E-Malt.com News article: United States: AB InBev gains partial victory in case against Illinois Liquor Control Commission

A federal judge in Chicago handed a partial victory to the U.S. arm of AB InBev NV, ruling that an Illinois beer-distribution law discriminates against out-of-state brewers, The Wall Street Journal reported on September, 8.

At issue is the brewer’s bid to acquire a controlling stake in its largest Chicago-area beer distributor, City Beverage, which could help the brewing giant compete more effectively in one of the nation's major beer markets. The Illinois Liquor Control Commission blocked the acquisition in March on the ground that a brewer based outside the state can't control an Illinois distributor.

The world’s No. 1 beer maker - whose U.S. division is based in St. Louis - immediately filed suit in U.S. District Court. A judge said at the end of last week that the Illinois law violates the Commerce Clause of the U.S. Constitution because it allows in-state brewers to distribute beer directly to retailers while barring the same privilege to beer makers based elsewhere. But he delayed enforcement of his ruling until March to allow the Illinois legislature to address the "constitutional defect."

The judge, in ruling in the Budweiser maker's favor, cited a landmark 2005 Supreme Court ruling that struck down as discriminatory state laws that allow in-state wine makers to ship wines directly to consumers while denying that right to out-of-state vintners.

But the judge denied AB InBev's request for self-distribution rights, saying the remedy "would be more disruptive" to the existing regulatory framework than the alternative step of blocking in-state brewers from self-distributing. Two small Illinois brewers currently take advantage of that opportunity. The judge said the Illinois legislature has ultimate authority over state public policy and should have until March 31 to act.

"We are pleased that the court found unlawful discrimination by the state but disappointed with the court's decision to further delay the answer to this question by waiting for the Illinois general assembly to possibly act," Gary Rutledge, vice president and general counsel for AB InBev's U.S. unit, said in prepared remarks. "We believe the Illinois general assembly has already spoken on the issue and properly continued to allow all brewers, whether in‑state or out of state, to distribute their beer and participate as a wholesaler."

AB InBev, whose global headquarters is in Leuven, Belgium, is the largest brewer in the world and in the U.S. by sales. The company sought to own the Chicago distributor outright so that it could improve its performance and become more competitive in the Windy City with MillerCoors LLC. MillerCoors, a joint venture of Molson Coors Brewing Co. and SABMiller PLC, is the leading brewer in the Chicago market and the No. 2 beer maker in the U.S.

AB InBev, which makes Bud Light and Stella Artois, owns about a dozen distributors around the U.S. About half of U.S. states allow beer makers to distribute their own beer, but brewers usually choose to sell to independent distributors. Some Wall Street analysts have said they expect the company to try to buy more of its distributors to trim supply-chain costs.


08 September, 2010