendants and the Proposed Transaction
On July 13, 2008, Anheuser-Busch and InBev entered into an
Agreement and Plan of Merger pursuant to which InBev intends to acquire
100 percent of the voting securities of Anheuser-Busch in a transaction
valued at approximately $52 billion. The proposed acquisition of
Anheuser-Busch by InBev would create the world's largest brewing
company with annual revenues of over $36 billion.
Anheuser-Busch, a Delaware corporation headquartered in St. Louis,
Missouri, is the largest brewing company in the United States,
accounting for approximately 50 percent of beer sales in the country.
Anheuser-Busch's best-selling brands are Budweiser and Bud Light. In
the Buffalo and Rochester metropolitan areas, Anheuser-Busch accounts
for approximately 24 percent of beer sales.\1\ In the Syracuse
metropolitan area, Anheuser-Busch accounts for approximately 28 percent
of beer sales.
---------------------------------------------------------------------------
\1\ The market shares for the Buffalo, Rochester, and Syracuse
metropolitan areas are calculated from weekly AC Nielsen grocery
store scanner data. This data is not available separately for
Buffalo and Rochester, and so the market share calculations are
based on a combined Buffalo/Rochester area. Information Resources,
Inc. (``IRI'') compiles drug store scanner data separately for
Buffalo and Rochester, and the IRI data indicates that the AC
Nielsen data may underestimate the Defendants' shares of beer sales
in Buffalo and Rochester. Based on IRI drug store data, in Buffalo,
Anheuser-Busch accounts for 32 percent of beer sales and InBev
accounts for 23 percent of beer sales. The IRI drug store data shows
that, in Rochester, Anheuser-Busch accounts for 33 percent of beer
sales and InBev accounts for 19 percent of beer sales.
---------------------------------------------------------------------------
Belgium-based InBev is the second-largest brewer in the world.
InBev's best-selling brands in the United States are Labatt, Stella
Artois, Bass, and Becks. Although InBev's share of beer sales
nationwide is small, in the Buffalo, Rochester, and Syracuse
metropolitan areas, it is substantial. In Buffalo and Rochester,
InBev's wholly-owned subsidiary, IUSA, accounts for at least 21 percent
of beer sales. In Syracuse, IUSA accounts for approximately 13 percent
of beer sales. Combined, IUSA and Anheuser-Busch control at least 45
percent of beer sales in Buffalo and Rochester and approximately 41
percent of beer sales in Syracuse. MillerCoors, the third significant
competitor, accounts for approximately 26 percent of sales in Buffalo
and Rochester and 28 percent of sales in Syracuse. No other competitor
sells more than 5 percent of the beer sold in these areas.
B. Competitive Effects of the Proposed Merger
1. Beer Is the Relevant Product Market
The Complaint alleges that beer is a line of commerce and a
relevant product market within the meaning of section 7 of the Clayton
Act. Beer is an alcoholic beverage that is substantially differentiated
from other alcoholic beverages by taste, quality, alcohol content,
image and price. Neither the price of wine nor the price of spirits
significantly influences or constrains the price of beer. Purchasers of
beer are unlikely to reduce their purchases of beer in response to a
small but significant and non-transitory increase in the price of beer
to an extent that would make such a price increase unprofitable. The
manufacture and sale of beer is the relevant product market.
2. The Metropolitan Areas of Buffalo, Rochester, and Syracuse, New
York, Are Relevant Geographic Markets
As alleged in the Complaint, the metropolitan areas of Buffalo,
Rochester, and Syracuse, New York, constitute three separate, relevant
geographic markets for the sale of beer within the meaning of the
Clayton Act. Beer is sold to consumers in local geographic markets
through a three-tier distribution system in New York and throughout the
United States. Brewers such as InBev and Anheuser-Busch sell beer to
wholesalers (often known as ``distributors''), which, in turn, sell to
retailers. In New York and throughout the United States, distributors'
contracts with brewers contain territorial limits and prohibit
distributors from selling beer outside their respective territories.
Because distributors cannot sell a brewer's products outside their
territories without violating their contracts with the brewer, brewers
can charge different prices in different locales for the same package
and brand of beer, and individual distributors (and retailers) cannot
defeat such price differences through arbitrage. Consequently, brewers
develop beer pricing and promotion strategies on a ``local'' market
basis, based on an assessment of local competitive conditions, local
demand for the brewers' beer, and local brand strength. Brewers selling
beer in a metropolitan area would be able to increase the price of beer
by a small but significant and non-transitory amount without losing
sufficient sales to make such a price increase unprofitable.
3. Anticompetitive Effects of the Proposed Merger
As alleged in the Complaint, the Buffalo, Rochester, and Syracuse
beer markets are highly concentrated. The top three brewers--Anheuser-
Busch, MillerCoors, and IUSA--respectively possess approximately 24
percent, 26 percent, and 21 percent of the Buffalo and Rochester beer
markets. In the Syracuse geographic market, the same three brewers
respectively possess approximately 28 percent, 28 percent, and 13
percent of the beer market.
If the proposed acquisition is permitted to occur, the beer markets
in the Buffalo, Rochester, and Syracuse geographic markets would become
substantially more concentrated. Combined, Defendants would account for
at least 45 percent of beer sales in Buffalo and Rochester and 41
percent in Syracuse, and the top two brewers--Defendants and
MillerCoors--would control about 70 percent of sales in each
[[Page 71690]]
market. No other competitor would account for more than 5 percent of
sales in these markets. Using a concentration measure called the
Herfindahl-Herschman Index (or ``HHI'', defined and explained in
Appendix A), the proposed acquisition would produce an HHI increase of
approximately 1,020 and a post-acquisition HHI of approximately 2,790
in the Buffalo and Rochester markets. In Syracuse, the proposed
acquisition would produce an HHI increase of approximately 750 and a
post-acquisition HHI of approximately 2,580.
The transaction would also eliminate significant head-to-head
pricing and promotion competition between InBev's Labatt brands and
Anheuser-Busch's Budweiser brands in each of the three geographic
markets. The significant increase in market concentration that the
transaction would produce in the three geographic markets, combined
with the loss of head-to-head competition, is likely to substantially
lessen competition, in violation of section 7 of the Clayton Act,
resulting in higher prices for beer.
4. Neither Supply Responses Nor Entry Would Prevent the Likely
Anticompetitive Effects of the Proposed Merger
The Complaint alleges that supply responses from competitors or
potential competitors would not likely prevent the anticompetitive
effects of the proposed acquisition of Anheuser-Busch by InBev.
Competition from other competitors is insufficient to prevent a small
but significant and non-transitory price increase implemented by the
Defendants in those markets from being profitable. Entry of a
significant new competitor into the marketplace is particularly
unlikely because a new entrant would not possess the highly-important
brand acceptance necessary to succeed.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment is designed to eliminate the
anticompetitive effects identified in the Complaint by requiring the
Defendants to divest IUSA and all of the real and intellectual property
rights required to brew, promote, market, distribute, and sell Labatt
brand beer for consumption in the United States. These rights include
an exclusive, perpetual, assignable, transferable, and fully-paid-up
license that grants the Acquirer the rights to (a) brew Labatt brand
beer in Canada and/or the United States, (b) promote, market,
distribute, and sell Labatt brand beer for consumption in the United
States, and (c) use all of the intellectual property rights associated
with the marketing, sale, and distribution of Labatt brand beer for
consumption in the United States, including the trade dress, the
advertising, the licensed marks, and such molds and designs as are used
in the manufacturing process of bottles for the Labatt brand beer.
Final Judgment II(F) and IV(A).
Further, to ensure that the Acquirer can brew Labatt beer without
any loss of quality or consistency, the proposed Final Judgment
requires Defendants to sell to the Acquirer all production know-how for
Labatt brand beer, including recipes, packaging and marketing and
distribution know-how and documentation. Final Judgment III(F) and
IV(A). The recipes required to be divested include all formulae,
recipes, processes and specifications specified * * * for use in
connection with the production and packaging of Labatt Brand Beer in
the United States, including * * * yeast, brewing processes, equipment
and material specifications, trade and manufacturing secrets, know-how
and scientific and technical information * * *. Final Judgment II(M).
The proposed Final Judgment ensures the uninterrupted sale of
Labatt brand beer in the United States by requiring Defendants to
divest all rights pursuant to distributor contracts and, at the option
of the Acquirer, to negotiate a transition services agreement of up to
one year in length, and to enter into a supply contract for Labatt
brand beer sufficient to meet all or part of the Acquirer's needs for a
period of up to three years. Final Judgment III(F)(iv) and IV(H). If
the Defendants and the Acquirer enter into such a supply contract, the
proposed Final Judgment will prevent the exchange of competitively
sensitive information between them; the Defendants are required to
implement procedures that will prevent the disclosure of the quantities
and units of Labatt brand beer ordered or purchased from the Defendants
by the Acquirer, the prices paid by the Acquirer, and any other
competitively sensitive information regarding the Defendants' or the
Acquirer's performance under the Supply Agreement, to any employee of
the Defendants who has direct responsibilities for marketing,
distributing, or selling beer in competition with the Acquirer in the
United States. Final Judgment IV(J).
To ensure that the Acquirer can continue to develop, grow, and
improve the Labatt brand, the proposed Final Judgment requires
Defendants to grant to the Acquirer a perpetual license that will allow
the Acquirer to brew, distribute, market, and sell ``extensions'' of
Labatt brand beer (e.g., a ``Light'' or ``Ice'' version). The extension
of beer brands has constituted a significant form of competition among
beer brewers in recent years.
The divestiture remedies the anticompetitive effects of the merger
by requiring InBev to divest the Divestiture Assets to an independent,
viable acquirer that can compete with the merged Anheuser-Busch/InBev.
Defendants are required to satisfy the United States in its sole
discretion that the Divestiture Assets will be operated as a viable,
ongoing business that will compete effectively in the relevant markets,
and that the divestiture will successfully remedy the otherwise
anticipated anticompetitive effects of the proposed merger. Defendants
must take all reasonable steps necessary to accomplish the divestiture
quickly and shall cooperate with prospective acquirers.
The proposed Final Judgment requires Defendants, within ninety (90)
days after the filing of the Complaint or five (5) calendar days after
notice of the entry of this Final Judgment by the Court, whichever is
later, to divest the Divestiture Assets, which will be used by the
acquirer as part of a viable, ongoing business of brewing, promoting,
marketing, distributing and selling Labatt brand beer for consumption
in the United States.
In the event that Defendants do not accomplish the divestiture
within the periods prescribed in the proposed Final Judgment, the Final
Judgment provides that the Court will appoint a trustee selected by the
United States to effect the divestiture. If a trustee is appointed, the
proposed Final Judgment provides that Defendants will pay all costs and
expenses of the trustee. The trustee's commission will be structured so
as to provide an incentive for the trustee based on the speed with
which the divestiture is accomplished and the price and terms obtained.
After his or her appointment becomes effective, the trustee will file
monthly reports with the Court and the United States setting forth his
or her efforts to accomplish the divestiture. If the requisite
divestiture has not been accomplished at the end of the trustee's term,
the trustee and the United States will make recommendations to the
Court, which shall enter such orders as appropriate in order to carry
out the purpose of the trust, including extending the trust or the term
of the trustee's appointment.
Until the divestiture under the proposed Final Judgment has been
[[Page 71691]]
accomplished, Defendants are required to comply with a Hold Separate
Stipulation and Order. Pursuant to this Stipulation and Order, the
Defendants are required to preserve, maintain, and operate the
Divestiture Assets as an ongoing business, and prohibited from taking
any action that would jeopardize the divestiture required by the
proposed Final Judgment.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against the Defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States Department of Justice, which
remains free to withdraw its consent to the proposed Final Judgment at
any time prior to the Court's entry of judgment. The comments and the
response of the United States will be filed with the Court and
published in the Federal Register. Written comments should be submitted
to: Joshua H. Soven, Chief, Litigation I Section, 1401 H Street, NW.,
Suite 4000, Antitrust Division, U.S. Department of Justice, Washington,
DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against Defendants. The
United States could have sought preliminary and permanent injunctions
against the proposed merger. The United States is satisfied, however,
that the divestiture of assets described in the proposed Final Judgment
will preserve competition for the provision of beer in the relevant
markets identified by the United States. Thus the proposed Final
Judgment would achieve all or substantially all of the relief the
United States would have obtained through litigation, but avoids the
time, expense and uncertainty of a full trial on the merits of the
Complaint.
VII. Standard of Review Under the APPA For the Proposed Final Judgment
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a sixty-day comment period, after which the court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the court, in accordance with the statute as amended in 2004, is
required to consider:
(A) The competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous, and any other
competitive considerations bearing upon the adequacy of such judgment
that the court deems necessary to a determination of whether the
consent judgment is in the public interest; and
(B) The impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and individuals
alleging specific injury from the violations set forth in the complaint
including consideration of the public benefit, if any, to be derived
from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors,
the court's inquiry is necessarily a limited one as the government is
entitled to ``broad discretion to settle with the defendant within the
reaches of the public interest.'' United States v. Microsoft Corp., 56
F.3d 1448, 1461 (D.C. Cir. 1995); see generally United States v. SBC
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public
interest standard under the Tunney Act).\2\
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\2\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns,
489 F. Supp. 2d at 11 (concluding that the 2004 amendments
``effected minimal changes'' to Tunney Act review).
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As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other things,
the relationship between the remedy secured and the specific
allegations set forth in the government's complaint, whether the decree
is sufficiently clear, whether enforcement mechanisms are sufficient,
and whether the decree may positively harm third parties. See
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the
relief secured by the decree, a court may not ``engage in an
unrestricted evaluation of what relief would best serve the public.''
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152
F. Supp. 2d 37, 40 (D.D.C. 2001). Courts have held that:
[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\3\
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\3\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''). See generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
``reaches of the public interest'').
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[[Page 71692]]
In determining whether a proposed settlement is in the public
interest, a district court ``must accord deference to the government's
predictions about the efficacy of its remedies, and may not require
that the remedies perfectly match the alleged violations.'' SBC
Commc'ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461
(noting the need for courts to be ``deferential to the government's
predictions as to the effect of the proposed remedies''); United States
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003)
(noting that the court should grant due respect to the United States'
prediction as to the effect of proposed remedies, its perception of the
market structure, and its views of the nature of the case).
Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be approved
even if it falls short of the remedy the court would impose on its own,
as long as it falls within the range of acceptability or is ``within
the reaches of public interest.'' United States v. Am. Tel. & Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky.
1985) (approving the consent decree even though the court would have
imposed a greater remedy). To meet this standard, the United States
``need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns,
489 F. Supp. 2d at 17.
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States did not pursue. Id.
at 1459-60. As this Court recently confirmed in SBC Communications,
courts ``cannot look beyond the complaint in making the public interest
determination unless the complaint is drafted so narrowly as to make a
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[n]othing in
this section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2). The language wrote into the statute
what Congress intended when it enacted the Tunney Act in 1974, as
Senator Tunney explained: ``[t]he court is nowhere compelled to go to
trial or to engage in extended proceedings which might have the effect
of vitiating the benefits of prompt and less costly settlement through
the consent decree process.'' 119 Cong. Rec. 24,598 (1973) (statement
of Senator Tunney). Rather, the procedure for the public interest
determination is left to the discretion of the court, with the
recognition that the court's ``scope of review remains sharply
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC
Commc'ns, 489 F. Supp. 2d at 11.\4\
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\4\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH)
`61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt
failure of the government to discharge its duty, the Court, in
making its public interest finding, should * * * carefully consider
the explanations of the government in the competitive impact
statement and its responses to comments in order to determine
whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6
(1973) (``Where the public interest can be meaningfully evaluated
simply on the basis of briefs and oral arguments, that is the
approach that should be utilized.'').
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VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: November 14, 2008.
Mitchell H. Glende, Esq.
U.S. Department of Justice, Antitrust Division, Litigation I Section,
1401 H Street, NW., Suite 4000, Washington, DC 20530, (202) 353-3106.
Appendix A
Definition of Herfindahl-Hirschman Index (``HHI'')
``HHI'' means the Herfindahl-Hirschman Index, a commonly accepted
measure of market concentration. It is calculated by squaring the
market share of each firm competing in the market and then summing the
resulting numbers. For example, for a market consisting of four firms
with shares of 30 percent, 30 percent, 20 percent, and 20 percent, the
HHI is 2600 (30\2\ + 30\2\ +20\2\ + 20\2\ = 2600). The HHI takes into
account the relative size distribution of the firms in a market and
approaches zero when a market consists of a large number of small
firms. The HHI increases both as the number of firms in the market
decreases and as the disparity in size between those firms increases.
Markets in which the HHI is between 1000 and 1800 points are
considered to be moderately concentrated, and those in which the HHI is
in excess of 1800 points are considered to be highly concentrated. See
Horizontal Merger Guidelines 1.51 (revised Apr. 8, 1997). Transactions
that increase the HHI by more than 100 points in concentrated markets
presumptively raise antitrust concerns under the guidelines issued by
the U.S. Department of Justice and Federal Trade Commission. See id.
[FR Doc. E8-27970 Filed 11-24-08; 8:45 am]
BILLING CODE 4410-11-P