E-Malt.com News article: USA: AB InBev concealed plans for price hikes in Group Modelo acquisition, beer drinkers say

A group of beer drinkers asked a California federal court to revive their antitrust suit against Anheuser-Busch InBev’s $20.1 million acquisition of Group Modelo, arguing on December 1 that AB InBev misled the court about future price increases and that plaintiffs are entitled to new discovery, Law 360 reported on December 2.

The plaintiffs claim Constellation Brands Inc., the company that bought Modelo’s US assets to dispel government antitrust concerns, was planning price hikes even as AB InBev’s lawyers said it would be “illogical” to believe Modelo’s prices would rise in tandem with AB InBev’s. The plaintiffs filed a memorandum on December 1 in reply to their motion last month to vacate their claim’s dismissal.

“If defendants had been truthful on the record about price increases, rather than misleading this court and plaintiffs, plaintiffs’ case should have and would have been permitted to proceed,” the memo said.

A California federal judge dismissed the suit in September, ruling that the consumers had failed to offer evidence backing up their assertion that Constellation, which bought Modelo’s US assets to settle an antitrust suit filed by the US Department of Justice, would serve as a "puppet" to the beer giant.

The plaintiffs — a group of nine beer drinkers from California and Missouri — alleged there was a "significant threat" that Constellation would not serve as a competitive restraint against AB InBev and the companies would collude to fix prices, but the court ruled there was a lack of "any factual allegations supporting such a claim.” It also ruled that the threat of future price-fixing was not a valid claim under the Sherman Act.

But in their memo of December 1, the plaintiffs argued that if AB InBev had been more forthcoming, they would have had enough information to state a valid claim in their complaint. They cite an August article in the trade publication Beer Marketer’s Insights claiming Crown, a Modelo importer owned by Constellation, planned to match price increases from AB InBev.

“Crown already told distribs of sizable price hikes in California [and] Florida,” the article said, according to the memo. “Crown also stated publicly that its price gaps are now good. That means when [AB InBev] goes up, it is much more likely to go up to maintain those gaps."

This is counter to statements made by a Constellation executive implying that Constellation planned to continue Modelo’s strategy of resisting matching AB InBev’s increases, the plaintiffs said.

“Defendants’ representations were clearly intended to lead the court to believe that the threatened anti-competitive effects of the transaction, which plaintiffs raised, would not occur, though they were being implemented at the same time,” the memo said.
AB InBev countered that the court’s dismissal of the case centered on whether AB InBev would be able to control Constellation, and did not base its ruling on the statements plaintiffs claim are misrepresentations, according to a response filed last month to the motion to vacate. AB InBev also argued that the information cited in Beer Marketer’s Insights was available about a month before the court dismissed the case, “leaving ample opportunity” to bring it to the courts attention, AB InBev said.

Belgium-based AB InBev first announced its plans to acquire Mexico-based Modelo in June 2012, but the DOJ balked and sued in January to block the combination, saying removing Modelo from the competitive landscape would make it easier for the remaining brewers to engage in "coordinated leader-follower pricing strategies in the future."

To appease the DOJ, AB InBev agreed to sell off Modelo’s US assets — its Piedras Negras brewery, its stake in the sole US importer of Modelo's brands, licenses for Modelo trademarks and other assets — to Constellation, as well as grant Constellation perpetual rights to Modelo’s brands. The companies reached a tentative agreement to settle the DOJ suit in April.

Representatives for the parties did not immediately respond on December 2 to requests for comment.

The beer drinkers are represented by the Alioto Law Firm, the Law Offices of Jeffrey K. Perkins, the Law Offices of Theodore Schwartz, the Law Offices of John Boone, Minami Tamaki LLP, Messina Law Firm PC and Peter Sullivan.

Anheuser-Busch InBev SA/NV is represented by Allen Ruby, Steven Sunshine, Ian John, James Keyte and Karen Lent of Skadden Arps Slate Meagher & Flom LLP.

Constellation Brands Inc. is represented by Daniel Alberti, Ray Jacobsen, Jon Dubrow and Margaret Warner of McDermott Will & Emery LLP.

The case is Steven Edstrom et al. v. Anheuser-Busch InBev SA/NV et al., case number 3:13-cv-01309, in the U.S. District Court for the Northern District of California.


04 December, 2013