Bloomberg News

AB InBev Part of Record Flurry of Obama Antitrust Suits

February 04, 2013

AB InBev Challenge by U.S. Adds to Record Flurry of Suits

Bottles of Grupo Modelo SAB Corona Light brand beer sit in a box during deliveries in Mexico City. The Justice Department’s suit to block the AB InBev-Modelo merger is the seventh antitrust case currently in litigation. Photographer: Susana Gonzalez/Bloomberg

The lawsuit challenging Anheuser- Busch InBev NV (ABI)’s $20.1 billion proposed takeover of Grupo Modelo SAB is part of a record-breaking U.S. docket of civil antitrust cases, reflecting the Obama administration’s greater willingness to intervene in markets, according to some antitrust scholars.

“It represents an attitude of more skepticism of the efficiency benefits of merging that are often claimed by the parties in the transaction,” said John Connor, a professor of industrial economics at Purdue University. “There’s been a greater willingness to challenge mergers than there was” in the administration of former President George W. Bush.

The Justice Department’s suit to block the AB InBev-Modelo merger is the seventh antitrust case currently in litigation.

“That’s the most ever at one time,” Gina Talamona, a department spokeswoman, said in an interview. “If the parties are not willing to offer a remedy or enter into a settlement that resolves our competitive concerns, we are prepared to litigate.”

Antitrust officials in the Bush administration placed less emphasis on the market impact of mergers and focused instead on pursuit of criminal price-fixing, said Albert Foer, president of the Washington-based American Antitrust Institute, a nonprofit group that advocates for market competition.

High-profile cases initiated by Bush-era regulators include an investigation of a conspiracy to fix the price of liquid crystal display panels that resulted in criminal convictions of eight companies, including AU Optronics Corp., the largest Taiwanese producer of LCD panels.

‘Criminal Cartels’

“The Republican approach has tended to focus on criminal cartels,” Foer said. “There’s a lot more variety of cases now than one would have seen in the Bush administration.”

“I don’t know if they would have brought a beer case,” said Foer, whose group published a paper skeptical of consumer benefits from the AB InBev-Modelo combination.

The Justice Department argues in its lawsuit that AB InBev’s proposed acquisition of Modelo would probably result in higher prices for U.S. beer buyers.

AB InBev in a statement on Jan. 31 called the filing “inconsistent with the law” and said it will contest the department’s allegations in court.

The other antitrust cases now being litigated include Bazaarvoice Inc.’s proposed acquisition of PowerReviews Inc. and electronic book pricing agreements involving Apple Inc. and Verlagsgruppe Georg von Holtzbrinck GmbH’s Macmillan unit.

Pricing Agreements

The Justice Department also is challenging most-favored- nation hospital pricing agreements involving Blue Cross Blue Shield of Michigan, alleged inflation of swipe fees charged to merchants who use the American Express Co. payment network and an alleged agreement by EBay Inc. (EBAY:US) not to hire people working for Intuit Inc.

In addition, the Justice Department and New York state Attorney General have sued a joint venture formed by Coach USA Inc. and City Sights LLC alleging that the entity, known as Twin America LLC, has reduced competition and led to higher prices in the New York City tour-bus market.

All seven of the lawsuits are still in pretrial proceedings. Only one case brought by the Obama administration has been tried, according to the Justice Department.

In that case, U.S. District Judge Beryl Howell in October 2011 ruled H&R Block Inc.’s acquisition of 2SS Holdings Inc., violated antitrust laws, killing its proposed $287.5 million purchase of the maker of TaxAct products.

Two months later, AT&T Inc. announced the end of its $39 billion bid to buy T-Mobile USA Inc. following a lawsuit by the Justice Department.

To contact the reporter on this story: Andrew Zajac in Washington at azajac@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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