Mega beer merger faces US Senate antitrust grilling this week
THE biggest beer merger in history faces its first official interrogation this week when the CEO of AB InBev, Carlos Brito, appears before a US Senate hearing on Tuesday.
He will answer questions about the impact of the $106billion (about R1.5-trillion) acquisition of SABMiller on competition in the US beer industry. No SABMiller executives have been asked to attend.
Similar interrogations are expected in other jurisdictions, including South Africa, where the Competition Tribunal hearings into the deal will be open to the public.
This week’s Senate hearings will be hosted by the judiciary committee’s subcommittee on antitrust, competition policy and consumer rights. Two top lawyers on the committee called for a hearing within days of the deal being announced in midOctober.
“The proposal to merge the world’s two biggest beer producers raises serious antitrust concerns for the $100-billion-ayear beer industry,” said one of the lawyers, Amy Klobuchar.
“It is critical that we examine this deal closely to see how it will affect the price of a pint, and if it will harm the craft brewers that are serving up world-class beers and jobs across the country.”
The hearings are going ahead despite plans to sidestep US competition authorities by announcing the sale of SABMiller’s North American operations to Molson Coors.
Eleanor Fox, professor of trade regulation at New York University School of Law and an adviser to the South African competition authorities, said this type of Senate hearing was not uncommon.
“They will sometimes vet very high-profile mergers, especially when they think that the antitrust [competition] aucompanies’ thorities will do nothing.”
Fox said the Senate could not make rules or tell the antitrust authorities what to do. “But they can sometimes stir up a lot of public sentiment and their pressure can cause the authorities to think twice.”
She noted that the merging pre-emptive move to spin off assets where there were significant overlaps often satisfied the antitrust authorities.
Also in the US, a group of consumers has launched legal action to block the merger. The lawsuit, filed on Tuesday, alleges that the acquisition will harm US beer consumers “by enhancing ABI’s ability to unilaterally-raise-the-prices-of SAB and other brands it will own post-acquisition, and diminish ABI’s incentive to innovate with respect to new brands, products and packaging”.
A lawyer for the plaintiffs said the merged entity would be too powerful and would negatively affect beer choices, quality and price.
Recent developments indicate that SABMiller will be significantly smaller by the time the deal is finalised. In addition to the sale of MillerCoors and the possible disposal of Snow in China, AB InBev has announced that it is also exploring the sale of part of SABMiller’s European business.
Although Grolsch and Peroni have been put up for sale, the announcement notes that any sale might include more than these brands. A sale would be conditional upon finalising the SABMiller acquisition. Analysts have raised concerns that given the possibility that finalising the transaction will take more than a year, the sense of uncertainty could affect productivity.
In South Africa, the merger has provided the public with access to detailed documentation relating to a corporate transaction for the first time.
AB InBev’s website contains a section devoted to the merger, which, among other things, allows interested parties to see the terms of the irrevocable undertakings provided by each of the SABMiller board members.
It also contains documents outlining “offer-related arrangements”, which highlight the complexity of this global merger.
The “common interest, confidentiality and joint defence agreement” outlines the way in which all of the parties and their advisers should co-operate in finalising the transaction. Joint positions should be established to secure regulatory approval, and joint responses prepared “to requests for information from government regulators . . . and any challenge to the proposed transaction”.
On Friday, SABMiller closed at R876, suggesting the market believes any regulatory challenge could be overcome.
The lawsuit alleges the acquisition will harm US beer consumers