United States v. Anheuser-Busch InBEV SA/NV, et al.; Public Comments and Response on Proposed Final Judgment, 10782-10798 [2017-03029]
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10782
Federal Register / Vol. 82, No. 30 / Wednesday, February 15, 2017 / Notices
D656,078; D569,776 (‘‘the ’D776
patent’’); D602,834; D582,328; D542,726
(‘‘the ’D726 patent’’); D604,221;
D570,760 (‘‘the ’D760 patent’’);
D544,823 (‘‘the ’D823 patent’’);
D486,437; D562,207; D635,904;
D618,150 (‘‘the ’D150 patent’’);
D585,802; D532,733 (‘‘the ’D733
patent’’); D572,646; D578,949; D638,772
(‘‘the ’D772 patent’’); D522,946;
D638,766; D610,516; 3,614,891;
4,423,458; 3,305,055; 1,807,353;
1,660,727; 657,386; 285,557; 4,076,271
(‘‘the CLS 500 mark’’); 3,224,584 (‘‘the
CLS 550 mark’’); 3,039,265 (‘‘the CLS 63
mark’’); 2,876,643; 2,909,827; 2,654,240
(‘‘the S 550 mark’’); 2,712,292;
2,028,111; 2,699,216 (‘‘the CLS–CLASS
mark’’); 2,716,842 (‘‘the S–CLASS
mark’’); 2,599,862; 2,028,107; 4,669,601;
3,103,610; 2,028,112; 3,100,860;
2,026,254; 2,815,926; 3,221,423;
2,227,526; 3,019,109; 2,837,833 (‘‘the
ML mark’’); and 2,529,332 (‘‘the CLS
mark’’). The complaint further alleges
that a domestic industry exists. The
Commission’s notice of investigation
named as respondents O.E. Wheel
Distributors, LLC (‘‘OEW’’) of Sarasota,
Florida; Amazon.com, Inc. (‘‘Amazon’’)
of Seattle, Washington; A Spec Wheels
& Tires, LLC d/b/a A SPEC Wheels &
Tires (‘‘ASPEC’’) of Hayward, California;
American Tire Distributors Holdings,
Inc. and American Tire Distributors, Inc.
(collectively, ‘‘American Tire’’), both of
Huntersville, North Carolina; Onyx
Enterprises Int’l Corp. d/b/a
CARiD.COM (‘‘Onyx’’) of Cranbury,
New Jersey; Powerwheels Pro, LLC
(‘‘Powerwheels Pro’’) of Waterford,
Michigan; Trade Union International
Inc. d/b/a Topline (‘‘Trade Union’’) of
Montclair, California; and the last
remaining respondents. The Office of
Unfair Import Investigations (‘‘OUII’’) is
also a party to the investigation. Id. As
detailed below, all other respondents
have been terminated from the
investigation based on settlement,
consent order, and/or withdrawal of the
allegations in the complaint.
On August 18, 2016, the Commission
issued notice of its determination not to
review the ALJ’s ID (Order No. 11)
terminating the investigation as to
ASPEC based on a consent order
stipulation and proposed consent order.
On September 30, 2016, the
Commission issued notice of its
determination not to review the ALJ’s ID
(Order No. 14) terminating the
investigation as to Powerwheels Pro
based on a consent order stipulation and
proposed consent order. On November
2, 2016, the Commission issued notice
of its determination not to review the
ALJ’s ID (Order No. 15) terminating the
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investigation as to the ’D726 patent and
the CLS 500 mark based on withdrawal
of the complaint as to these allegations.
On December 2, 2016, the Commission
issued notice of its determination not to
review the ALJ’s ID (Order No. 16)
terminating the investigation as to
American Tire based on a consent order
stipulation, proposed consent order, and
settlement agreements. On December 16,
2016, the Commission issued notice of
its determination not to review the ALJ’s
IDs (Order Nos. 17, 18) terminating the
investigation as to Onyx and Trade
Union, each based on a consent order
stipulation, proposed consent order, and
settlement agreement. On the same date,
the Commission issued notice of its
determination not to review the ALJ’s ID
(Order No. 19) terminating the
investigation as to Amazon based on
withdrawal of the allegations in the
complaint as to Amazon. On January 6,
2017, the Commission issued notice of
its determination not to review the ALJ’s
ID (Order No. 21) terminating the
investigation as to the ’D211, ’D330,
’D776, ’D726, ’D760, ’D823, ’D150,
’D733, and ’D772 patents; and the CLS
500, CLS 550, CLS 63, S 550, CLS–
CLASS, S–CLASS, ML, and CLS marks
based on withdrawal of the complaint as
to these allegations. On February 2,
2017, the Commission issued notice of
its determination not to review the ALJ’s
ID (Order No. 23) terminating the
investigation as to OEW based on a
consent order stipulation, proposed
consent order, and settlement
agreement.
On January 17, 2017, the complainant
filed an unopposed motion to terminate
the investigation as to the last remaining
respondents based on withdrawal of the
allegations in the complaint as to these
respondents. In the motion, the
complainant states that there are no
other agreements, written or oral,
express or implied between the parties
concerning the subject matter of the
investigation.
The ALJ issued the subject ID on
January 23, 2017, granting the motion
for termination. He found that the
motion satisfied Commission Rule
210.21(a)(1) (19 CFR 210.21(a)(1)) and
that there are no extraordinary
circumstances that warrant denying the
motion. No party petitioned for review
of the subject ID.
The Commission has determined not
to review the ID and has terminated the
investigation.
The authority for the Commission’s
determination is contained in section
337 of the Tariff Act of 1930, as
amended, 19 U.S.C. 1337, and in part
210 of the Commission’s Rules of
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Practice and Procedure, 19 CFR part
210.
Issued: February 9, 2017.
By order of the Commission.
Lisa R. Barton,
Secretary to the Commission.
[FR Doc. 2017–02987 Filed 2–14–17; 8:45 am]
BILLING CODE 7020–02–P
INTERNATIONAL TRADE
COMMISSION
[USITC SE–17–006]
Government in the Sunshine Act
Meeting Notice
United
States International Trade Commission.
TIME AND DATE: February 22, 2017 at
11:00 a.m.
PLACE: Room 101, 500 E Street SW.,
Washington, DC 20436, Telephone:
(202) 205–2000.
STATUS: Open to the public.
MATTERS TO BE CONSIDERED:
1. Agendas for future meetings: None.
2. Minutes.
3. Ratification List.
4. Vote in Inv. Nos. 701–TA–556 and
731–TA–1311 (Final) (Truck and Bus
Tires from China). The Commission is
currently scheduled to complete and file
its determinations and views of the
Commission by March 13, 2017.
5. Vote in Inv. No. 731–TA–1091
(Second Review) (Artists’ Canvas from
China). The Commission is currently
scheduled to complete and file its
determination and views of the
Commission by March 2, 2017.
6. Outstanding action jackets: None.
In accordance with Commission
policy, subject matter listed above, not
disposed of at the scheduled meeting,
may be carried over to the agenda of the
following meeting.
AGENCY HOLDING THE MEETING:
By order of the Commission.
Issued: February 9, 2017.
William R. Bishop,
Supervisory Hearings and Information
Officer.
[FR Doc. 2017–03114 Filed 2–13–17; 11:15 am]
BILLING CODE P
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Anheuser-Busch
InBEV SA/NV, et al.; Public Comments
and Response on Proposed Final
Judgment
Pursuant to the Antitrust Procedures
and Penalties Act, 15 U.S.C. 16(b)–(h),
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the United States hereby publishes
below the Response of Plaintiff United
States to Public Comments on the
Proposed Final Judgment in United
States v. Anheuser-Busch InBev SA/NV,
et al., Civil Action No. 1:16–cv–01483–
EGS, which was filed in the United
States District Court for the District of
Columbia on January 13, 2017, together
with copies of the 12 comments
received by the United States.
Pursuant to the Court’s January 19,
2017 minute order, comments were
published electronically and are
available to be viewed and downloaded
at the Antitrust Division’s Web site, at:
https://www.justice.gov/atr/case/us-vanheuser-busch-inbev-sanv-andsabmiller-plc. A copy of the United
States’ response to the comments is also
available at the same location.
Copies of the comments and the
response are available for inspection at
the Department of Justice, Antitrust
Division, Antitrust Documents Group,
450 Fifth Street NW., Suite 1010,
Washington, DC 20530 (telephone: (202)
514–2481), and at the Office of the Clerk
of the United States District Court for
the District of Columbia. Copies of any
of these materials may also be obtained
10783
upon request and payment of a copying
fee.
Patricia A. Brink,
Director of Civil Enforcement.
United States District Court for the
District of Columbia
United States of America, Plaintiff, v.
Anheuser-Busch InBEV, and SABMiller plc,
Defendants.
Civil Action No. 1:16–cv–01483 (EGS)
RESPONSE OF PLAINTIFF UNITED
STATES TO PUBLIC COMMENTS ON
THE PROPOSED FINAL JUDGMENT
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TABLE OF CONTENTS
I. Introduction ...................................................................................................................................................................................................
II. Procedural History .......................................................................................................................................................................................
III. Standard of Judicial Review .......................................................................................................................................................................
IV. The Investigation and the Proposed Final Judgment ...............................................................................................................................
V. Summary of Public Comments and the United States’ Response ............................................................................................................
A. Response to Comments on ABI’s Distribution Practices ...................................................................................................................
1. The Restrictions on ABI’s Distribution Practices Were Designed to Ensure that the Divestiture Adequately Addresses the
Harm Alleged in the Complaint and Identified in the CIS ..........................................................................................................
2. Comments Regarding ABI’s Ability Under Section V.D to Condition Incentives, Programs, or Contractual Terms on ABI’s
Percentage of Beer Industry Sales in a Geographic Area .............................................................................................................
a. Summary of Comments .................................................................................................................................................................
b. Allowing ABI to Condition Incentives, Promotions, or Contractual Terms on ABI’s Percentage of Beer Industry Sales in a
Geographic Area Does Not Undermine the Effectiveness of the Proposed Final Judgment ......................................................
3. Comments Regarding the Allocation to ABI’s Beers of an Independent Distributor’s Annual Spending on Beer Promotions and Incentives ..................................................................................................................................................................
a. Summary of Comments .................................................................................................................................................................
b. Allowing ABI to Require a Proportional Allocation of an Independent Distributor’s Annual Spending on Beer Promotions and Incentives Based on Previous-Year Beer Sales Does Not Undermine the Effectiveness of the Proposed Final
Judgment .........................................................................................................................................................................................
4. Comment Regarding the Effect of the Proposed Final Judgment on Independent Distributors’ Best Efforts to Market, Advertise, Place, Promote, and Sell Third-Party Brewers’ Beer .......................................................................................................
a. Summary of Comments .................................................................................................................................................................
b. Allowing ABI to Require Best Efforts from Independent Distributors to Market and Sell ABI Beer Does Not Conflict With
Independent Distributors Also Providing Best Efforts to Market and Sell Third-Party Brewers’ Beer ....................................
5. Comments Regarding the Restrictions on ABI’s Ability to Disapprove the General Managers and Successor General Managers of Independent Distributors .................................................................................................................................................
a. Summary of Comment ...................................................................................................................................................................
b. Section V.E Appropriately Restricts ABI’s Ability to Disapprove the General Managers and Successor General Managers
of Independent Distributors ...........................................................................................................................................................
6. Comment Regarding Restrictions on ABI’s Exercise of Rights Related to the Transfer of Control, Ownership, or Equity of
Distributors .....................................................................................................................................................................................
a. Summary of Comment ...................................................................................................................................................................
b. Section V.F Appropriately Restricts ABI’s Exercise of Rights Related to the Transfer of Control, Ownership, or Equity of
Distributors .....................................................................................................................................................................................
7. Comments Regarding Restrictions Related to ABI-Owned Distributors .....................................................................................
a. Summary of Comments .................................................................................................................................................................
b. Additional Restrictions Related to ABI-Owned Distributors Are Not Necessary ......................................................................
c. Section V.B Appropriately Restricts ABI’s Ability to Increase the Volume of Beer Sold By ABI-Owned Distributors .........
(i) A Nationwide Restriction is Appropriate ....................................................................................................................................
(ii) Safeguards Exist to Prevent ABI from Circumventing the Cap .................................................................................................
(iii) The Definition of ABI-Owned Distributor is Appropriate .......................................................................................................
8. Comments Requesting that Section V’s Distribution Restrictions Also be Made to Apply to Molson Coors .........................
a. Summary of Comments .................................................................................................................................................................
b. Molson Coors’ Distribution Practices Are Outside the Scope of this Proceeding .....................................................................
9. Comment Related to ABI’s Obligation to Inform Independent Distributors of the Requirements of the Proposed Final
Judgment .........................................................................................................................................................................................
a. Summary of Comment ...................................................................................................................................................................
b. The Proposed Final Judgment Adequately Requires ABI to Inform Independent Distributors of the Requirements of the
Final Judgment ...............................................................................................................................................................................
10. Comment Related to ABI’s Ability to Terminate Independent Distributors ............................................................................
a. Summary of Comment ...................................................................................................................................................................
b. The Proposed Final Judgment Already Prohibits ABI from Terminating an Independent Distributor Based on the Distributor’s Sales, Promotion, Advertising, Marketing, or Retail Placement of a Third-Party Brewer’s Beer .............................
11. Other Comments Requesting that the Restrictions in Section V be Broadened ......................................................................
a. Summary of Comments .................................................................................................................................................................
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TABLE OF CONTENTS—Continued
b. Section V Meaningfully Restricts ABI’s Ability to Reward or Penalize Independent Distributors Based on Their Relationships with Third-Party Brewers .....................................................................................................................................................
B. Comments Related to ABI’s Ownership of Craft Breweries ...............................................................................................................
1. Summary of Comments .................................................................................................................................................................
2. The Proposed Final Judgment Adequately Ensures that the Department May Evaluate ABI’s Acquisition of Craft Brewers
C. Comments Related to the Eden Brewery .............................................................................................................................................
1. Summary of Comments .................................................................................................................................................................
2. The Requested Divestiture of the Eden Brewery is Outside the Scope of this Action .............................................................
D. Other Comments ...................................................................................................................................................................................
1. Comments Related to a Potential Antitrust Compliance Policy .................................................................................................
a. Summary of Comments .................................................................................................................................................................
b. The Absence of a Required Compliance Policy Does Not Undermine the Effectiveness of the Proposed Final Judgment ...
2. Comments Related to the Monitoring Trustee .............................................................................................................................
a. Summary of Comments .................................................................................................................................................................
b. The Monitoring Trustee Already Has the Ability to Monitor ABI’s Compliance with the Proposed Final Judgment ...........
3. Comment Related to the Application of Law to ABI ...................................................................................................................
a. Summary of Comment ...................................................................................................................................................................
b. ABI Remains Subject to All Applicable Antitrust Laws .............................................................................................................
4. Comment Related to ABI’s Ability to Make Recommendations Regarding Retailer Schematics .............................................
a. Summary of Comment ...................................................................................................................................................................
b. The Harms Alleged in the Complaint Do Not Justify the Requested Restrictions on Retail Shelf Schematics ......................
5. Comment Related to ABI’s Ability to Vertically Integrate into Retail Sales ..............................................................................
a. Summary of Comment ...................................................................................................................................................................
b. The Proposed Final Judgment Prevents ABI from Further Vertically Integrating as a Result of the SABMiller Acquisition
and Provides the Department with Advance Notice of, and an Opportunity to Review, Future Acquisitions by ABI ..........
6. Comments Related to Use of Certain Data Sources in the Complaint and Proposed Final Judgment .....................................
a. Summary of Comments .................................................................................................................................................................
b. The Data Sources Referenced in the Complaint and Proposed Final Judgment are Appropriate ............................................
7. Comments Related to ABI’s Use of Third-Party Sales Data ........................................................................................................
a. Summary of Comments .................................................................................................................................................................
b. The Proposed Final Judgment Protects Distributors Against ABI’s Unauthorized Use of Third-Party Sales Data .................
8. Comment Requesting to Extend and Periodically Reopen the Period for Public Comments ...................................................
a. Summary of Comment ...................................................................................................................................................................
b. No Extension or Reopening of the Comment Period is Necessary Because the Department Will Approve ABI’s Descriptions of its Changes to its Programs and Agreements with Distributors ....................................................................................
9. Comments Related to the Use of the Terms ‘‘Third-Party Brewer’s Beer’’ and ‘‘Third-Party Brewers’ Beer’’ ........................
a. Summary of Comments 48.
b. References to ‘‘Third-Party Brewer’s Beer’’ Apply Individually and Collectively to Third-Party Brewers 48.
10. Comment Related to the Term of the Proposed Final Judgment ..............................................................................................
a. Summary of Comment ...................................................................................................................................................................
b. The Ten-Year Term is Appropriate ..............................................................................................................................................
11. Comment Requesting the Department Publicize the Last Day of the 60-day Public Comment Period .................................
a. Summary of Comment ...................................................................................................................................................................
b. The APPA Does Not Require the Department to State on its Public Website the Last Day for Public Comments on Consent Decrees ....................................................................................................................................................................................
VI. Conclusion ..................................................................................................................................................................................................
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I. INTRODUCTION
II. PROCEDURAL HISTORY
Pursuant to the requirements of the
Antitrust Procedures and Penalties Act
(the ‘‘APPA’’ or ‘‘Tunney Act’’), 15
U.S.C. §§ 16(b)–(h), the United States
hereby responds to the twelve public
comments received regarding the
proposed Final Judgment in this case.
After careful consideration of the
submitted comments, the United States
continues to believe that the proposed
Final Judgment will provide an effective
and appropriate remedy for the antitrust
violation alleged in the Complaint. The
United States will move the Court for
entry of the proposed Final Judgment
after the public comments and this
response have been published pursuant
to 15 U.S.C. § 16(d).1
On November 11, 2015, AnheuserBusch InBev SA/NV (‘‘ABI’’) entered
into an agreement to acquire SABMiller
plc (‘‘SABMiller’’) (collectively,
‘‘Defendants’’) in a transaction valued at
approximately $107 billion. On July 20,
2016, the United States filed a civil
antitrust Complaint, seeking to enjoin
ABI from acquiring SABMiller. The
Complaint alleges that ABI’s proposed
acquisition of SABMiller likely would
substantially lessen competition in the
sale of beer to customers in the United
States in violation of Section 7 of the
Clayton Act, 15 U.S.C. § 18.
Simultaneously with the filing of the
Complaint, the United States filed a
proposed Final Judgment, a Stipulation
signed by Plaintiff and Defendants
1 On January 12, 2017, the United States
submitted its Unopposed Motion and Supporting
Memorandum to Excuse Federal Register
Publication of Comments and Attachments,
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consenting to entry of the proposed
Final Judgment after compliance with
the requirements of the Tunney Act, 15
U.S.C. § 16, and a Competitive Impact
Statement (‘‘CIS’’) describing the
transaction and the proposed Final
Judgment. The United States published
the proposed Final Judgment and CIS in
the Federal Register on August 4, 2016,
see 81 Fed. Reg. 51465, and caused
summaries of the proposed Final
Judgment and CIS, together with
directions for the submission of written
comments relating to the proposed Final
Judgment, to be published in The
Washington Post on August 3, 4, 5, 6, 7,
8, and 9, 2016. The 60-day period for
public comment ended on October 4,
2016. The United States received twelve
comments (Attachments 1 through 12).
III. STANDARD OF JUDICIAL REVIEW
requesting that this Court authorize an alternative
means for publishing the public comments and
attachments received in this action (Doc. 15).
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The APPA requires that proposed
consent judgments in antitrust cases
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brought by the United States be subject
to a 60-day public 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 is required to
consider:
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(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.
Id.
The public interest inquiry is
necessarily a limited one because, as
courts have repeatedly held, the
government is entitled to deference
when determining whether a proposed
settlement provides an effective and
appropriate remedy for the alleged
antitrust violation. See generally United
States v. Microsoft Corp., 56 F.3d 1448,
1461 (D.C. Cir. 1995) (holding that the
government is entitled to ‘‘broad
discretion to settle with the defendant
within the reaches of the public
interest’’); United States v. US Airways
Grp., Inc., 38 F. Supp. 3d 69, 75 (D.D.C.
2014) (noting that the court’s ‘‘inquiry is
limited’’ because the government has
‘‘broad discretion’’ to ‘‘determine the
adequacy of the relief secured through
a settlement’’); United States v. InBev
N.V./S.A., No. 08–cv–1965 (JR), 2009–2
Trade Cas. (CCH) ¶ 76,736, 2009 U.S.
Dist. LEXIS 84787, at *3 (D.D.C. Aug.
11, 2009) (noting that the court’s review
of a consent judgment is limited and
only inquires ‘‘into whether the
government’s determination that the
proposed remedies will cure the
antitrust violations alleged in the
complaint was reasonable, and whether
the mechanisms to enforce the proposed
Final Judgment are clear and
manageable’’); United States v. SBC
Commc’ns, Inc., 489 F. Supp. 2d 1, 10–
11 (D.D.C. 2007) (concluding that the
court’s public interest inquiry is
‘‘sharply proscribed by precedent and
the nature of Tunney Act proceedings’’).
Under the APPA, a court considers,
among other things, the relationship
between the remedy secured and the
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specific allegations set forth in the
government’s complaint, whether the
decree is sufficiently clear, whether the
enforcement mechanisms are sufficient,
and whether the decree may 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) (quoting United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir.
1981)); see also Microsoft, 56 F.3d at
1460–62 (same); United States v. Alcoa,
Inc., 152 F. Supp. 2d 37, 40 (D.D.C.
2001) (same); InBev, 2009–2 Trade Cas.
(CCH) ¶ 76,736, 2009 U.S. Dist. LEXIS
84787, at *3 (same). 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).
In determining whether a proposed
settlement is in the public interest, ‘‘the
court ‘must accord deference to the
government’s predictions about the
efficacy of its remedies.’ ’’ US Airways,
38 F. Supp. 3d at 76 (quoting SBC
Commc’ns, 489 F. Supp. at 17); see also
Microsoft, 56 F.3d at 1461 (noting that
the government’s ‘‘predictions as to the
effect of the proposed remedies’’ must
be afforded deference); 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
government’s ‘‘prediction as to the effect
of the proposed remedies, its perception
of the market structure, and its views of
the nature of the case’’); United States
v. Morgan Stanley, 881 F. Supp. 2d 563,
567–68 (S.D.N.Y. 2012) (explaining that
the government is entitled to deference
when crafting proposed remedies for
antitrust violations).
Courts ‘‘may not require that the
remedies perfectly match the alleged
violations.’’ SBC Commc’ns, 489 F.
Supp. 2d at 17. Rather, the ultimate
question is whether ‘‘the remedies
[obtained in the decree are] so
inconsonant with the allegations
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10785
charged as to fall outside of the ‘reaches
of the public interest.’ ’’ Microsoft, 56
F.3d at 1461. Accordingly, 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; see also United States
v. Apple, Inc., 889 F. Supp. 2d 623, 631
(S.D.N.Y. 2012) (same).
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
the public interest.’’ United States v.
Am. Tel. & Tel. Co., 552 F. Supp. 131,
151 (D.D.C. 1982) (citations and internal
quotation marks omitted); 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). And, the risk and
uncertainty of further litigation are
appropriate factors for the court to
consider when evaluating whether a
proposed remedy is in the public
interest. See SBC Commc’ns, 489
F.Supp. 2d at 15 (‘‘[R]oom must be
made for the government to grant
concessions in the negotiation process
for settlements[.]’’).
In its 2004 amendments to the
Tunney Act,2 Congress made clear its
intent to preserve the practical benefits
of using consent decrees in antitrust
enforcement actions brought by the
government by 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
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 the Tunney Act proceedings.’’
SBC Commc’ns, 489 F. Supp. 2d at 11;
see also United States v. Enova Corp.,
107 F. Supp. 2d 10, 17 (D.D.C. 2000)
(‘‘[T]he Tunney Act expressly allows the
court to make its public interest
determination on the basis of the
competitive impact statement and
response to public comments alone.’’);
2 The 2004 amendments substituted ‘‘shall’’ for
‘‘may’’ in directing relevant factors for courts 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 a court’s public interest inquiry
‘‘remains sharply proscribed by precedent and the
nature of Tunney Act proceedings’’ because the
2004 amendments ‘‘effected minimal changes’’ to
Tunney Act review).
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US Airways, 38 F. Supp. 3d at 76
(same).
IV. THE INVESTIGATION AND THE
PROPOSED FINAL JUDGMENT
The proposed Final Judgment is the
culmination of a thorough nine month
investigation conducted by the Antitrust
Division of the United States
Department of Justice (the
‘‘Department’’). In investigating the
proposed transaction’s likely
competitive effects, the Department
collected more than 1.4 million
documents from the Defendants and
third parties, conducted over 70
interviews of beer industry participants,
took numerous party depositions, and
coordinated with both state and foreign
competition agencies reviewing the
transaction. The Department carefully
analyzed the information it obtained
from these sources, as well as publicly
available information, and thoroughly
considered all of the competitive issues
presented.
Based on evidence gathered during its
investigation, the Department
concluded that ABI’s proposed
acquisition of SABMiller would likely
substantially lessen competition in the
sale of beer to U.S. customers both
nationally and in every local market in
the United States by eliminating headto-head competition between ABI and
MillerCoors LLC (‘‘MillerCoors’’). The
proposed transaction would have
eliminated competition between ABI
and MillerCoors—the two largest beer
brewers in the United States—because it
would have given ABI a majority
ownership interest in and 50%
governance rights over MillerCoors,
which was a joint venture between
SABMiller and Molson Coors Brewing
Company (‘‘Molson Coors’’) through
which SABMiller conducted
substantially all of its U.S. operations.
Accordingly, the Department filed a
civil antitrust lawsuit to block the
acquisition as a violation of Section 7 of
the Clayton Act, 15 U.S.C. § 18.
The proposed Final Judgment
provides an effective and appropriate
remedy for the transaction’s likely
competitive harm by requiring ABI to
divest SABMiller’s equity and
ownership stake in MillerCoors, as well
as certain other assets related to
MillerCoors’ business and the Millerbranded beer business outside of the
United States. After the Department
filed the proposed Final Judgment, ABI
acquired SABMiller and divested these
assets to Molson Coors. The divestiture
preserves competition in the U.S. beer
industry by ensuring that MillerCoors
continues to be an independent and
viable competitor because it provides
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MillerCoors with (i) perpetual, royaltyfree licenses to products for which it
previously had to pay royalties, and (ii)
ownership of the rights to the Miller
beer brands.
To further help preserve and promote
competition in the U.S. beer industry,
the proposed Final Judgment (i) imposes
certain restrictions on ABI’s distribution
practices and ownership of distributors,
and (ii) requires ABI to provide the
United States with notice of future
acquisitions, including acquisitions of
beer distributors and craft brewers, prior
to their consummation. Among other
things, the proposed Final Judgment
prohibits ABI from:
• Acquiring a distributor if the acquisition
would cause more than 10% of ABI’s beer
in the United States to be sold through
ABI-owned distributors;
• Prohibiting or impeding a distributor that
sells ABI’s beer from using its best efforts
to sell, market, advertise, promote, or
secure retail placement for rivals’ beers,
including the beers of high-end brewers;
• Providing incentives or rewards to a
distributor who sells ABI’s beer based on
the percentage of ABI beer the distributor
sells as compared to the distributor’s sales
of the beers of ABI’s rivals;
• Conditioning any agreement or program
with a distributor that sells ABI’s beer on
the fact that it sells ABI’s rivals’ beer
outside of the geographic area in which it
sells ABI’s beer;
• Exercising its rights over distributor
management and ownership based on a
distributor’s sales of ABI’s rivals’ beers;
• Requiring a distributor to report financial
information associated with the sale of
ABI’s rivals’ beers;
• Requiring that a distributor who sells ABI’s
beer offer its sales force the same
incentives for selling ABI’s beer when the
distributor promotes the beers of ABI’s
rivals with sales incentives; and
• Consummating non-reportable acquisitions
of beer brewers—including craft brewers—
without providing the United States with
advance notice and an opportunity to
assess the transaction’s likely competitive
effects.
The proposed Final Judgment also
authorizes the Department to appoint a
Monitoring Trustee—subject to the
Court’s approval—with the power and
authority to monitor ABI’s compliance
with the terms of the proposed Final
Judgment and other powers that the
Court deems appropriate. Among other
things, the Monitoring Trustee may
investigate and report on complaints
that ABI has violated the distributionrelated restrictions contained in the
proposed Final Judgment.
V. SUMMARY OF PUBLIC
COMMENTS AND THE UNITED
STATES’ RESPONSE
During the 60-day comment period,
the Department received twelve
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comments regarding the proposed Final
Judgment. These comments came from
individuals representing four beer
wholesaler associations (Beer
Distributors of Oklahoma, Virginia Beer
Wholesalers Association Inc., Wholesale
Beer Association Executives, and
National Beer Wholesalers Association),
two brewers (D.G. Yuengling & Son, Inc.
and Ninkasi Brewing Company),
Consumer Watchdog (a consumer
advocacy organization), American
Beverage Licensees (a national trade
association), the Brewers Association,
the North Carolina Department of
Justice, the International Brotherhood of
Teamsters, and Stephen Calkins,
Professor of Law, Wayne State
University.
In connection with sharing
recommendations on how the proposed
Final Judgment could be improved,
many commenters acknowledged the
meaningful protections for consumers
and competition that the Department
achieved through the proposed Final
Judgment. For example:
• Virginia Beer Wholesalers Association
stated that ‘‘[o]verall,’’ it ‘‘believes that the
proposed Final Judgment addresses the
most egregious anticompetitive aspects of
the’’ ABI/SABMiller transaction; 3
• American Beverage Licensees stated: ‘‘The
DOJ, in its proposed Final Judgment,
addresses the concerns that a $100 billion
brewer with a publicly-stated interest in
expanding its distribution footprint
presents to the United States’ independent
beer distribution system. This is an
important recognition of the impact of
vertical integration on access to
distribution, and the DOJ rightly puts forth
reasonable limits for ABI.’’ 4
• Beer Distributors of Oklahoma stated that
it ‘‘believes that the Complaint and
Proposed Final Judgment (PFJ) identifies
key issues and goes a long way towards
providing necessary relief designed to
protect the consumer by ensuring a more
level playing field for brewers.’’ 5
• Consumer Watchdog applauded the
Department for ‘‘obtaining a
comprehensive remedy to resolve wideranging competitive concerns resulting
from the combination of the two largest
global beer producers,’’ and stated that the
‘‘comprehensive remedy demonstrates the
DOJ’s newfound willingness to impose
meaningful remedies to protect consumers
and preserve competition when industry
megaliths seek to merge.’’6
• Wholesale Beer Association Executives
stated: ‘‘With the caveats expressed [in its
comments], WBAE is supportive of the
3 Virginia Beer Wholesalers Association comment
at 1 (Attachment 1).
4 American Beer Licensees comment at 3
(Attachment 2).
5 Beer Distributors of Oklahoma comment at 1
(Attachment 3).
6 Consumer Watchdog comment at 1 (Attachment
4).
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[proposed Final Judgment] and expresses
its gratitude to the Department of Justice
for addressing certain anticompetitive
aspects of the proposed transaction and
conduct in the mature marketplace after
the closing of the transaction.’’ 7
Many of the public comments fall into
one of three broad categories: (1)
comments related to the restrictions
imposed by the proposed Final
Judgment on ABI’s distribution
practices and ownership of distributors,
(2) comments related to ABI’s
ownership of craft brewers and beers,
and (3) comments related to the brewery
owned by MillerCoors in Eden, North
Carolina (the ‘‘Eden brewery’’). There
were other comments as well. Below are
summaries of the issues raised by the
commenters and the United States’
responses to those issues.
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A. Response to Comments on ABI’s
Distribution Practices
The principal harm alleged in the
Complaint is the reduction in
competition that would have resulted
from ABI’s acquisition of SABMiller’s
interest in MillerCoors. In the absence of
a remedy, ABI’s proposed acquisition of
SABMiller would have given ABI a
majority ownership interest in and 50%
governance rights over MillerCoors.
That would have eliminated head-tohead competition between the two
largest brewers in the United States.
Thus, the likely effect of the acquisition
would have been to substantially lessen
competition in the sale of beer to U.S.
consumers both nationally and in every
local market in the United States.
In addition, the Complaint alleged
that ABI’s acquisition of SABMiller
would have increased ABI’s incentive
and ability to disadvantage its high-end
rivals—such as brewers of craft and
import beers—by limiting the
distribution of their beers. With the
elimination of MillerCoors as a
competitive constraint, ABI’s high-end
rivals would have become a more
important constraint on ABI’s ability to
raise beer prices. ABI would thus have
had a greater incentive to invest
resources in distributor acquisitions and
to use practices that restrict its high-end
rivals’ access to distribution. Further,
with control over the MillerCoors beer
brands, ABI could have encouraged the
distributors of both ABI brands and
MillerCoors brands to limit their sales of
ABI’s high-end rivals’ beer, which
would likely have resulted in increased
beer prices and fewer choices for
consumers.
7 Wholesale
Beer Association Executives
comment at 2 (Attachment 5).
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The proposed Final Judgment secures
a structural remedy to address the harm
alleged in the Complaint. Specifically,
the proposed Final Judgment requires
ABI to divest SABMiller’s equity and
ownership stake in MillerCoors, as well
as certain other assets related to
MillerCoors’ business and the Millerbranded beer business outside of the
United States. The divestiture buyer,
Molson Coors, acquired the assets
necessary to maintain MillerCoors as an
independent competitor. The proposed
Final Judgment did not permit ABI to
acquire any SABMiller asset that was
used to compete in the markets for beer
in the United States. Consequently, the
divesture ensures that ABI’s acquisition
of SABMiller will not result in ABI’s
market share increasing or the U.S. beer
industry becoming more concentrated.
1. The Restrictions on ABI’s
Distribution Practices Were Designed to
Ensure that the Divestiture Adequately
Addresses the Harm Alleged in the
Complaint and Identified in the CIS
As the United States explained in the
CIS, however, the divestiture to Molson
Coors alone, without additional relief,
could lead to conditions that might
increase ABI’s incentive to disadvantage
its high-end rivals by limiting the
distribution of their beers. The United
States noted that unlike MillerCoors,
which competed directly against ABI
only in the United States, Molson Coors
competes against ABI in multiple
countries throughout the world. See CIS
at 11. The United States also noted that
ABI and Molson Coors have cooperative
arrangements related to beer brewing
and distribution in certain countries in
Eastern Europe. Id. The United States
stated:
The change in ownership of MillerCoors—
from a joint venture between SABMiller and
Molson Coors to a wholly owned subsidiary
of Molson Coors—will increase the number
of highly concentrated markets across the
world in which ABI competes directly
against Molson Coors. By increasing the
number of markets in which ABI and Molson
Coors compete, the divestiture of
SABMiller’s interest in MillerCoors to
Molson Coors could facilitate coordination
between ABI and Molson Coors in the United
States. For example, this multimarket contact
could lead Molson Coors and ABI to be more
accommodating to each other in the United
States in order to avoid provoking a
competitive response outside the United
States or disrupting their cooperative
business arrangements in other countries.
Coordination could also be facilitated by the
existing and newly-created cooperative
agreements between ABI and Molson Coors
around the world.
If the divestiture facilitates coordination
between ABI and Molson Coors, it would
also increase ABI’s incentive to limit
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10787
competition from its high-end rivals. This is
because competition from high-end rivals
would become an even more important
constraint on the ability of ABI and Molson
Coors to increase the prices of their beers
across all segments. As a result, following a
divestiture to Molson Coors, ABI may have
a greater incentive to impede the growth and
reduce the competitiveness of its high-end
rivals by limiting their access to effective and
efficient distribution. The extent to which
craft and other brewers in the United States
are able to compete with ABI and Molson
Coors will thus affect the likelihood of the
divestiture to Molson Coors leading to
unilateral or coordinated anticompetitive
effects.
Id. at 12.
For these reasons, the restrictions on
ABI’s distribution practices in Section V
of the proposed Final Judgment were
crafted in order to preserve and promote
competition in the U.S. beer industry by
limiting ABI’s ability to disadvantage its
rivals in their efforts to compete for
consumer demand. As a result, Section
V of the proposed Final Judgment
prevents ABI from engaging in
distribution practices that long predated the announcement of its proposed
acquisition of SABMiller.
For example, Section V of the
proposed Final Judgment eliminates
certain restrictions that ABI had placed
on Independent Distributors 8 that were
designed to encourage them to sell and
promote ABI’s Beer brands over the Beer
brands of ABI’s competitors. Section V
also prohibits ABI from compensating
Independent Distributors based upon
the amount of sales the Independent
Distributor makes of ABI Beer relative to
the Beer of ABI’s competitors. Moreover,
Section V broadly prohibits ABI from
rewarding, penalizing, or in any other
way conditioning its relationship with
Independent Distributors on the
Distributor’s sales, marketing,
advertising, promotion, or retail
placement of Third-Party Brewers’
Beers.
Accordingly, the proposed Final
Judgment provides an effective and
appropriate remedy for the likely
competitive harm arising out of ABI’s
acquisition of SABMiller by:
• preventing ABI from increasing its market
share in the U.S. and further concentrating
the U.S. beer industry through its
acquisition of SABMiller;
• preserving head-to-head competition
between ABI and its largest U.S.
competitor, MillerCoors;
• granting MillerCoors ownership rights of
Miller beer brands and perpetual, royaltyfree licenses to products for which it
previously paid royalties;
8 Capitalized terms not otherwise defined herein
have the meaning ascribed to them in the proposed
Final Judgment.
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• placing certain restrictions on ABI’s
distribution practices and ownership of
distributors; and
• requiring ABI to provide the United States
with notice of future acquisitions,
including non-reportable acquisitions of
beer distributors and craft brewers, prior to
their consummation.
As described below, some commenters
urged the Department to place
additional restrictions on ABI’s
relationships with Independent
Distributors.
2. Comments Regarding ABI’s Ability
Under Section V.D to Condition
Incentives, Programs, or Contractual
Terms on ABI’s Percentage of Beer
Industry Sales in a Geographic Area
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a. Summary of Comments
So long as ABI does not ‘‘require or
encourage an Independent Distributor to
provide less than best efforts to the sale,
marketing, advertising, retail placement,
or promotion of any Third-Party
Brewer’s Beer or to discontinue the
distribution of a Third-Party Brewer’s
Beer,’’ Section V.D of the proposed
Final Judgment permits ABI to
‘‘condition incentives, programs, or
contractual terms based on an
Independent Distributor’s volume of
sales of Defendant ABI’s Beer, the retail
placement of Defendant ABI’s Beer, or
on Defendant ABI’s percentage of Beer
industry sales in a geographic area (such
percentage not to be defined by
reference to or derived from information
obtained from Independent Distributors
concerning their sales of any ThirdParty Brewer’s Beer).’’ Three
commenters urged that Section V.D be
revised to eliminate entirely ABI’s
ability to condition incentives,
programs, or contractual terms on ABI’s
percentage of Beer industry sales in a
geographic area.9
b. Allowing ABI to Condition
Incentives, Programs, or Contractual
Terms on ABI’s Percentage of Beer
Industry Sales in a Geographic Area
Does Not Undermine the Effectiveness
of the Proposed Final Judgment
At the time the Complaint was filed,
ABI’s Wholesaler Equity Agreement
prohibited an Independent Distributor
from requesting that a bar replace an
ABI tap handle with a competitor’s tap
handle, requesting that a retailer replace
ABI shelf space with a competitor’s
beer, and compensating its salespeople
for their sales of competing beer brands
(such as a dollar-per-case incentive),
unless the Independent Distributor
9 Consumer Watchdog comment at 6–7; Brewers
Association comment at 4 (Attachment 6); Professor
Calkins comment at 3–4 (Attachment 7).
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provided the same incentives for sales
of certain ABI beer brands. See Compl.
at ¶¶ 27–28.
Section V of the proposed Final
Judgment prohibits ABI from continuing
these practices which encouraged
Independent Distributors to favor ABI
beer over competing beers in their
portfolios. Consequently, the proposed
remedy secures substantial benefits for
millions of Americans and advances
competition. At the same time, the
proposed Final Judgment recognizes
that ABI has a legitimate interest in
Independent Distributors growing ABI’s
percentage of all Beer industry sales in
the areas in which the Distributors sell
ABI’s Beer. As a result, the proposed
Final Judgment appropriately
acknowledges ABI’s interest in
competing while at the same time
prohibiting ABI’s prior practices of
conditioning incentives, programs, and
contractual terms on an Independent
Distributor’s sale of ABI beer relative to
the sale of Third-Party Brewers’ beer in
the Distributor’s portfolio.
Thus, giving deference to the
Department’s assessment, and
considered in conjunction with the
proposed Final Judgment’s other
distribution-related relief, allowing ABI
to condition incentives, programs, and
contractual terms on ABI’s percentage of
Beer industry sales in a geographic area
is within the reaches of the public
interest.
3. Comments Regarding the Allocation
to ABI’s Beers of an Independent
Distributor’s Annual Spending on Beer
Promotions and Incentives
a. Summary of Comments
Section V.D of the proposed Final
Judgment provides that ‘‘Defendant ABI
may require an Independent Distributor
to allocate to Defendant ABI’s Beer a
proportion of the Independent
Distributor’s annual spending on Beer
promotions and incentives not to exceed
the proportion of revenues that
Defendant ABI’s Beer constitutes in the
Independent Distributor’s overall
revenue for Beer sales in the preceding
year.’’ Three commenters urged that this
language be revised, either to make the
allocation based on the proportion of
the Independent Distributor’s revenues
received in the current year 10 or to
provide a carve-out for products newly
added to the Distributor’s portfolio.11 In
particular, commenter National Beer
Wholesalers Association (‘‘NBWA’’)
10 Brewers Association comment at 6–7; NBWA
comment at 20–21 (Attachment 8).
11 Brewers Association comment at 7; NBWA
comment at 20–22; Virginia Beer Wholesalers
Association, Inc. comment at 4.
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described marketing as a forwardlooking investment and expressed
concern that Section V.D allows ABI to
require an Independent Distributor to
set marketing spend on backwardlooking sales data.12 Commenter
Virginia Beer Wholesalers Association,
Inc. expressed concern that Section V.D
‘‘would expose an Independent
Distributor to demands that it spend
100% of its promotion funds on ABI
products in the current year if that
distributor derived 100% [of] its
revenues from the sale of ABI products
in the prior year. In such case, ABI
could block the distributor from
spending any of its own budget dollars
towards the marketing of newly
acquired Third-Party Brewer’s products
for an entire year.’’ 13
b. Allowing ABI to Require a
Proportional Allocation of an
Independent Distributor’s Annual
Spending on Beer Promotions and
Incentives Based on Previous-Year Beer
Sales Does Not Undermine the
Effectiveness of the Proposed Final
Judgment
This provision protects competition
while also recognizing that ABI has a
legitimate competitive interest in
encouraging Independent Distributors to
allocate to ABI a proportion of their
annual spending on Beer promotions
and incentives. As the Department
explained in the CIS, in any geographic
area, an Independent Distributor
‘‘provides the exclusive path to market
for ABI’s beers, and therefore ABI may
be reluctant to invest in its distributors
without some assurance that those
investments will not be used primarily
to benefit its rivals.’’ CIS at 21. As a
result, the proposed Final Judgment
allows ABI to require a proportional
allocation of an Independent
Distributor’s spending on Beer
promotions and incentives based on the
Independent Distributor’s previous-year
overall revenues. The primary reason
that prior-year data were chosen as the
measure was to promote accuracy and
certainty for the calculations—
something that would not be possible if,
as proposed by some commenters, the
allocation were based on projections for
current-year revenues.
The Department acknowledges that,
because the proposed Final Judgment
does not provide a carve-out for
products newly added to an
Independent Distributor’s portfolio, the
possibility exists that if an Independent
Distributor derived 100% of its prior12 NBWA
comment at 20–21.
Beer Wholesalers Association, Inc.
comment at 4 (emphasis in original).
13 Virginia
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year revenues from ABI Beer, and the
Independent Distributor added to its
portfolio a Third-Party Brewer’s Beer,
ABI could prevent a Distributor from
allocating any of its own promotional
spending to the Third-Party Brewer’s
Beer in the year the Distributor started
selling it. However, this possibility does
not take the proposed Final Judgment
outside the public interest.
First, at the time the Department filed
the Complaint, the vast majority of
Independent Distributors already
derived some of their revenues from
Third-Party Brewers’ Beer. Second,
there are alternative avenues for
promotion of a newly added product to
an Independent Distributor’s portfolio.
For example, the proposed Final
Judgment does not restrict or prevent
Third-Party Brewers from providing
money to Independent Distributors to
promote and incentivize Independent
Distributors to sell the Third-Party
Brewers’ Beer—including products
newly added to an Independent
Distributor’s portfolio. If a Third-Party
Brewer provides to an Independent
Distributor a dollar-per-case incentive to
sell a new Beer product, that dollar-percase amount would not be promotional
spending by the Independent Distributor
and therefore would not be included in
the calculation of the Distributor’s
spending on Beer promotions and
incentives. As a result, an Independent
Distributor that sold only ABI Beer in
the previous year could use funds
provided by the Third-Party Brewer to
promote a Third Party Brewer’s Beer
that it was newly distributing—even in
the first year the Distributor added the
Beer to its portfolio. Moreover, once an
Independent Distributor established
revenues for a newly distributed
product, ABI could not demand in the
next year that the Distributor spend
100% of its promotion funds on ABI
products.
Finally, Section V.D of the proposed
Final Judgment improves the status quo
by placing a restriction—where none
existed before—on ABI’s ability to
demand that Independent Distributors
allocate more than a proportional
amount of their spending on Beer
promotions and incentives to the ABI
Beer in their portfolios. Thus, giving
deference to the Department’s
assessment, allowing ABI to require a
proportional allocation of an
Independent Distributor’s annual
spending on Beer promotions and
incentives based on the Independent
Distributor’s previous-year overall
revenues is within the reaches of the
public interest.
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4. Comments Regarding the Effect of the
Proposed Final Judgment on
Independent Distributors’ Best Efforts
to Market, Advertise, Place, Promote,
and Sell Third-Party Brewers’ Beer
5. Comments Regarding the Restrictions
on ABI’s Ability to Disapprove the
General Managers and Successor
General Managers of Independent
Distributors
a. Summary of Comments
a. Summary of Comments
Two comments questioned how ABI
can both be prohibited from preventing
Independent Distributors from using
their best efforts to sell, market,
advertise, or promote any Third-Party
Brewer’s Beer while at the same time
being allowed to require Independent
Distributors to use their best efforts to
sell, market, advertise, or promote ABI’s
Beer.14
b. Allowing ABI to Require Best Efforts
From Independent Distributors to
Market and Sell ABI Beer Does not
Conflict With Independent Distributors
Also Providing Best Efforts to Market
and Sell Third-Party Brewers’ Beer
The Department does not find the
provisions (a) allowing ABI to require
an Independent Distributor to provide
best efforts to sell, market, advertise, or
promote ABI’s Beer and (b) prohibiting
ABI from preventing an Independent
Distributor from providing its best
efforts regarding Third-Party Brewers’
Beer, to be in conflict. Section V.D.5 of
the proposed Final Judgment prohibits
ABI from ‘‘[p]reventing an Independent
Distributor from using best efforts to
sell, market, advertise, or promote any
Third-Party Brewer’s Beer, which may
be defined as efforts designed to achieve
and maintain the highest practicable
sales volume and retail placement of the
Third Party Brewer’s Beer in a
geographic area.’’ Section V.D continues
in relevant part: ‘‘Notwithstanding the
foregoing, nothing in this Final
Judgment shall prohibit Defendant ABI
from entering into or enforcing an
agreement with any Independent
Distributor requiring the Independent
Distributor to use best efforts to sell,
market, advertise, or promote Defendant
ABI’s Beer, which may be defined as
efforts designed to achieve and maintain
the highest practicable sales volume and
retail placement of Defendant ABI’s
Beer in a geographic area.’’ An
Independent Distributor may provide its
best efforts to competing brands of Beer
in its portfolio.
14 Yuengling comment at 13, 15 (Attachment 9);
Professor Calkins comment at 3.
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Section V.E of the proposed Final
Judgment prohibits ABI from
disapproving ‘‘an Independent
Distributor’s selection of a general
manager or successor general manager
based on the Independent Distributor’s
sales, marketing, advertising,
promotion, or retail placement of a
Third-Party Brewer’s Beer.’’ Three
comments argued for broadening or
clarifying these restrictions. Virginia
Beer Wholesaler Association urged the
Department to prohibit ABI from
requiring that the general manager of an
Independent Distributor purchase an
equity stake in the Independent
Distributor.15 Professor Calkins urged
the Department to prohibit ABI from
disapproving an Independent
Distributor’s selection of a general
manager or successor general manager
based on the Independent Distributor’s
sale of craft beer or failure to meet
certain ABI-imposed thresholds for Beer
sales or tap handles.16 NBWA
recommended that the language in
Section V.E describing ABI’s
disapproval rights be made identical to
certain language in Section V.F.17 None
of these concerns should affect the
Court’s public interest determination.
b. Section V.E Appropriately Restricts
ABI’s Ability to Disapprove the General
Managers and Successor General
Managers of Independent Distributors
First, the fact that ABI may require a
general manager of an Independent
Distributor to purchase an equity stake
in the Independent Distributor was not
at issue in the ABI/SABMiller
transaction. For that reason, the
Complaint does not allege and the CIS
does not identify any harm to
competition resulting from requiring
any such equity stake. Accordingly, a
remedy directed to such a requirement
is beyond the scope of this APPA
proceeding, and the absence of such a
remedy does not provide a basis for
rejecting the proposed Final Judgment.
See US Airways, 38 F. Supp. 3d at 76
(‘‘ ‘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. . . .’ ’’ (quoting United
15 Virginia Beer Wholesalers Association
comment at 3–4.
16 Professor Calkins comment at 4.
17 NBWA comment at 23.
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States v. Graftech Int’l, No. 10–cv–2039,
2011 WL 1566781, at *13 (D.D.C. Mar.
24, 2011)). The proposed Final
Judgment should not be measured by
how it might resolve general industry
concerns about ownership of
Independent Distributors that are not
implicated in this matter.
Second, while Section V.E of the
proposed Final Judgment does not refer
to specific measures of an Independent
Distributor’s success in selling ABI Beer
such as ABI-imposed volume thresholds
for Beer sales or tap handles, it does
restrict ABI’s general manager
disapproval rights related to an
Independent Distributor’s success in
selling Third-Party Brewers’ Beer.
Accordingly, Section V.E properly
balances ABI’s legitimate interest in
ensuring that Independent Distributors
have managers that can successfully
market and sell ABI Beer in their
respective distribution territories against
the danger of allowing ABI to
disapprove a general manager or
successor general manager based on the
Independent Distributor’s sales,
marketing, advertising, promotion, or
retail placement of a Third-Party
Brewer’s Beer.
Finally, with respect to commenter
NBWA’s characterization of the
restrictions on ABI in Section V.E as
inconsistent with the restrictions on ABI
in V.F,18 no problematic inconsistency
exists. Both Sections V.E and V.F
restrict ABI’s ability to consider ‘‘the
Independent Distributor’s sales,
marketing, advertising, promotion, or
retail placement of a Third-Party
Brewer’s Beer’’ as appropriate to the
respective circumstance.
Thus, giving deference to the
Department’s assessment, the
restrictions in the proposed Final
Judgment on ABI’s ability to disapprove
the general manager and successor
general manager of Independent
Distributors are within the reaches of
the public interest.
6. Comment Regarding Restrictions on
ABI’s Exercise of Rights Related to the
Transfer of Control, Ownership, or
Equity of Distributors
broadened to require ABI to explain any
decision that it makes when exercising
a right related to the transfer of control,
ownership, or equity of a Distributor
and to set forth a procedure by which
the Department will review ABI’s
decision.19
b. Section V.F Appropriately Restricts
ABI’s Exercise of Rights Related to the
Transfer of Control, Ownership, or
Equity of Distributors
Section V.F restricts ABI’s ability to
exercise any rights related to the
transfer, ownership, control, or equity of
Distributors by prohibiting ABI from
giving weight to or basing its decision
to exercise such rights on a Distributor’s
business relationship with a Third-Party
Brewer. These restrictions are intended
to prevent ABI from using its rights over
management or ownership changes to
promote alignment by selecting new
owners because they have demonstrated
a willingness not to carry or promote
rival brands. Thus, the restrictions help
ensure that ABI cannot exercise its
rights related to the ownership or
control of Distributors in a manner that
harms competition or disadvantages
ABI’s rivals. An absolute ban is
unnecessary, especially because
competitively permissible reasons could
exist for ABI to seek to exercise such
rights. In addition, pursuant to Section
VIII.B, a Monitoring Trustee will
monitor ABI’s compliance with Section
V.F and recommend appropriate
remedial measures if the Monitoring
Trustee determines that ABI has
violated its provisions. Should the
Monitoring Trustee or anyone else bring
an alleged violation to the Department’s
attention, the Department already has
well-established procedures for
reviewing such allegations. No
additional procedures need be specified
in the proposed Final Judgment.
Giving deference to the Department’s
assessment, imposing the Section V.F
restrictions on ABI’s exercise of rights
related to the transfer of control,
ownership, or equity in any Distributor
to any other Distributor is within the
reaches of the public interest.
mstockstill on DSK3G9T082PROD with NOTICES
a. Summary of Comment
7. Comments Regarding Restrictions
Related to ABI-Owned Distributors
Section V.F of the proposed Final
Judgment places restrictions on ABI in
connection with its exercise of rights
related to the transfer of control,
ownership, or equity of Distributors.
Commenter D.G. Yuengling & Son, Inc.
(‘‘Yuengling’’) asks that ABI’s ability to
exercise those rights be eliminated or,
alternatively, that Section V.F be
a. Summary of Comments
Section V.B of the proposed Final
Judgment prohibits ABI from acquiring
any equity interests in, or any
ownership or control of the assets of, a
Distributor if more than 10% of ABI’s
Beer in the United States would be sold
by ABI-Owned Distributors after the
acquisition. Five comments called for
18 NBWA
comment at 23.
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19 Yuengling
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comment at 9–12, 14.
Fmt 4703
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the proposed Final Judgment to be
amended to place additional restrictions
on ABI’s ownership of Distributors,
ranging from a total ban on ABI’s
acquisition of additional Distributors to
a state-by-state rather than a nationwide
volume cap to requiring ABI to divest
all ABI-Owned Distributors.20 Two
comments also called for a more
expansive definition of ABI-Owned
Distributor.21
b. Additional Restrictions Related to
ABI-Owned Distributors Are Not
Necessary
Commenter Beer Distributors of
Oklahoma urged that ABI be required to
divest all ABI-Owned Distributors,22
and commenters Consumer Watchdog,
Brewers Association, NBWA, and
Ninkasi Brewing Company (‘‘Ninkasi’’)
urged that ABI be prevented from
acquiring any additional Distributors
during the term of the proposed Final
Judgment.23 Such restrictions are not
necessary to remedy the harms alleged
in the Complaint or identified in the
CIS. See US Airways, 38 F. Supp. 3d at
76 (‘‘[T]he court ‘must accord deference
to the government’s predictions about
the efficacy of its remedies.’’’ (quoting
SBC Commc’ns, 489 F. Supp. at 17)).
Moreover, nothing in the proposed
Final Judgment provides ABI with any
antitrust exemption for acquisitions of
Distributors—even if ABI remains below
the 10% limit set forth in Section V.B
of the proposed Final Judgment. To the
contrary, the notification provisions in
Section XII of the proposed Final
Judgment, which require ABI to notify
the Department about certain Distributor
acquisitions that are not otherwise
reportable under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as
amended (the ‘‘HSR Act’’), ensure that
the Department will have the
opportunity to evaluate the likely
competitive effects of such Distributor
acquisitions before they are
completed—even if the acquisition
would keep ABI under the 10% cap.
Thus, giving deference to the
Department’s assessment, neglecting to
place a total ban on future Distributor
acquisitions does not place the
proposed Final Judgment outside the
reaches of the public interest.
20 Beer Distributors of Oklahoma comment at 3–
5; Consumer Watchdog comment at 6; Brewers
Association comment at 5–6; NBWA comment at
13–15; Ninkasi comment at 1–2 (Attachment 10).
21 NBWA comment at 16–19; Wholesale Beer
Association Executives comment at 7–9.
22 Beer Distributors of Oklahoma comment at 3–
4.
23 Consumer Watchdog comment at 6; Brewers
Association comment at 5–6; NBWA comment at
15; Ninkasi comment at 1–2.
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c. Section V.B Appropriately Restricts
ABI’s Ability to Increase the Volume of
Beer Sold By ABI-Owned Distributors
(i) A Nationwide Restriction is
Appropriate
mstockstill on DSK3G9T082PROD with NOTICES
Commenters Beer Distributors of
Oklahoma, NBWA, and Consumer
Watchdog questioned the proposed
Final Judgment for imposing a 10% cap
under Section V.B on a nationwide
level, rather than imposing a 10% cap
in each state in which ABI-Owned
Distributors operate.24 The fact that the
10% cap is calculated based on ABI’s
national Beer sales does not provide a
basis for concluding that the proposed
Final Judgment is not in the public
interest.
The Department was aware when it
negotiated the proposed Final Judgment
that ABI is prohibited in some states
from owning Distributors and,
accordingly, in states where it is
allowed to own Distributors, ABI may
sell more than 10% of its Beer volume
through ABI-Owned Distributors. The
imposition of a 10% nationwide cap—
where no cap existed before—on the
volume of Beer ABI can sell through
ABI-Owned Distributors is a meaningful
restriction on ABI’s ability to restrict the
sale of Third-Party Brewer’s Beer
through the acquisition of Distributors,
especially considering, as the
Department alleged in the Complaint,
that ABI already sells approximately 9%
of its beer in the United States through
ABI-Owned Distributors. See Compl.
¶ 25.
In addition, as discussed above, the
proposed Final Judgment does not
convey antitrust immunity upon ABI for
any future Distributor acquisitions.
Should a future proposed Distributor
acquisition implicate competitive
concerns in a particular state or region
due to high concentration levels or other
reasons, the Department will have the
opportunity to review such acquisition.
And Section XII of the proposed Final
Judgment ensures that the Department
will have the necessary notice to do so.
Thus, giving deference to the
Department’s assessment, the 10%
nationwide cap placed on the volume of
Beer ABI-Owned Distributors may sell
in the Territory is within the reaches of
the public interest.
(ii) Safeguards Exist to Prevent ABI
From Circumventing the Cap
Commenters NBWA and Brewers
Association additionally suggested that
ABI could circumvent the 10% limit by
24 Beer Distributors of Oklahoma comment at 5–
6; NBWA comment at 13–15; Consumer Watchdog
comment at 6.
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selling existing ABI-Owned Distributors
to ‘‘friendly’’ Independent Distributors
and then buying more Distributors.25
The purpose of the Section V.B cap,
however, is to limit the volume of Beer
sold by ABI-Owned Distributors; other
provisions in the proposed Final
Judgment provide safeguards that
reduce ABI’s influence and control over
Independent Distributors, including
Sections V.D, V.E, and V.F.
Commenter Professor Calkins asked
the Department to clarify whether ABI
can circumvent the 10% cap by
acquiring a Distributor that specialized
in non-ABI craft Beers and then, postacquisition, having the Distributor sell
ABI craft Beers instead.26 The
Department clarifies that under the
proposed Final Judgment, once a
Distributor becomes an ABI-Owned
Distributor, the volume of ABI Beer the
Distributor sells will count toward the
10% cap.
Finally, commenter Wholesale Beer
Association Executives urged the
Department to include in the Section
V.B 10% calculation the sales volume of
any Distributor for which ABI exercises
its ‘‘match-and-redirect’’ right—that is,
assigning to the Independent Distributor
of ABI’s choice the ability to purchase
another Distributor upon certain agreedupon terms—because ABI ‘‘often
[assigns] that right to a preferred
distributor who often conforms to the
policies regarding competing brand
portfolios that are prohibited by the
[proposed Final Judgment].’’ 27
As noted above with respect to NBWA
and Brewers Association’s concerns
about ABI circumventing the Section
V.B cap, the purpose of the cap is to
limit the volume of Beer sold by ABIOwned Distributors; other provisions in
the proposed Final Judgment provide
safeguards that reduce ABI’s influence
and control over Independent
Distributors, including ‘‘friendly’’
Independent Distributors and those who
may benefit from ABI’s exercise of its
‘‘match-and-redirect’’ right. For
example, Section V.D.1 of the proposed
Final Judgment prohibits ABI from
conditioning the availability of ABI’s
Beer on an Independent Distributor’s
sales, marketing, advertising,
promotion, or retail placement of a
Third-Party Brewer’s Beer, and Section
V.D.3 prohibits ABI from conditioning
any agreement or program with an
Independent Distributor on the fact that
25 NBWA comment at 13–14; Brewers Association
comment at 5–6.
26 Professor Calkins comment at 2.
27 Wholesale Beer Association Executives
comment at 9. The commenter refers to ABI’s
‘‘match-and-redirect’’ right as ABI’s right of first
refusal.
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10791
an Independent Distributor sells a
Third-Party Brewer’s Beer outside of the
geographic area in which the
Independent Distributor sells ABI’s
Beer.
(iii) The Definition of ABI-Owned
Distributor is Appropriate
Commenters NBWA and Wholesale
Beer Association Executives urged the
Department to broaden the definition of
ABI-Owned Distributor to include
additional, partially-owned Distributors,
because they contend that ABI
effectively controls Distributors in
which it has a less-than-50% ownership
stake.28 The proposed Final Judgment
defines an ABI-Owned Distributor as
‘‘any Distributor in which ABI owns
more than 50% of the outstanding
equity interests or more than 50% of the
assets.’’ 29 The 50% ownership
threshold is appropriate because it
provides certainty for determining
which Distributors are ABI-Owned
Distributors for purposes of enforcing
the Final Judgment. A 50% ownership
threshold is also consistent with how
the Department defined ABI-Owned
Distributors in the ABI/Grupo Modelo
decree.30
Additionally, safeguards in other
parts of Section V that reduce ABI’s
influence and control over Independent
Distributors apply even where ABI has
less than 50% ownership. For example,
Section V.E of the proposed Final
Judgment prohibits ABI from
disapproving an Independent
Distributor’s selection of a general
manager or successor general manager
based on the Independent Distributor’s
sales, marketing, advertising,
promotion, or retail placement of a
Third-Party Brewer’s Beer, and Section
V.F provides that, when exercising any
right related to the transfer of control,
ownership, or equity in any Distributor
to any other Distributor, ABI shall not
give weight to or base any decision to
exercise such right upon either
28 NBWA comment at 16–19; Wholesale Beer
Association Executives comment at 8–9
(recommending a 25% ownership threshold).
29 Similarly, the proposed Final Judgment defines
ABI to include certain other entities ‘‘in which
there is majority (greater than 50%) or total
ownership or control between [ABI] and any other
person.’’ Proposed Final Judgment at II.A. Thus, in
response to NBWA’s request for clarification (see
NBWA comment at 14), if ABI owns a 31.6% share
of Craft Brew Alliance, Craft Brew Alliance does not
meet the definition of ABI, and Craft Brew Alliance
Beer thus does not count as ABI Beer for the
purpose of Section V.B’s 10% cap.
30 See Final Judgment at 3, United States v.
Anheuser-Busch InBev SA/NV, 1:13–CV–00127
(Oct. 24, 2013) (‘‘‘ABI-Owned Distributor’ means
any Distributor in which ABI owns more than 50
percent of the outstanding equity interests as of the
date of the divestiture of the Divestiture Assets.’’).
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Distributor’s business relationship with
a Third-Party Brewer—including, but
not limited to, such Distributor’s sales,
marketing, advertising, promotion, or
retail placement of a Third-Party
Brewer’s Beer.
For these reasons, the ownership
threshold for ABI-Owned Distributors
does not undermine the effectiveness of
the proposed Final Judgment.
applicability of the proposed Final
Judgment to ABI does not place the
proposed Final Judgment outside the
reaches of the public interest.
8. Comments Requesting that Section
V’s Distribution Restrictions Also be
Made to Apply to Molson Coors
NBWA urged that the proposed Final
Judgment be amended to require ABI to
(1) include the Final Judgment as an
amendment to ABI’s agreements with
Independent Distributors, and (2) state
in its agreements with Independent
Distributors that the Final Judgment will
govern any conflict between the
agreements and the Final Judgment.34
a. Summary of Comments
Four commenters asked that the
distribution restrictions in Section V of
the proposed Final Judgment—which
apply only to ABI—also be made to
apply to Molson Coors.31 In support of
its comment, Wholesale Beer
Association Executives reported that
Molson Coors has already begun to
implement tactics of concern similar to
those of ABI, such as aggressive
acquisition of craft brewers.32
mstockstill on DSK3G9T082PROD with NOTICES
b. Molson Coors’ Distribution Practices
Are Outside the Scope of this
Proceeding
Molson Coors is neither a defendant
in this case nor a party to the proposed
Final Judgment.33 Final judgments
typically do not apply to divestiture
buyers, and this case does not warrant
an exception. The Complaint does not
allege that either MillerCoors or Molson
Coors—unlike ABI—engaged in the type
of restrictive distribution practices
alleged in the Complaint. In fact, at the
time the Complaint was filed,
MillerCoors owned only one beer
distributor in the United States, a Coors
distributor in Denver, Colorado, and
Molson Coors owned none.
If in the future Molson Coors were to
acquire distributors or change its
distribution practices in a manner that
the Department believes might be
anticompetitive, or to otherwise
implement anticompetitive tactics as
commenter Wholesale Beer Association
Executives complains, the Department
would have the ability to investigate
those practices and seek appropriate
relief if it determines that the practices
violated the antitrust laws. Limiting the
31 Virginia Beer Wholesalers Association
comment at 3; Wholesale Beer Association
Executives comment at 10–11; NBWA comment at
11–13; Consumer Watchdog comment at 7–8.
32 Wholesale Beer Association Executives
comment at 10–11.
33 As required by Section V.A of the proposed
Final Judgment, however, Molson Coors—in an
amendment to its purchase agreement with ABI—
has agreed not to cite the divestiture required by the
proposed Final Judgment as a basis for modifying,
renegotiating, or terminating any contract with any
Distributor.
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9. Comment Related to ABI’s Obligation
to Inform Independent Distributors of
the Requirements of the Proposed Final
Judgment
a. Summary of Comment
b. The Proposed Final Judgment
Adequately Requires ABI to Inform
Independent Distributors of the
Requirements of the Final Judgment
Section V.I of the proposed Final
Judgment requires that, within ten days
of the entry of the Final Judgment, ABI
provide the United States, for the
United States to approve in its sole
discretion, with a proposed form of
written notification to be provided to
any Independent Distributor that
distributes ABI’s Beer in the Territory.
Such notification must (1) explain the
practices prohibited by Section V of the
Final Judgment, (2) describe the changes
ABI is making to any programs,
agreements, or any interpretations of
agreements required to comply with
Section V of the Final Judgment, and (3)
inform the Independent Distributor of
its right, without fear of retaliation, to
bring to the attention of the Monitoring
Trustee any actions by ABI which the
Independent Distributor believes may
violate Section V of the Final Judgment.
Requiring that the Final Judgment be
made an amendment to ABI’s existing
agreements with its Independent
Distributors would not increase the
protections afforded to the Independent
Distributors under Section V of the
proposed Final Judgment. Requiring
agreements with Independent
Distributors to state that the Final
Judgment will control in the event of a
conflict with the language of the
agreements would not increase the
protections afforded to Independent
Distributors. Nor would either
requirement provide additional levels of
notice to affected Distributors.
ABI will be required to provide notice
of the Final Judgment to all of its
34 NBWA comment at 22–23; see also Wholesale
Beer Association Executives comment at 9–10.
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Independent Distributors 35 and to
comply with Section V of the proposed
Final Judgment irrespective of any
language to the contrary in its existing
distribution agreements. Independent
Distributors can raise their concerns
with the Department or the Monitoring
Trustee without fear of retaliation if ABI
implements any programs, policies, or
practices that an Independent
Distributor believes violate Section V.
10. Comment Related to ABI’s Ability to
Terminate Independent Distributors
a. Summary of Comment
NBWA recommends that the
proposed Final Judgment be modified to
explicitly state that ABI may not
terminate Independent Distributors
based on their sales, promotion,
advertising, marketing, or retail
placement of Third-Party Brewers’
Beer.36
b. The Proposed Final Judgment
Already Prohibits ABI from
Terminating an Independent
Distributor Based on the Distributor’s
Sales, Promotion, Advertising,
Marketing, or Retail Placement of a
Third-Party Brewer’s Beer
The proposed Final Judgment already
explicitly prohibits ABI from
terminating an Independent Distributor
based on the latter’s sales, promotion,
advertising, marketing, or retail
placement of a Third-Party Brewer’s
Beer. Section V.D prohibits ABI from
penalizing or ‘‘in any other way
condition[ing] its relationship with’’ an
Independent Distributor based on ‘‘the
amount of sales the Independent
Distributor makes of a Third-Party
Brewer’s Beer or the marketing,
advertising, promotion, or retail
placement of such Beer.’’ Section V.H
additionally prohibits ABI from
discriminating against, penalizing, or
otherwise retaliating against any
Distributor because such Distributor
raises, alleges, or otherwise brings to the
attention of the Department or the
Monitoring Trustee an actual, potential,
or perceived violation of Section V of
the Final Judgment.
35 Independent Distributors will also be able to
review the proposed Final Judgment and other
court filings in this matter on the Department’s
public Web site. The Department will make the
Final Judgment publicly available once the Court
enters it. See https://www.justice.gov/atr/case/us-vanheuser-busch-inbev-sanv-and-sabmiller-plc.
36 NBWA comment at 25.
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Judgment.42 Another commenter asked
that craft beers owned by ABI be
required to identify ABI’s ownership on
their packaging.43
11. Other Comments Requesting that
the Restrictions in Section V be
Broadened
a. Summary of Comments
In addition to the above, commenters
requested that the relief in Section V of
the proposed Final Judgment be
broadened in a variety of ways. For
example, commenters asked that:
• ABI be prohibited from rewarding,
penalizing, or otherwise conditioning its
relationship with Independent Distributors
based on their ‘‘storage, warehousing,
transportation or administration’’ of a
Third-Party Brewer’s Beers; 37
• ABI be prohibited from exercising its
match-and-redirect right if the originallyproposed purchaser is otherwise qualified
to sell ABI’s Beer; 38
• ABI be prohibited from exercising its
match-and-redirect right or required when
exercising its match-and-redirect right to
pay the seller the full purchase price in
consideration of its release of all brand
rights for Third-Party Brewers’ Beer
without any additional consideration; 39
• ABI be barred from financing, directly or
indirectly, the operations of any
Independent Distributor; 40 and
• ABI be barred from manipulating
‘‘delivered price’’ amounts to similarly
situated Independent Distributors as a way
to incentivize Independent Distributors to
carry only ABI Beer brands.41
b. Section V Meaningfully Restricts
ABI’s Ability to Reward or Penalize
Independent Distributors Based on
Their Relationships with Third-Party
Brewers
As discussed in the preceding
sections, the changes to ABI’s practices
regarding Independent Distributors
imposed by the proposed Final
Judgment appropriately address the
competitive effects of the transaction
that are alleged in the Complaint and
will increase Third-Party Brewers’
access to effective distribution to the
substantial benefit of millions of
consumers nationwide. The failure to
include the additional restrictions
suggested by these commenters does not
move the proposed Final Judgment
outside the scope of the public interest.
B. Comments Related to ABI’s
Ownership of Craft Breweries
mstockstill on DSK3G9T082PROD with NOTICES
1. Summary of Comments
One commenter maintained that ABI
should be prohibited from acquiring any
brewers during the period of the Final
37 NBWA
comment at 20.
38 Wholesale Beer Executives Association
comment at 9.
39 Yuengling comment at 14.
40 Yuengling comment at 15.
41 Yuengling comment at 15.
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2. The Proposed Final Judgment
Adequately Ensures that the
Department May Evaluate ABI’s
Acquisition of Craft Brewers
Restricting ABI from acquiring craft
breweries or requiring ABI to label its
craft beer as brewed by ABI is not
necessary for the proposed divestiture to
be effective in remedying the harms
alleged in the Complaint. Although ABI
has acquired multiple craft breweries
over the past several years, those
acquisitions were not at issue with
respect to ABI’s proposed acquisition of
SABMiller, and the Complaint does not
contain any allegations related to those
acquisitions. Beer labeling similarly was
not an issue implicated by the
transaction and was not made a part of
the Complaint. Accordingly, a remedy
directed to such requirements is beyond
the scope of this APPA proceeding, and
the absence of such a remedy does not
provide a basis for rejecting the
proposed Final Judgment. See US
Airways, 38 F. Supp. 3d at 76
(‘‘ ‘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. . . .’ ’’ (quoting Graftech,
2011 WL 1566781, at *13)).
In addition, Section XII of the
proposed Final Judgment provides the
Department with the ability to review
ABI’s acquisition of craft brewers in the
United States, even if those acquisitions
do not otherwise meet the filing
thresholds of the HSR Act. As a result,
the Department will be able to evaluate
the likely competitive effects of any
proposed acquisition of craft brewers by
ABI and to challenge the transaction if
the Department concludes that the
proposed acquisition—whether by itself
or in combination with other
transactions or other conduct—is likely
to substantially lessen competition in
the U.S. beer industry.
C. Comments Related to the Eden
Brewery
1. Summary of Comments
Both the North Carolina Department
of Justice (‘‘NC DOJ’’) and the
International Brotherhood of Teamsters
(‘‘Teamsters’’) submitted comments
asserting that the Department should
have required the divestiture of the
MillerCoors brewery in Eden, North
Carolina. MillerCoors closed the Eden
42 Consumer
43 Ninkasi
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brewery in September 2016. Both the
NC DOJ and Teamsters assert that the
Department should have required such
relief because the fact that MillerCoors
announced the closure of its Eden
brewery two days before ABI and
SABMiller announced their merger
negotiations raises concerns that
MillerCoors had anticompetitive
motives when deciding to close this
brewery and declining to sell it to
another brewer.44 As additional support
for their comments, the NC DOJ and the
Teamsters also point to the
Department’s requirement in the final
judgment in the ABI/Grupo Modelo
transaction 45 that Constellation Brands,
the divestiture buyer in that transaction,
purchase and expand a legacy Grupo
Modelo brewery in Mexico.
2. The Requested Divestiture of the
Eden Brewery is Outside the Scope of
this Action
The Department took the allegations
about the closing of the Eden brewery
seriously and considered the
circumstances surrounding that closure
during the Department’s investigation of
the transaction. Among other things, the
Department obtained and reviewed
documents related to the brewery
closure, asked questions about its
closure, and met with the relevant
parties. In reviewing such information,
the Department did not uncover
evidence suggesting that MillerCoors’
decision to close the Eden brewery was
related to ABI’s proposed acquisition of
SABMiller. Accordingly, the Complaint
did not allege that the Eden brewery
closure was an anticompetitive effect of
the transaction, nor did the Department
seek relief related to the Eden brewery
as part of the proposed Final Judgment.
The Department understands that the
NC DOJ is conducting its own
investigation into whether any
competition-related laws have been
violated in connection with the closure
of the Eden brewery.46 The NC DOJ’s
comment indicates that the evidence it
has reviewed to date ‘‘confirms [the NC
DOJ’s concerns] that anticompetitive
motives may have played a part
regarding the closure of the Eden
brewery and the accompanying lack of
meaningful effort to sell it.’’ 47 The
Department has great respect for the NC
DOJ and has worked with that office
cooperatively on many occasions.
However, the Department made a
44 NC DOJ comment at 2 (Attachment 11);
Teamsters comment at 23 (Attachment 12).
45 Final Judgment at 13–16, United States v.
Anheuser-Busch InBev SA/NV, 1:13–CV–00127
(Oct. 24, 2013).
46 NC DOJ comment at 3.
47 NC DOJ comment at 3.
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decision, based on the evidence
available to it at the time, not to allege
that closure of the Eden brewery was a
competitive effect of the transaction.
Should the NC DOJ develop additional
evidence, nothing in the proposed Final
Judgment prevents the NC DOJ from
seeking further relief under applicable
federal or state laws—including relief
related to the Eden brewery.
Additionally, the circumstances here
are distinguishable from those in the
ABI/Grupo Modelo matter. In ABI/
Grupo Modelo, the Department required
the divestiture buyer, Constellation, to
purchase and expand the brewery in
question because, in order for the
divestiture to be effective, Constellation
needed to be able to produce all
Modelo-branded beer in Mexico but did
not have its own Mexican brewery. As
the Department noted in the
Competitive Impact Statement in ABI/
Grupo Modelo: ‘‘Requiring the buyer of
divested assets to improve those assets
for the purposes of competing against
the seller is an exceptional remedy that
the United States found appropriate
under the specific set of facts presented
here. . . . No other combination of
Modelo’s brewing assets would have
properly addressed the competitive
harm caused by the proposed merger
and allowed the acquirer of the
Divestiture Assets to compete as
effectively and economically with ABI
as Modelo does today.’’ 48 By contrast,
in this case, the ABI/SABMiller
transaction and divestiture to Molson
Coors does not affect the brewing
capacity of MillerCoors in the United
States.
Accordingly, the NC DOJ’s and the
Teamsters’ concerns about the closure of
the Eden brewery do not provide a basis
for questioning the Department’s
determination—which is entitled to
deference—that the proposed Final
Judgment provides an effective and
appropriate remedy for the likely
anticompetitive harm arising out of
ABI’s proposed acquisition of
SABMiller.
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D. Other Comments
Commenters raised a variety of other
procedural and substantive concerns,
recommending that the proposed Final
Judgment be amended in numerous
respects. As discussed below, these
recommendations include: requiring
ABI to adopt an updated antitrust
compliance policy; 49 expanding the
48 Competitive Impact Statement at 13, United
States v. Anheuser-Busch InBev SA/NV, 1:13–CV–
00127 (Apr. 19, 2013).
49 Consumer Watchdog comment at 7; NBWA
comment at 24–25.
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role of the Monitoring Trustee; 50
expressly stating that any action taken
by ABI remains subject to applicable
antitrust laws; 51 preventing ABI-Owned
Distributors from managing or making
recommendations concerning the
schematics of retailers; 52 restricting ABI
from vertically integrating into the retail
channel; 53 preventing ABI from using
sales data from third parties to punish
distributors; 54 modifying the term of the
proposed Final Judgment; 55 and
clarifying certain references to Third
Party Brewers.56 Commenters also
raised questions about the Department’s
use of certain data sources in the
Complaint and proposed Final
Judgment 57 and recommended that in
the future the Department publish on its
public website the end of the 60-day
public comment period.58
1. Comments Related to a Potential
Antitrust Compliance Policy
a. Summary of Comments
Consumer Watchdog and NBWA
urged the Court to require ABI to update
its antitrust compliance policy, with
mandatory employee training.59
Consumer Watchdog contended that the
Department should approve ABI’s
antitrust compliance policy, while
NBWA recommended that the
Monitoring Trustee be tasked with
drafting and overseeing ABI’s
compliance policy. NBWA noted that
the Department required mandatory
compliance programs in United States
v. Apple, Inc. and United States v.
Bazaarvoice, Inc.60
50 Consumer
Watchdog comment at 8; NBWA
comment at 23–24.
51 Professor Calkins comment at 2–3.
52 Ninkasi comment at 2.
53 American Beverage Licensees comment at 1–3.
54 NBWA comment at 20–22.
55 NBWA comment at 24.
56 Brewers Association comment at 3.
57 American Beverage Licensees comment at 4;
Beer Distributors of Oklahoma comment at 2.
58 Professor Calkins comment at 1–2.
59 NBWA comment at 24–25; Consumer
Watchdog comment at 7.
60 NBWA comment at 25; see Final Judgment at
11, United States v. Apple, Inc., No. 1:12–cv–02826
(S.D.N.Y. Sept. 5, 2015) (‘‘The External Compliance
Monitor shall have the power and authority to
review and evaluate Apple’s existing internal
antitrust compliance policies and procedures and
the training program required by Section V.C of this
Final Judgment, and to recommend to Apple
changes to address any perceived deficiencies in
those policies, procedures, and training.’’); Third
Amended Final Judgment at 9, United States v.
Bazaarvoice, Inc., No. 3:13–cv–00133 (N.D. Cal.
Dec. 2, 2014) (‘‘Defendant shall designate, within
ninety (90) days of entry of this Final Judgment, an
internal Compliance Officer who shall be an
employee of Defendant with responsibility for
administering Defendant’s antitrust compliance
program and helping to ensure compliance with
this Final Judgment.’’).
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b. The Absence of a Required
Compliance Policy Does Not
Undermine the Effectiveness of the
Proposed Final Judgment
The circumstances here do not
warrant requiring ABI to have an
antitrust compliance policy approved by
the Department or the Monitoring
Trustee. The Complaint does not allege
that ABI has previously violated the
antitrust laws. Rather, it asserts that
ABI’s acquisition of SABMiller would
violate Section 7 of the Clayton Act.
Moreover, the Complaint does not
contain any allegations related to ABI’s
antitrust compliance policies.
Those circumstances distinguish this
case from Apple and Bazaarvoice. In
Apple, the Department argued that
‘‘serious violations of the antitrust laws
occurred at Apple while its current
program was in effect, and they were
orchestrated by key executives and even
a member of Apple’s legal team.’’ 61 In
addition, Apple’s counsel and a person
involved in the antitrust violation could
not recall receiving antitrust compliance
training.62 Bazaarvoice involved a Final
Judgment that was ordered after a trial
had determined that the defendant had
violated the antitrust laws.63 Neither of
those circumstances is analogous to this
case where ABI has agreed to a
settlement with the Department without
an allegation or finding that ABI
previously violated the antitrust laws.
Thus, the lack of a requirement for a
compliance policy does not undermine
the effectiveness of the proposed Final
Judgment.
2. Comments Related to the Monitoring
Trustee
a. Summary of Comments
Consumer Watchdog recommended
that the Monitoring Trustee be given the
ability to interpret the proposed Final
Judgment broadly to prevent ABI from
‘‘getting around’’ its terms.64 As
discussed above, NBWA recommended
that the Monitoring Trustee be tasked
with drafting and overseeing the
compliance policy that NBWA urged
was necessary.65 NBWA also
recommended that the Monitoring
Trustee’s appointment should be for the
full ten-year term of the proposed Final
Judgment.66 The Virginia Beer
61 Memorandum in Support of Plaintiffs’ Revised
Proposed Injunction at 5–6, United States v. Apple,
Inc., No 1:12–cv–02826 (S.D.N.Y. Aug. 13, 2013).
62 Memorandum in Support of Plaintiffs’ Revised
Proposed Injunction at 6, United States v. Apple,
Inc., No 1:12–cv–02826 (S.D.N.Y. Aug. 13, 2013).
63 See United States v. Bazaarvoice, Inc., No. 13–
cv–00133, 2014 WL 203966 (N.D. Cal. Jan. 8, 2014).
64 Consumer Watchdog comment at 8.
65 NBWA comment at 24–25.
66 NBWA comment at 23–24.
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Wholesalers Association urged that the
proposed Final Judgment include
specific timelines for both the
submission of recommendations by the
Monitoring Trustee and the acceptance,
modification, or rejection of those
recommendations by the Department,
and also that the proposed Final
Judgment be amended to require timely
publication of the Monitoring Trustee’s
recommendations to the Department
and the ultimate disposition of the
recommendations.67
b. The Monitoring Trustee Already Has
the Ability to Monitor ABI’s
Compliance with the Proposed Final
Judgment
The Monitoring Trustee has been
appointed by the Department and
approved by the Court to help ensure
that the proposed Final Judgment will
be properly enforced. (See Docket Entry
13 (Order approving United States’
appointment of Monitoring Trustee)).
The Monitoring Trustee works closely
with and regularly reports to the
Department and, as appropriate, will
report to the Court. If the Monitoring
Trustee has particular concerns, he can
bring those concerns to the attention of
the Department and the Court. The
Department and the Court can then
appropriately respond to those concerns
or empower the Monitoring Trustee to
take appropriate actions to address
those concerns. The powers possessed
by the Monitoring Trustee are adequate
to effectively monitor ABI’s compliance
with the proposed Final Judgment.
Under Section VIII.I of the proposed
Final Judgment, the Monitoring Trustee
must serve until the sale of all the
Divestiture Assets is finalized, the
Transition Services Agreements and the
Interim Supply Agreements have
expired, and all other relief has been
completed as defined in Section V—
unless the Department, in its sole
discretion, authorizes the early
termination of the Monitoring Trustee’s
service. Because ABI’s obligations under
Section V of the proposed Final
Judgment will continue throughout the
ten-year term of the decree, the
Department may determine in its
discretion that the Monitoring Trustee
should serve the full ten-year term.
NBWA has provided no basis for the
Court to substitute NBWA’s opinion that
the Monitoring Trustee must be
appointed for the full ten-year term of
the proposed Final Judgment for the
Department’s discretion as to the
appropriate length of the Monitoring
Trustee’s appointment, which, as noted
above, could last throughout the
duration of the decree.
Section VIII.H of the proposed Final
Judgment requires the Monitoring
Trustee to file reports every 90 days—
or more frequently as needed—with the
Department and, when appropriate,
with the Court setting forth ABI’s efforts
to comply with its obligations under the
proposed Final Judgment. Under
Section VIII.B, if the Monitoring Trustee
determines that ABI has violated the
Final Judgment or breached a related
agreement, the Monitoring Trustee must
recommend an appropriate remedy to
the Department, which, in its sole
discretion, can accept, modify, or reject
a recommendation to pursue a remedy.
There is no sound basis for the Court to
substitute for the Department’s
discretion a preference that the
Monitoring Trustee’s recommendations,
and their resolutions, be made public.
3. Comment Related to the Application
of Law to ABI
a. Summary of Comment
Wayne State University Law Professor
Stephen Calkins indicated that the
proposed Final Judgment should make
clear that, notwithstanding the proposed
Final Judgment, ABI remains subject to
all existing antitrust laws.68
maximizes ABI Beer sales ‘‘over any
rational set that would otherwise better
serve the retail customer and
consumer.’’ 70
b. The Harms Alleged in the Complaint
Do Not Justify the Requested
Restrictions on Retail Shelf Schematics
As discussed above, the 10% cap in
Section V.B appropriately restricts ABI’s
ability to use ABI-Owned Distributors to
disadvantage Third-Party Brewers.
Moreover, the Complaint does not
include allegations related to ABI’s
influence over retailers, through ABIOwned Distributors or otherwise. Nor
do such concerns arise from the merger
of ABI and SABMiller. Thus, Ninkasi’s
assertion that the Department should
restrict ABI-Owned Distributors from
managing retail shelf schematics
concerns a matter outside the scope of
this APPA proceeding. See US Airways,
38 F. Supp. 3d at 76 (‘‘ ‘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. . . .’ ’’
(quoting Graftech, 2011 WL 1566781 at
*13)).
5. Comment Related to ABI’s Ability to
Vertically Integrate into Retail Sales
a. Summary of Comment
b. ABI Remains Subject to All
Applicable Antitrust Laws
ABI remains subject to all applicable
antitrust laws. The proposed Final
Judgment does not restrict the
application of those laws to ABI or
provide an antitrust exemption to ABI
for conduct addressed by the proposed
Final Judgment. In fact, Section XII of
the proposed Final Judgment, relating to
future ABI acquisitions, places greater
reporting requirements on ABI than
required under the HSR Act to help
ensure its compliance with applicable
antitrust laws. Expressly stating in the
proposed Final Judgment that the
proposed Final Judgment does not
supplant the antitrust laws is
unnecessary.
4. Comment Related to ABI’s Ability to
Make Recommendations Regarding
Retailer Schematics
a. Summary of Comment
Ninkasi asked that ABI-Owned
Distributors be prohibited from
managing shelf schematics at retailers
that sell Beer.69 Ninkasi states that ABIOwned Distributors typically do not
carry non-ABI Beer brands and that they
set retailers’ shelves in a way that
American Beverage Licensees
expressed concern that the ABI/
SABMiller transaction, ‘‘along with
recent actions by ABI and the market
reactions they might trigger, could lead
to increased vertical integration and
tied-house opportunities in the beverage
alcohol marketplace,’’ which American
Beverage Licensees argues would ‘‘be to
the detriment of a competitive retail
beverage alcohol environment.’’ 71
American Beverage Licensees stated
that, over the past decade, ABI has
‘‘encroached on traditional beer
retailing establishments across the
country, and now has direct brewery
control of 30 or more on-premise beer
retailing establishments that include
thousands of seats with tied house
opportunities.’’ 72 American Beverage
Licensees further stated that the
proposed Final Judgment ‘‘stops at the
water’s edge and does not wade into
concerns that [the ABI/SABMiller]
merger could have future
anticompetitive implications for
America’s independent beverage
retailers.’’ 73
70 Ninkasi
comment at 2.
Beverage Licensees comment at 1.
72 American Beverage Licensees comment at 2.
73 American Beverage Licensees comment at 3.
71 American
67 Virginia Beer Wholesalers Association
comment at 2.
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69 Ninkasi
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b. The Proposed Final Judgment
Prevents ABI from Further Vertically
Integrating as a Result of the SABMiller
Acquisition and Provides the
Department with Advance Notice of,
and an Opportunity to Review, Future
Acquisitions by ABI
The proposed Final Judgment requires
ABI to divest SABMiller’s entire U.S.
business, which ABI did on October 12,
2016. Accordingly, the proposed Final
Judgment prevents ABI from further
vertically integrating through its
acquisition of SABMiller. Moreover,
Section XII of the proposed Final
Judgment requires ABI to provide the
Department with advance notice of, and
an opportunity to evaluate, ABI’s
acquisition of Beer brewers—including
brewers that own restaurants or tap
rooms. This provision applies to
acquisitions of brewers by ABI that
would not otherwise be reportable
under the HSR Act. Accordingly, the
proposed Final Judgment provides the
Department with an increased ability to
evaluate ABI’s acquisitions of brewers
that own retail establishments and
determine whether any such
acquisitions could lead to
anticompetitive effects.
Moreover, ABI’s previous acquisitions
of on-premise beer retailers were not at
issue with respect to the ABI/SABMiller
transaction, and the Complaint does not
allege any harm to competition resulting
from ABI’s ownership of such retailers.
Accordingly, a remedy directed to ABI’s
existing ownership of on-premise beer
retailers would be outside of the scope
of this APPA proceeding. See US
Airways, 38 F. Supp. 3d at 76.
6. Comments Related to Use of Certain
Data Sources in the Complaint and
Proposed Final Judgment
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a. Summary of Comments
American Beverage Licensees and the
Beer Distributors of Oklahoma noted
that in the Complaint, the Department
uses IRI data to define ABI’s market
share and claim that IRI data is not an
appropriate measure of market share
because it focuses on large stores in the
off-premise channel.74 Separately, the
Wholesale Beer Association Executives
and NBWA each expressed concern that
Section V.B of the Final Judgment relies
on ABI’s BudNet data to measure the
percentage of Beer volume sold through
ABI-Owned Distributors. NBWA stated
that ‘‘currently, there is no method for
independently verifying the accuracy of
ABI’s self-reporting BudNet data and the
accuracy of its reporting to DOJ.’’ 75
Similarly, Wholesale Beer Association
Executives stated, ‘‘ABI’s BudNet
system is completely reliant on ABI’s
self-reporting, is not subject to
transparent oversight, and could be
subject to manipulation by ABI in
calculating whether future acquisitions
exceed the 10% threshold established
by the [proposed Final Judgment].’’ 76
b. The Data Sources Referenced in the
Complaint and the Proposed Final
Judgment are Appropriate
The IRI data relied upon by the
Department in calculating market shares
provided the best available indicator of
brewers’ future competitive significance
for the harms alleged in the Complaint.
Using IRI data was therefore
appropriate. Moreover, the Department
did not use market share data to exclude
any geographic areas from the required
divestiture. Rather, the proposed Final
Judgment required ABI to divest
SABMiller’s business throughout the
United States. The Department’s use of
IRI data to measure market shares
therefore does not affect whether the
proposed Final Judgment was in the
public interest.
The proposed Final Judgment does
not require the use of BudNet data to
measure the percentage of ABI Beer sold
through ABI-Owned Distributors.
Section V.B of the proposed Final
Judgment prohibits ABI from acquiring
‘‘any equity interests in, or any
ownership or control of the assets of, a
Distributor if (i) such acquisition would
transform said Distributor into an ABIOwned Distributor, and (ii) as measured
on the day of entering into an agreement
for such acquisition more than ten
percent (10%), by volume, of Defendant
ABI’s Beer sold in the Territory would
be sold through ABI-Owned Distributors
after such acquisition.’’ Attachment C to
the proposed Final Judgment states that
Beer volume shall be calculated based
on ‘‘the most comprehensive data [used
by ABI at the time of the calculation]
(currently, ABI’s BudNet system),
during the Relevant Period.’’ As a result,
the proposed Final Judgment
contemplates the use of the most
comprehensive data ABI has available.
The Department believes that ABI,
rather than a third party, will possess
the most robust data to show the volume
of its Beer sales. Moreover, both the
Department and the Monitoring Trustee
are well-positioned to investigate
whether BudNet remains the most
comprehensive data for ABI’s Beer
7. Comments Related to ABI’s Use of
Third-Party Sales Data
a. Summary of Comments
The NBWA and Professor Calkins
asserted that the proposed Final
Judgment permits ABI to access sales
information of its Independent
Distributors, including Independent
Distributors’ sales of the Beers of ThirdParty Brewers. They contended that ABI
could use such information to take
action against Independent Distributors
due to the Independent Distributors’
treatment of Third-Party Brewers or
sales of Third-Party Brewers’ Beer.77
b. The Proposed Final Judgment
Protects Distributors Against ABI’s
Unauthorized Use of Third-Party Sales
Data
The proposed Final Judgment limits
the information that ABI can request or
require an Independent Distributor to
report. Under Section V.G, ABI cannot
request or require that Independent
Distributors report, ‘‘whether in
aggregated or disaggregated form, the
Independent Distributor’s revenues,
profits, margins, costs, sales volumes, or
other financial information associated
with the purchase, sale, or distribution
of a Third-Party Brewer’s Beer.’’ ABI
can, however, request that Independent
Distributors report ‘‘general financial
information . . . [for ABI] to assess the
overall financial condition and financial
viability of such Independent
Distributor, or the percentage of total
Beer revenues received by the
Independent Distributor in the prior
year associated with the purchase, sale,
or distribution of Defendant ABI’s Beer
distributed by the Independent
Distributor.’’ But, as Section V.G makes
clear, ABI cannot request from
Independent Distributors information
that would ‘‘disclose or enable
Defendant ABI to infer the disaggregated
revenues, profits, margins, costs, or
sales volumes associated with the
Independent Distributor’s purchase,
sale, or distribution of Third-Party
Brewers’ Beer.’’
The information that ABI is permitted
to receive under the proposed Final
Judgment is relevant to ABI’s ordinary
course business decisions that are
unrelated to an Independent
Distributor’s sale of Third-Party
Brewers’ Beers. ABI has a legitimate
interest in information about
Independent Distributors’ sales of ABI
75 NBWA
74 American
Beverage Licensees comment at 4;
Beer Distributors of Oklahoma comment at 2.
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comment at 15.
Beer Association Executives
comment at 7.
volume and ensure that ABI uses for
this calculation the most comprehensive
data then available.
76 Wholesale
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products. ABI also has a legitimate
interest in assessing the financial health
of Independent Distributors, and an
Independent Distributor’s total sales
may be relevant to that assessment. The
proposed Final Judgment properly
balances ABI’s legitimate need for
information about its business partners
against the danger of ABI’s obtaining
information that it could use to punish
Independent Distributors for their sales
of the Beers of Third-Party Brewers.
Nevertheless, the NBWA argues that
the information that ABI is permitted to
receive ‘‘allows ABI to infer the
aggregated revenue attributable to nonABI beer’’ and is thus ‘‘sufficient to
enable ABI to continue to target
distributors that carry and promote rival
brands.’’ 78 The NBWA requests that
‘‘any actions taken against distributors
based on this information or any
difference in treatment between
distributors with a high proportion of
ABI sales and those with a low
proportion of ABI sales be seen as a
violation of the [proposed Final
Judgment].’’ 79
In fact, Section V.D of the proposed
Final Judgment prohibits ABI from
taking any adverse action against an
Independent Distributor based upon
that distributor’s sales of a Third-Party
Brewer’s Beer. The proposed Final
Judgment thus protects against the harm
that the NBWA’s comment seeks to
prevent.
8. Comment Requesting to Extend and
Periodically Reopen the Period for
Public Comments
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a. Summary of Comment
The Virginia Beer Wholesalers
Association requested that the period
for public comment be extended until
after the Final Judgment has been
entered and periodically reopened to
allow interested parties the opportunity
to review and comment on the changes
that ABI proposes to make to its
programs and agreements with
Distributors to comply with the
proposed Final Judgment.80 The
association writes that the closing of the
public comment period prior to ABI’s
issuance of proposed amendments to its
Distributor agreements and programs
‘‘would severely limit the ability of
distributors and regulators in Virginia,
and in those states with similar
franchise laws, to determine’’ whether
78 NBWA
comment at 22.
comment at 22.
80 Virginia Beer Wholesalers Association
comment at 1.
the proposed amendments would
comply with state laws.81
Distributors violate state franchise or
other laws.
b. No Extension or Reopening of the
Comment Period is Necessary Because
the Department Will Approve ABI’s
Descriptions of its Changes to its
Programs and Agreements with
Distributors
9. Comments Related to Use of the
Terms ‘‘Third-Party Brewer’s Beer’’ and
‘‘Third-Party Brewers’ Beers’’
The Tunney Act sets forth specific
procedures for the Court to approve
consent judgments such as the proposed
Final Judgment in this case. See 15
U.S.C. §§ 16(b)–(f). As Virginia Beer
Wholesalers Association suggested,
those procedures contemplate that the
period for public comment will precede
the entry of the Final Judgment. See 15
U.S.C. § 16(b). No extension or
reopening of the comment period is
necessary because the Department must
approve ABI’s descriptions of its
changes to its programs and agreements
with Independent Distributors. Section
V.I requires ABI to obtain the
Department’s approval of the
notification that ABI must provide to
Independent Distributors (1) explaining
the practices prohibited by Section V of
the Final Judgment, (2) describing the
changes ABI is making to any programs,
agreements, or any interpretations of
agreements required to comply with
Section V of the Final Judgment, and (3)
informing the Independent Distributor
of its right, without fear of retaliation, to
bring to the attention of the Monitoring
Trustee any actions by ABI which the
Independent Distributor believes may
violate Section V. As discussed above,
the Monitoring Trustee will monitor
ABI’s compliance with the proposed
Final Judgment, including with respect
to changes to its agreements and
programs with Independent
Distributors. Industry participants and
other interested parties are also
welcome to contact the Department to
express concerns about ABI’s
compliance with, or potential violations
of, the proposed Final Judgment. As
expressly stated in Section XVII, during
the ten-year term of the proposed Final
Judgment, the Department may apply to
the Court ‘‘for further orders and
directions as may be necessary or
appropriate to carry out or construe
[the] Final Judgment, to modify any of
its provisions, to ensure and enforce
compliance, and to punish violations of
its provisions.’’
Finally, nothing in the proposed Final
Judgment prevents state regulators from
determining whether ABI’s programs or
agreements with Independent
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a. Summary of Comments
Commenter Brewers Association
requested that the Department clarify
that the proposed Final Judgment’s
prohibitions related to ABI’s distributor
incentive programs apply not only to
programs that specifically reference a
particular Third-Party Brewer’s Beer but
rather to incentive programs that apply
to Third-Party Brewers’ Beer in the
aggregate.82 Similarly, Professor Calkins
requested that the Department clarify
that references to ‘‘a Third-Party
Brewer’s Beer’’ in proposed Final
Judgment Sections V.D, V.E, and V.G
apply individually and collectively to
Third-Party Brewers.83
b. References to ‘‘Third-Party Brewer’s
Beer’’ Apply Individually and
Collectively to Third-Party Brewers
The Department hereby clarifies that
references to Third-Party Brewer’s Beer
apply individually and collectively to
Third-Party Brewers.
10. Comment Related to the Term of the
Proposed Final Judgment
a. Summary of Comment
Commenter NBWA requested that the
proposed Final Judgment terminate not
of its own accord at the end of a ten-year
term but rather only after the
Department, with the assistance of the
Monitoring Trustee, has provided a
report evaluating the competitive
conditions in the U.S. beer industry and
the Court has determined that the
proposed Final Judgment has been
effective.84
b. The Ten-Year Term is Appropriate
The typical term of the Department’s
consent decrees resolving violations of
Section 7 of the Clayton Act is ten years.
In addition, Section XVIII contemplates
that the ten-year term of the proposed
Final Judgment may be extended by the
Court.
The purpose of the proposed Final
Judgment is not to broadly ensure that
the U.S. beer market is competitive, but
rather to cure the antitrust violations
alleged in the Complaint. Thus, it is not
appropriate to extend the term of the
proposed Final Judgment based on a
determination that the competitive
conditions of the U.S. beer industry are
unsatisfactory. Although the proposed
82 Brewers
79 NBWA
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84 NBWA comment at 24.
83 Professor
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Federal Register / Vol. 82, No. 30 / Wednesday, February 15, 2017 / Notices
Final Judgment includes provisions that
the Department believes will preserve
competition in the U.S. beer industry
that would likely be lost due to ABI’s
acquisition of SABMiller, generally
improving the competitive conditions in
the U.S. beer industry is beyond the
scope of this APPA proceeding.
11. Comment Requesting the
Department Publicize the Last Day of
the 60-day Public Comment Period
Commenter Professor Calkins
requested that the Department state on
its public website the last day of the 60day period for public comments on
proposed consent decrees.85
b. The APPA Does Not Require the
Department to State on its Public
Website the Last Day for Public
Comments on Consent Decrees
The APPA sets forth specific
procedures for the Court to approve
consent judgments such as the proposed
Final Judgment in this case. See 15
U.S.C. §§ 16(b)–(f). Those requirements
do not include notice on the
Department’s public website of the last
day of the 60-day period for public
comments. The Department
nevertheless appreciates Professor
Calkins’ suggestion and will consider
implementing it in connection with
future proposed final judgments.
VI. CONCLUSION
mstockstill on DSK3G9T082PROD with NOTICES
After careful consideration of the
public comments, the Department
continues to believe that the proposed
Final Judgment, as drafted, provides an
effective and appropriate remedy for the
antitrust violations alleged in the
Complaint, and is therefore in the
public interest. The Department will
move this Court to enter the proposed
Final Judgment after the comments and
this response are published pursuant to
15 U.S.C. § 16(d).
Dated: January 13, 2017
Respectfully submitted,
Michelle R. Seltzer (D.C. Bar No.
475482), David C. Kelly, David M.
Stoltzfus, Attorneys for the United
States, Litigation I Section, Antitrust
Division, U.S. Department of Justice,
450 Fifth Street, N.W., Suite 4100,
Washington, DC 20530, Telephone:
(202) 353–3865, Facsimile: (202) 307–
5802, E-mail: michelle.seltzer@
usdoj.gov.
BILLING CODE P
85 Professor
Calkins comment at 1–2.
VerDate Sep<11>2014
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Jkt 241001
Office of Justice Programs
[OJP (OJP) Docket No. 1734]
Meeting of the Office of Justice
Programs’ Science Advisory Board
comments to the DFO, as the time
available will not allow the public to
directly address the Board at the
meeting. Anyone requiring special
accommodations should notify Ms.
Darke Schmitt at least seven (7) calendar
days in advance of the meeting.
AGENCY:
Office of Justice Programs
(OJP), Justice.
ACTION: Notice of meeting.
Katherine Darke Schmitt,
Senior Policy Advisor and SAB DFO, Office
of the Assistant Attorney General, Office of
Justice Programs.
This notice announces a
forthcoming meeting of OJP’s Science
Advisory Board (‘‘the Board’’). This
meeting is scheduled for March 27–28,
2017. General Function of the Board:
The Board is chartered to provide OJP,
a component of the Department of
Justice, with valuable advice in the
areas of science and statistics for the
purpose of enhancing the overall impact
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activities in criminal and juvenile
justice.
DATES: The meeting will take place on
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approximately 12 noon p.m. to 5:30
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from approximately 9 a.m. to 12 noon.
ADDRESSES: The meeting will take place
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FOR FURTHER INFORMATION CONTACT:
Katherine Darke Schmitt, Designated
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Assistant Attorney General, Office of
Justice Programs, 810 7th Street NW.,
Washington, DC 20531; Phone: (202)
616–7373 [Note: This is not a toll-free
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SUPPLEMENTARY INFORMATION: This
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address at least seven (7) calendar days
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allowed without registration. Persons
interested in communicating with the
Board should submit their written
[FR Doc. 2017–02986 Filed 2–14–17; 8:45 am]
SUMMARY:
a. Summary of Comment
[FR Doc. 2017–03029 Filed 2–14–17; 8:45 am]
DEPARTMENT OF JUSTICE
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BILLING CODE 4410–18–P
DEPARTMENT OF LABOR
Mine Safety and Health Administration
Brookwood-Sago Mine Safety Grants
Mine Safety and Health
Administration, Labor.
ACTION: Funding Opportunity
Announcement (FOA).
AGENCY:
Announcement Type: New.
Funding Opportunity Number: FOA
17–3BS.
Catalog of Federal Domestic
Assistance (CFDA) Number: 17.603.
SUMMARY: The U.S. Department of Labor
(DOL), Mine Safety and Health
Administration (MSHA), is making up
to $1,000,000 available in grant funds
for education and training programs to
help identify, avoid, and prevent unsafe
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and the Commonwealth of the Mariana
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Indians, and Native Hawaiian
organizations. MSHA could award as
many as 20 grants. The amount of each
individual grant will be at least
$50,000.00 and the maximum
individual award will be $250,000.
MSHA may incrementally fund these
grants based on milestones and
availability of funds. This notice
contains all of the information needed
to apply for grant funding.
DATES: The closing date for applications
will be March 24, 2017, (no later than
11:59 p.m. EST). MSHA will award
grants on or before April 10, 2017.
ADDRESSES: Grant applications for this
competition must be submitted
E:\FR\FM\15FEN1.SGM
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Agencies
[Federal Register Volume 82, Number 30 (Wednesday, February 15, 2017)]
[Notices]
[Pages 10782-10798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03029]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Anheuser-Busch InBEV SA/NV, et al.; Public
Comments and Response on Proposed Final Judgment
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h),
[[Page 10783]]
the United States hereby publishes below the Response of Plaintiff
United States to Public Comments on the Proposed Final Judgment in
United States v. Anheuser-Busch InBev SA/NV, et al., Civil Action No.
1:16-cv-01483-EGS, which was filed in the United States District Court
for the District of Columbia on January 13, 2017, together with copies
of the 12 comments received by the United States.
Pursuant to the Court's January 19, 2017 minute order, comments
were published electronically and are available to be viewed and
downloaded at the Antitrust Division's Web site, at: https://www.justice.gov/atr/case/us-v-anheuser-busch-inbev-sanv-and-sabmiller-plc. A copy of the United States' response to the comments is also
available at the same location.
Copies of the comments and the response are available for
inspection at the Department of Justice, Antitrust Division, Antitrust
Documents Group, 450 Fifth Street NW., Suite 1010, Washington, DC 20530
(telephone: (202) 514-2481), and at the Office of the Clerk of the
United States District Court for the District of Columbia. Copies of
any of these materials may also be obtained upon request and payment of
a copying fee.
Patricia A. Brink,
Director of Civil Enforcement.
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Anheuser-Busch InBEV,
and SABMiller plc, Defendants.
Civil Action No. 1:16-cv-01483 (EGS)
RESPONSE OF PLAINTIFF UNITED STATES TO PUBLIC COMMENTS ON THE PROPOSED
FINAL JUDGMENT
TABLE OF CONTENTS
I. Introduction................................................. 1
II. Procedural History.......................................... 1
III. Standard of Judicial Review................................ 2
IV. The Investigation and the Proposed Final Judgment........... 6
V. Summary of Public Comments and the United States' Response... 8
A. Response to Comments on ABI's Distribution Practices..... 10
1. The Restrictions on ABI's Distribution Practices Were 11
Designed to Ensure that the Divestiture Adequately
Addresses the Harm Alleged in the Complaint and
Identified in the CIS..................................
2. Comments Regarding ABI's Ability Under Section V.D to 13
Condition Incentives, Programs, or Contractual Terms on
ABI's Percentage of Beer Industry Sales in a Geographic
Area...................................................
a. Summary of Comments.................................. 13
b. Allowing ABI to Condition Incentives, Promotions, or 14
Contractual Terms on ABI's Percentage of Beer Industry
Sales in a Geographic Area Does Not Undermine the
Effectiveness of the Proposed Final Judgment...........
3. Comments Regarding the Allocation to ABI's Beers of 15
an Independent Distributor's Annual Spending on Beer
Promotions and Incentives..............................
a. Summary of Comments.................................. 15
b. Allowing ABI to Require a Proportional Allocation of 16
an Independent Distributor's Annual Spending on Beer
Promotions and Incentives Based on Previous-Year Beer
Sales Does Not Undermine the Effectiveness of the
Proposed Final Judgment................................
4. Comment Regarding the Effect of the Proposed Final 18
Judgment on Independent Distributors' Best Efforts to
Market, Advertise, Place, Promote, and Sell Third-Party
Brewers' Beer..........................................
a. Summary of Comments.................................. 18
b. Allowing ABI to Require Best Efforts from Independent 18
Distributors to Market and Sell ABI Beer Does Not
Conflict With Independent Distributors Also Providing
Best Efforts to Market and Sell Third-Party Brewers'
Beer...................................................
5. Comments Regarding the Restrictions on ABI's Ability 19
to Disapprove the General Managers and Successor
General Managers of Independent Distributors...........
a. Summary of Comment................................... 19
b. Section V.E Appropriately Restricts ABI's Ability to 19
Disapprove the General Managers and Successor General
Managers of Independent Distributors...................
6. Comment Regarding Restrictions on ABI's Exercise of 21
Rights Related to the Transfer of Control, Ownership,
or Equity of Distributors..............................
a. Summary of Comment................................... 21
b. Section V.F Appropriately Restricts ABI's Exercise of 21
Rights Related to the Transfer of Control, Ownership,
or Equity of Distributors..............................
7. Comments Regarding Restrictions Related to ABI-Owned 22
Distributors...........................................
a. Summary of Comments.................................. 22
b. Additional Restrictions Related to ABI-Owned 23
Distributors Are Not Necessary.........................
c. Section V.B Appropriately Restricts ABI's Ability to 24
Increase the Volume of Beer Sold By ABI-Owned
Distributors...........................................
(i) A Nationwide Restriction is Appropriate............. 24
(ii) Safeguards Exist to Prevent ABI from Circumventing 25
the Cap................................................
(iii) The Definition of ABI-Owned Distributor is 26
Appropriate............................................
8. Comments Requesting that Section V's Distribution 27
Restrictions Also be Made to Apply to Molson Coors.....
a. Summary of Comments.................................. 27
b. Molson Coors' Distribution Practices Are Outside the 28
Scope of this Proceeding...............................
9. Comment Related to ABI's Obligation to Inform 28
Independent Distributors of the Requirements of the
Proposed Final Judgment................................
a. Summary of Comment................................... 28
b. The Proposed Final Judgment Adequately Requires ABI 29
to Inform Independent Distributors of the Requirements
of the Final Judgment..................................
10. Comment Related to ABI's Ability to Terminate 30
Independent Distributors...............................
a. Summary of Comment................................... 30
b. The Proposed Final Judgment Already Prohibits ABI 30
from Terminating an Independent Distributor Based on
the Distributor's Sales, Promotion, Advertising,
Marketing, or Retail Placement of a Third-Party
Brewer's Beer..........................................
11. Other Comments Requesting that the Restrictions in 31
Section V be Broadened.................................
a. Summary of Comments.................................. 31
[[Page 10784]]
b. Section V Meaningfully Restricts ABI's Ability to 31
Reward or Penalize Independent Distributors Based on
Their Relationships with Third-Party Brewers...........
B. Comments Related to ABI's Ownership of Craft Breweries... 32
1. Summary of Comments.................................. 32
2. The Proposed Final Judgment Adequately Ensures that 32
the Department May Evaluate ABI's Acquisition of Craft
Brewers................................................
C. Comments Related to the Eden Brewery..................... 33
1. Summary of Comments.................................. 33
2. The Requested Divestiture of the Eden Brewery is 33
Outside the Scope of this Action.......................
D. Other Comments........................................... 35
1. Comments Related to a Potential Antitrust Compliance 36
Policy.................................................
a. Summary of Comments.................................. 36
b. The Absence of a Required Compliance Policy Does Not 37
Undermine the Effectiveness of the Proposed Final
Judgment...............................................
2. Comments Related to the Monitoring Trustee........... 37
a. Summary of Comments.................................. 37
b. The Monitoring Trustee Already Has the Ability to 38
Monitor ABI's Compliance with the Proposed Final
Judgment...............................................
3. Comment Related to the Application of Law to ABI..... 39
a. Summary of Comment................................... 39
b. ABI Remains Subject to All Applicable Antitrust Laws. 40
4. Comment Related to ABI's Ability to Make 40
Recommendations Regarding Retailer Schematics..........
a. Summary of Comment................................... 40
b. The Harms Alleged in the Complaint Do Not Justify the 40
Requested Restrictions on Retail Shelf Schematics......
5. Comment Related to ABI's Ability to Vertically 41
Integrate into Retail Sales............................
a. Summary of Comment................................... 41
b. The Proposed Final Judgment Prevents ABI from Further 42
Vertically Integrating as a Result of the SABMiller
Acquisition and Provides the Department with Advance
Notice of, and an Opportunity to Review, Future
Acquisitions by ABI....................................
6. Comments Related to Use of Certain Data Sources in 42
the Complaint and Proposed Final Judgment..............
a. Summary of Comments.................................. 42
b. The Data Sources Referenced in the Complaint and 43
Proposed Final Judgment are Appropriate................
7. Comments Related to ABI's Use of Third-Party Sales 44
Data...................................................
a. Summary of Comments.................................. 44
b. The Proposed Final Judgment Protects Distributors 44
Against ABI's Unauthorized Use of Third-Party Sales
Data...................................................
8. Comment Requesting to Extend and Periodically Reopen 46
the Period for Public Comments.........................
a. Summary of Comment................................... 46
b. No Extension or Reopening of the Comment Period is 46
Necessary Because the Department Will Approve ABI's
Descriptions of its Changes to its Programs and
Agreements with Distributors...........................
9. Comments Related to the Use of the Terms ``Third- 48
Party Brewer's Beer'' and ``Third-Party Brewers' Beer''
a. Summary of Comments 48...............................
b. References to ``Third-Party Brewer's Beer'' Apply
Individually and Collectively to Third-Party Brewers 48
10. Comment Related to the Term of the Proposed Final 48
Judgment...............................................
a. Summary of Comment................................... 48
b. The Ten-Year Term is Appropriate..................... 49
11. Comment Requesting the Department Publicize the Last 49
Day of the 60-day Public Comment Period................
a. Summary of Comment................................... 49
b. The APPA Does Not Require the Department to State on 49
its Public Website the Last Day for Public Comments on
Consent Decrees........................................
VI. Conclusion.................................................. 50
I. INTRODUCTION
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act (the ``APPA'' or ``Tunney Act''), 15 U.S.C. Sec. Sec.
16(b)-(h), the United States hereby responds to the twelve public
comments received regarding the proposed Final Judgment in this case.
After careful consideration of the submitted comments, the United
States continues to believe that the proposed Final Judgment will
provide an effective and appropriate remedy for the antitrust violation
alleged in the Complaint. The United States will move the Court for
entry of the proposed Final Judgment after the public comments and this
response have been published pursuant to 15 U.S.C. Sec. 16(d).\1\
---------------------------------------------------------------------------
\1\ On January 12, 2017, the United States submitted its
Unopposed Motion and Supporting Memorandum to Excuse Federal
Register Publication of Comments and Attachments, requesting that
this Court authorize an alternative means for publishing the public
comments and attachments received in this action (Doc. 15).
---------------------------------------------------------------------------
II. PROCEDURAL HISTORY
On November 11, 2015, Anheuser-Busch InBev SA/NV (``ABI'') entered
into an agreement to acquire SABMiller plc (``SABMiller'')
(collectively, ``Defendants'') in a transaction valued at approximately
$107 billion. On July 20, 2016, the United States filed a civil
antitrust Complaint, seeking to enjoin ABI from acquiring SABMiller.
The Complaint alleges that ABI's proposed acquisition of SABMiller
likely would substantially lessen competition in the sale of beer to
customers in the United States in violation of Section 7 of the Clayton
Act, 15 U.S.C. Sec. 18.
Simultaneously with the filing of the Complaint, the United States
filed a proposed Final Judgment, a Stipulation signed by Plaintiff and
Defendants consenting to entry of the proposed Final Judgment after
compliance with the requirements of the Tunney Act, 15 U.S.C. Sec. 16,
and a Competitive Impact Statement (``CIS'') describing the transaction
and the proposed Final Judgment. The United States published the
proposed Final Judgment and CIS in the Federal Register on August 4,
2016, see 81 Fed. Reg. 51465, and caused summaries of the proposed
Final Judgment and CIS, together with directions for the submission of
written comments relating to the proposed Final Judgment, to be
published in The Washington Post on August 3, 4, 5, 6, 7, 8, and 9,
2016. The 60[hyphen]day period for public comment ended on October 4,
2016. The United States received twelve comments (Attachments 1 through
12).
III. STANDARD OF JUDICIAL REVIEW
The APPA requires that proposed consent judgments in antitrust
cases
[[Page 10785]]
brought by the United States be subject to a 60-day public comment
period, after which the court shall determine whether entry of the
proposed Final Judgment ``is in the public interest.'' 15 U.S.C. Sec.
16(e)(1). In making that determination, the court 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.
Id.
The public interest inquiry is necessarily a limited one because,
as courts have repeatedly held, the government is entitled to deference
when determining whether a proposed settlement provides an effective
and appropriate remedy for the alleged antitrust violation. See
generally United States v. Microsoft Corp., 56 F.3d 1448, 1461 (D.C.
Cir. 1995) (holding that the government is entitled to ``broad
discretion to settle with the defendant within the reaches of the
public interest''); United States v. US Airways Grp., Inc., 38 F. Supp.
3d 69, 75 (D.D.C. 2014) (noting that the court's ``inquiry is limited''
because the government has ``broad discretion'' to ``determine the
adequacy of the relief secured through a settlement''); United States
v. InBev N.V./S.A., No. 08-cv-1965 (JR), 2009-2 Trade Cas. (CCH) ]
76,736, 2009 U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009)
(noting that the court's review of a consent judgment is limited and
only inquires ``into whether the government's determination that the
proposed remedies will cure the antitrust violations alleged in the
complaint was reasonable, and whether the mechanisms to enforce the
proposed Final Judgment are clear and manageable''); United States v.
SBC Commc'ns, Inc., 489 F. Supp. 2d 1, 10-11 (D.D.C. 2007) (concluding
that the court's public interest inquiry is ``sharply proscribed by
precedent and the nature of Tunney Act proceedings'').
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 the enforcement mechanisms are sufficient,
and whether the decree may 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) (quoting United States v.
Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft,
56 F.3d at 1460-62 (same); United States v. Alcoa, Inc., 152 F. Supp.
2d 37, 40 (D.D.C. 2001) (same); InBev, 2009-2 Trade Cas. (CCH) ]
76,736, 2009 U.S. Dist. LEXIS 84787, at *3 (same). 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).
In determining whether a proposed settlement is in the public
interest, ``the court `must accord deference to the government's
predictions about the efficacy of its remedies.' '' US Airways, 38 F.
Supp. 3d at 76 (quoting SBC Commc'ns, 489 F. Supp. at 17); see also
Microsoft, 56 F.3d at 1461 (noting that the government's ``predictions
as to the effect of the proposed remedies'' must be afforded
deference); 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 government's ``prediction as to the effect of the proposed
remedies, its perception of the market structure, and its views of the
nature of the case''); United States v. Morgan Stanley, 881 F. Supp. 2d
563, 567-68 (S.D.N.Y. 2012) (explaining that the government is entitled
to deference when crafting proposed remedies for antitrust violations).
Courts ``may not require that the remedies perfectly match the
alleged violations.'' SBC Commc'ns, 489 F. Supp. 2d at 17. Rather, the
ultimate question is 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.' '' Microsoft, 56 F.3d at 1461.
Accordingly, 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; see also
United States v. Apple, Inc., 889 F. Supp. 2d 623, 631 (S.D.N.Y. 2012)
(same).
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 the public
interest.'' United States v. Am. Tel. & Tel. Co., 552 F. Supp. 131, 151
(D.D.C. 1982) (citations and internal quotation marks omitted); 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). And, the risk and uncertainty of
further litigation are appropriate factors for the court to consider
when evaluating whether a proposed remedy is in the public interest.
See SBC Commc'ns, 489 F.Supp. 2d at 15 (``[R]oom must be made for the
government to grant concessions in the negotiation process for
settlements[.]'').
In its 2004 amendments to the Tunney Act,\2\ Congress made clear
its intent to preserve the practical benefits of using consent decrees
in antitrust enforcement actions brought by the government by 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. Sec.
16(e)(2). 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 the Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d
at 11; see also United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (``[T]he Tunney Act expressly allows the court to make
its public interest determination on the basis of the competitive
impact statement and response to public comments alone.'');
[[Page 10786]]
US Airways, 38 F. Supp. 3d at 76 (same).
---------------------------------------------------------------------------
\2\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for courts 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.
Sec. 16(e) (2004), with 15 U.S.C. Sec. 16(e)(1) (2006); see also
SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that a court's
public interest inquiry ``remains sharply proscribed by precedent
and the nature of Tunney Act proceedings'' because the 2004
amendments ``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------
IV. THE INVESTIGATION AND THE PROPOSED FINAL JUDGMENT
The proposed Final Judgment is the culmination of a thorough nine
month investigation conducted by the Antitrust Division of the United
States Department of Justice (the ``Department''). In investigating the
proposed transaction's likely competitive effects, the Department
collected more than 1.4 million documents from the Defendants and third
parties, conducted over 70 interviews of beer industry participants,
took numerous party depositions, and coordinated with both state and
foreign competition agencies reviewing the transaction. The Department
carefully analyzed the information it obtained from these sources, as
well as publicly available information, and thoroughly considered all
of the competitive issues presented.
Based on evidence gathered during its investigation, the Department
concluded that ABI's proposed acquisition of SABMiller would likely
substantially lessen competition in the sale of beer to U.S. customers
both nationally and in every local market in the United States by
eliminating head-to-head competition between ABI and MillerCoors LLC
(``MillerCoors''). The proposed transaction would have eliminated
competition between ABI and MillerCoors--the two largest beer brewers
in the United States--because it would have given ABI a majority
ownership interest in and 50% governance rights over MillerCoors, which
was a joint venture between SABMiller and Molson Coors Brewing Company
(``Molson Coors'') through which SABMiller conducted substantially all
of its U.S. operations. Accordingly, the Department filed a civil
antitrust lawsuit to block the acquisition as a violation of Section 7
of the Clayton Act, 15 U.S.C. Sec. 18.
The proposed Final Judgment provides an effective and appropriate
remedy for the transaction's likely competitive harm by requiring ABI
to divest SABMiller's equity and ownership stake in MillerCoors, as
well as certain other assets related to MillerCoors' business and the
Miller-branded beer business outside of the United States. After the
Department filed the proposed Final Judgment, ABI acquired SABMiller
and divested these assets to Molson Coors. The divestiture preserves
competition in the U.S. beer industry by ensuring that MillerCoors
continues to be an independent and viable competitor because it
provides MillerCoors with (i) perpetual, royalty-free licenses to
products for which it previously had to pay royalties, and (ii)
ownership of the rights to the Miller beer brands.
To further help preserve and promote competition in the U.S. beer
industry, the proposed Final Judgment (i) imposes certain restrictions
on ABI's distribution practices and ownership of distributors, and (ii)
requires ABI to provide the United States with notice of future
acquisitions, including acquisitions of beer distributors and craft
brewers, prior to their consummation. Among other things, the proposed
Final Judgment prohibits ABI from:
Acquiring a distributor if the acquisition would cause more
than 10% of ABI's beer in the United States to be sold through ABI-
owned distributors;
Prohibiting or impeding a distributor that sells ABI's beer
from using its best efforts to sell, market, advertise, promote, or
secure retail placement for rivals' beers, including the beers of
high-end brewers;
Providing incentives or rewards to a distributor who sells
ABI's beer based on the percentage of ABI beer the distributor sells
as compared to the distributor's sales of the beers of ABI's rivals;
Conditioning any agreement or program with a distributor
that sells ABI's beer on the fact that it sells ABI's rivals' beer
outside of the geographic area in which it sells ABI's beer;
Exercising its rights over distributor management and
ownership based on a distributor's sales of ABI's rivals' beers;
Requiring a distributor to report financial information
associated with the sale of ABI's rivals' beers;
Requiring that a distributor who sells ABI's beer offer its
sales force the same incentives for selling ABI's beer when the
distributor promotes the beers of ABI's rivals with sales
incentives; and
Consummating non-reportable acquisitions of beer brewers--
including craft brewers--without providing the United States with
advance notice and an opportunity to assess the transaction's likely
competitive effects.
The proposed Final Judgment also authorizes the Department to appoint a
Monitoring Trustee--subject to the Court's approval--with the power and
authority to monitor ABI's compliance with the terms of the proposed
Final Judgment and other powers that the Court deems appropriate. Among
other things, the Monitoring Trustee may investigate and report on
complaints that ABI has violated the distribution-related restrictions
contained in the proposed Final Judgment.
V. SUMMARY OF PUBLIC COMMENTS AND THE UNITED STATES' RESPONSE
During the 60-day comment period, the Department received twelve
comments regarding the proposed Final Judgment. These comments came
from individuals representing four beer wholesaler associations (Beer
Distributors of Oklahoma, Virginia Beer Wholesalers Association Inc.,
Wholesale Beer Association Executives, and National Beer Wholesalers
Association), two brewers (D.G. Yuengling & Son, Inc. and Ninkasi
Brewing Company), Consumer Watchdog (a consumer advocacy organization),
American Beverage Licensees (a national trade association), the Brewers
Association, the North Carolina Department of Justice, the
International Brotherhood of Teamsters, and Stephen Calkins, Professor
of Law, Wayne State University.
In connection with sharing recommendations on how the proposed
Final Judgment could be improved, many commenters acknowledged the
meaningful protections for consumers and competition that the
Department achieved through the proposed Final Judgment. For example:
Virginia Beer Wholesalers Association stated that
``[o]verall,'' it ``believes that the proposed Final Judgment
addresses the most egregious anticompetitive aspects of the'' ABI/
SABMiller transaction; \3\
---------------------------------------------------------------------------
\3\ Virginia Beer Wholesalers Association comment at 1
(Attachment 1).
---------------------------------------------------------------------------
American Beverage Licensees stated: ``The DOJ, in its
proposed Final Judgment, addresses the concerns that a $100 billion
brewer with a publicly-stated interest in expanding its distribution
footprint presents to the United States' independent beer
distribution system. This is an important recognition of the impact
of vertical integration on access to distribution, and the DOJ
rightly puts forth reasonable limits for ABI.'' \4\
---------------------------------------------------------------------------
\4\ American Beer Licensees comment at 3 (Attachment 2).
---------------------------------------------------------------------------
Beer Distributors of Oklahoma stated that it ``believes
that the Complaint and Proposed Final Judgment (PFJ) identifies key
issues and goes a long way towards providing necessary relief
designed to protect the consumer by ensuring a more level playing
field for brewers.'' \5\
---------------------------------------------------------------------------
\5\ Beer Distributors of Oklahoma comment at 1 (Attachment 3).
---------------------------------------------------------------------------
Consumer Watchdog applauded the Department for ``obtaining
a comprehensive remedy to resolve wide-ranging competitive concerns
resulting from the combination of the two largest global beer
producers,'' and stated that the ``comprehensive remedy demonstrates
the DOJ's newfound willingness to impose meaningful remedies to
protect consumers and preserve competition when industry megaliths
seek to merge.''\6\
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\6\ Consumer Watchdog comment at 1 (Attachment 4).
---------------------------------------------------------------------------
Wholesale Beer Association Executives stated: ``With the
caveats expressed [in its comments], WBAE is supportive of the
[[Page 10787]]
[proposed Final Judgment] and expresses its gratitude to the
Department of Justice for addressing certain anticompetitive aspects
of the proposed transaction and conduct in the mature marketplace
after the closing of the transaction.'' \7\
---------------------------------------------------------------------------
\7\ Wholesale Beer Association Executives comment at 2
(Attachment 5).
Many of the public comments fall into one of three broad
categories: (1) comments related to the restrictions imposed by the
proposed Final Judgment on ABI's distribution practices and ownership
of distributors, (2) comments related to ABI's ownership of craft
brewers and beers, and (3) comments related to the brewery owned by
MillerCoors in Eden, North Carolina (the ``Eden brewery''). There were
other comments as well. Below are summaries of the issues raised by the
commenters and the United States' responses to those issues.
A. Response to Comments on ABI's Distribution Practices
The principal harm alleged in the Complaint is the reduction in
competition that would have resulted from ABI's acquisition of
SABMiller's interest in MillerCoors. In the absence of a remedy, ABI's
proposed acquisition of SABMiller would have given ABI a majority
ownership interest in and 50% governance rights over MillerCoors. That
would have eliminated head-to-head competition between the two largest
brewers in the United States. Thus, the likely effect of the
acquisition would have been to substantially lessen competition in the
sale of beer to U.S. consumers both nationally and in every local
market in the United States.
In addition, the Complaint alleged that ABI's acquisition of
SABMiller would have increased ABI's incentive and ability to
disadvantage its high-end rivals--such as brewers of craft and import
beers--by limiting the distribution of their beers. With the
elimination of MillerCoors as a competitive constraint, ABI's high-end
rivals would have become a more important constraint on ABI's ability
to raise beer prices. ABI would thus have had a greater incentive to
invest resources in distributor acquisitions and to use practices that
restrict its high-end rivals' access to distribution. Further, with
control over the MillerCoors beer brands, ABI could have encouraged the
distributors of both ABI brands and MillerCoors brands to limit their
sales of ABI's high-end rivals' beer, which would likely have resulted
in increased beer prices and fewer choices for consumers.
The proposed Final Judgment secures a structural remedy to address
the harm alleged in the Complaint. Specifically, the proposed Final
Judgment requires ABI to divest SABMiller's equity and ownership stake
in MillerCoors, as well as certain other assets related to MillerCoors'
business and the Miller-branded beer business outside of the United
States. The divestiture buyer, Molson Coors, acquired the assets
necessary to maintain MillerCoors as an independent competitor. The
proposed Final Judgment did not permit ABI to acquire any SABMiller
asset that was used to compete in the markets for beer in the United
States. Consequently, the divesture ensures that ABI's acquisition of
SABMiller will not result in ABI's market share increasing or the U.S.
beer industry becoming more concentrated.
1. The Restrictions on ABI's Distribution Practices Were Designed to
Ensure that the Divestiture Adequately Addresses the Harm Alleged in
the Complaint and Identified in the CIS
As the United States explained in the CIS, however, the divestiture
to Molson Coors alone, without additional relief, could lead to
conditions that might increase ABI's incentive to disadvantage its
high-end rivals by limiting the distribution of their beers. The United
States noted that unlike MillerCoors, which competed directly against
ABI only in the United States, Molson Coors competes against ABI in
multiple countries throughout the world. See CIS at 11. The United
States also noted that ABI and Molson Coors have cooperative
arrangements related to beer brewing and distribution in certain
countries in Eastern Europe. Id. The United States stated:
The change in ownership of MillerCoors--from a joint venture between
SABMiller and Molson Coors to a wholly owned subsidiary of Molson
Coors--will increase the number of highly concentrated markets
across the world in which ABI competes directly against Molson
Coors. By increasing the number of markets in which ABI and Molson
Coors compete, the divestiture of SABMiller's interest in
MillerCoors to Molson Coors could facilitate coordination between
ABI and Molson Coors in the United States. For example, this
multimarket contact could lead Molson Coors and ABI to be more
accommodating to each other in the United States in order to avoid
provoking a competitive response outside the United States or
disrupting their cooperative business arrangements in other
countries. Coordination could also be facilitated by the existing
and newly-created cooperative agreements between ABI and Molson
Coors around the world.
If the divestiture facilitates coordination between ABI and
Molson Coors, it would also increase ABI's incentive to limit
competition from its high-end rivals. This is because competition
from high-end rivals would become an even more important constraint
on the ability of ABI and Molson Coors to increase the prices of
their beers across all segments. As a result, following a
divestiture to Molson Coors, ABI may have a greater incentive to
impede the growth and reduce the competitiveness of its high-end
rivals by limiting their access to effective and efficient
distribution. The extent to which craft and other brewers in the
United States are able to compete with ABI and Molson Coors will
thus affect the likelihood of the divestiture to Molson Coors
leading to unilateral or coordinated anticompetitive effects.
Id. at 12.
For these reasons, the restrictions on ABI's distribution practices
in Section V of the proposed Final Judgment were crafted in order to
preserve and promote competition in the U.S. beer industry by limiting
ABI's ability to disadvantage its rivals in their efforts to compete
for consumer demand. As a result, Section V of the proposed Final
Judgment prevents ABI from engaging in distribution practices that long
pre-dated the announcement of its proposed acquisition of SABMiller.
For example, Section V of the proposed Final Judgment eliminates
certain restrictions that ABI had placed on Independent Distributors
\8\ that were designed to encourage them to sell and promote ABI's Beer
brands over the Beer brands of ABI's competitors. Section V also
prohibits ABI from compensating Independent Distributors based upon the
amount of sales the Independent Distributor makes of ABI Beer relative
to the Beer of ABI's competitors. Moreover, Section V broadly prohibits
ABI from rewarding, penalizing, or in any other way conditioning its
relationship with Independent Distributors on the Distributor's sales,
marketing, advertising, promotion, or retail placement of Third-Party
Brewers' Beers.
---------------------------------------------------------------------------
\8\ Capitalized terms not otherwise defined herein have the
meaning ascribed to them in the proposed Final Judgment.
---------------------------------------------------------------------------
Accordingly, the proposed Final Judgment provides an effective and
appropriate remedy for the likely competitive harm arising out of ABI's
acquisition of SABMiller by:
preventing ABI from increasing its market share in the U.S.
and further concentrating the U.S. beer industry through its
acquisition of SABMiller;
preserving head-to-head competition between ABI and its
largest U.S. competitor, MillerCoors;
granting MillerCoors ownership rights of Miller beer brands
and perpetual, royalty-free licenses to products for which it
previously paid royalties;
[[Page 10788]]
placing certain restrictions on ABI's distribution
practices and ownership of distributors; and
requiring ABI to provide the United States with notice of
future acquisitions, including non-reportable acquisitions of beer
distributors and craft brewers, prior to their consummation.
As described below, some commenters urged the Department to place
additional restrictions on ABI's relationships with Independent
Distributors.
2. Comments Regarding ABI's Ability Under Section V.D to Condition
Incentives, Programs, or Contractual Terms on ABI's Percentage of Beer
Industry Sales in a Geographic Area
a. Summary of Comments
So long as ABI does not ``require or encourage an Independent
Distributor to provide less than best efforts to the sale, marketing,
advertising, retail placement, or promotion of any Third-Party Brewer's
Beer or to discontinue the distribution of a Third-Party Brewer's
Beer,'' Section V.D of the proposed Final Judgment permits ABI to
``condition incentives, programs, or contractual terms based on an
Independent Distributor's volume of sales of Defendant ABI's Beer, the
retail placement of Defendant ABI's Beer, or on Defendant ABI's
percentage of Beer industry sales in a geographic area (such percentage
not to be defined by reference to or derived from information obtained
from Independent Distributors concerning their sales of any Third-Party
Brewer's Beer).'' Three commenters urged that Section V.D be revised to
eliminate entirely ABI's ability to condition incentives, programs, or
contractual terms on ABI's percentage of Beer industry sales in a
geographic area.\9\
---------------------------------------------------------------------------
\9\ Consumer Watchdog comment at 6-7; Brewers Association
comment at 4 (Attachment 6); Professor Calkins comment at 3-4
(Attachment 7).
---------------------------------------------------------------------------
b. Allowing ABI to Condition Incentives, Programs, or Contractual Terms
on ABI's Percentage of Beer Industry Sales in a Geographic Area Does
Not Undermine the Effectiveness of the Proposed Final Judgment
At the time the Complaint was filed, ABI's Wholesaler Equity
Agreement prohibited an Independent Distributor from requesting that a
bar replace an ABI tap handle with a competitor's tap handle,
requesting that a retailer replace ABI shelf space with a competitor's
beer, and compensating its salespeople for their sales of competing
beer brands (such as a dollar-per-case incentive), unless the
Independent Distributor provided the same incentives for sales of
certain ABI beer brands. See Compl. at ]] 27-28.
Section V of the proposed Final Judgment prohibits ABI from
continuing these practices which encouraged Independent Distributors to
favor ABI beer over competing beers in their portfolios. Consequently,
the proposed remedy secures substantial benefits for millions of
Americans and advances competition. At the same time, the proposed
Final Judgment recognizes that ABI has a legitimate interest in
Independent Distributors growing ABI's percentage of all Beer industry
sales in the areas in which the Distributors sell ABI's Beer. As a
result, the proposed Final Judgment appropriately acknowledges ABI's
interest in competing while at the same time prohibiting ABI's prior
practices of conditioning incentives, programs, and contractual terms
on an Independent Distributor's sale of ABI beer relative to the sale
of Third-Party Brewers' beer in the Distributor's portfolio.
Thus, giving deference to the Department's assessment, and
considered in conjunction with the proposed Final Judgment's other
distribution-related relief, allowing ABI to condition incentives,
programs, and contractual terms on ABI's percentage of Beer industry
sales in a geographic area is within the reaches of the public
interest.
3. Comments Regarding the Allocation to ABI's Beers of an Independent
Distributor's Annual Spending on Beer Promotions and Incentives
a. Summary of Comments
Section V.D of the proposed Final Judgment provides that
``Defendant ABI may require an Independent Distributor to allocate to
Defendant ABI's Beer a proportion of the Independent Distributor's
annual spending on Beer promotions and incentives not to exceed the
proportion of revenues that Defendant ABI's Beer constitutes in the
Independent Distributor's overall revenue for Beer sales in the
preceding year.'' Three commenters urged that this language be revised,
either to make the allocation based on the proportion of the
Independent Distributor's revenues received in the current year \10\ or
to provide a carve-out for products newly added to the Distributor's
portfolio.\11\ In particular, commenter National Beer Wholesalers
Association (``NBWA'') described marketing as a forward-looking
investment and expressed concern that Section V.D allows ABI to require
an Independent Distributor to set marketing spend on backward-looking
sales data.\12\ Commenter Virginia Beer Wholesalers Association, Inc.
expressed concern that Section V.D ``would expose an Independent
Distributor to demands that it spend 100% of its promotion funds on ABI
products in the current year if that distributor derived 100% [of] its
revenues from the sale of ABI products in the prior year. In such case,
ABI could block the distributor from spending any of its own budget
dollars towards the marketing of newly acquired Third-Party Brewer's
products for an entire year.'' \13\
---------------------------------------------------------------------------
\10\ Brewers Association comment at 6-7; NBWA comment at 20-21
(Attachment 8).
\11\ Brewers Association comment at 7; NBWA comment at 20-22;
Virginia Beer Wholesalers Association, Inc. comment at 4.
\12\ NBWA comment at 20-21.
\13\ Virginia Beer Wholesalers Association, Inc. comment at 4
(emphasis in original).
---------------------------------------------------------------------------
b. Allowing ABI to Require a Proportional Allocation of an Independent
Distributor's Annual Spending on Beer Promotions and Incentives Based
on Previous-Year Beer Sales Does Not Undermine the Effectiveness of the
Proposed Final Judgment
This provision protects competition while also recognizing that ABI
has a legitimate competitive interest in encouraging Independent
Distributors to allocate to ABI a proportion of their annual spending
on Beer promotions and incentives. As the Department explained in the
CIS, in any geographic area, an Independent Distributor ``provides the
exclusive path to market for ABI's beers, and therefore ABI may be
reluctant to invest in its distributors without some assurance that
those investments will not be used primarily to benefit its rivals.''
CIS at 21. As a result, the proposed Final Judgment allows ABI to
require a proportional allocation of an Independent Distributor's
spending on Beer promotions and incentives based on the Independent
Distributor's previous-year overall revenues. The primary reason that
prior-year data were chosen as the measure was to promote accuracy and
certainty for the calculations--something that would not be possible
if, as proposed by some commenters, the allocation were based on
projections for current-year revenues.
The Department acknowledges that, because the proposed Final
Judgment does not provide a carve-out for products newly added to an
Independent Distributor's portfolio, the possibility exists that if an
Independent Distributor derived 100% of its prior-
[[Page 10789]]
year revenues from ABI Beer, and the Independent Distributor added to
its portfolio a Third-Party Brewer's Beer, ABI could prevent a
Distributor from allocating any of its own promotional spending to the
Third-Party Brewer's Beer in the year the Distributor started selling
it. However, this possibility does not take the proposed Final Judgment
outside the public interest.
First, at the time the Department filed the Complaint, the vast
majority of Independent Distributors already derived some of their
revenues from Third-Party Brewers' Beer. Second, there are alternative
avenues for promotion of a newly added product to an Independent
Distributor's portfolio. For example, the proposed Final Judgment does
not restrict or prevent Third-Party Brewers from providing money to
Independent Distributors to promote and incentivize Independent
Distributors to sell the Third-Party Brewers' Beer--including products
newly added to an Independent Distributor's portfolio. If a Third-Party
Brewer provides to an Independent Distributor a dollar-per-case
incentive to sell a new Beer product, that dollar-per-case amount would
not be promotional spending by the Independent Distributor and
therefore would not be included in the calculation of the Distributor's
spending on Beer promotions and incentives. As a result, an Independent
Distributor that sold only ABI Beer in the previous year could use
funds provided by the Third-Party Brewer to promote a Third Party
Brewer's Beer that it was newly distributing--even in the first year
the Distributor added the Beer to its portfolio. Moreover, once an
Independent Distributor established revenues for a newly distributed
product, ABI could not demand in the next year that the Distributor
spend 100% of its promotion funds on ABI products.
Finally, Section V.D of the proposed Final Judgment improves the
status quo by placing a restriction--where none existed before--on
ABI's ability to demand that Independent Distributors allocate more
than a proportional amount of their spending on Beer promotions and
incentives to the ABI Beer in their portfolios. Thus, giving deference
to the Department's assessment, allowing ABI to require a proportional
allocation of an Independent Distributor's annual spending on Beer
promotions and incentives based on the Independent Distributor's
previous-year overall revenues is within the reaches of the public
interest.
4. Comments Regarding the Effect of the Proposed Final Judgment on
Independent Distributors' Best Efforts to Market, Advertise, Place,
Promote, and Sell Third-Party Brewers' Beer
a. Summary of Comments
Two comments questioned how ABI can both be prohibited from
preventing Independent Distributors from using their best efforts to
sell, market, advertise, or promote any Third-Party Brewer's Beer while
at the same time being allowed to require Independent Distributors to
use their best efforts to sell, market, advertise, or promote ABI's
Beer.\14\
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\14\ Yuengling comment at 13, 15 (Attachment 9); Professor
Calkins comment at 3.
---------------------------------------------------------------------------
b. Allowing ABI to Require Best Efforts From Independent Distributors
to Market and Sell ABI Beer Does not Conflict With Independent
Distributors Also Providing Best Efforts to Market and Sell Third-Party
Brewers' Beer
The Department does not find the provisions (a) allowing ABI to
require an Independent Distributor to provide best efforts to sell,
market, advertise, or promote ABI's Beer and (b) prohibiting ABI from
preventing an Independent Distributor from providing its best efforts
regarding Third-Party Brewers' Beer, to be in conflict. Section V.D.5
of the proposed Final Judgment prohibits ABI from ``[p]reventing an
Independent Distributor from using best efforts to sell, market,
advertise, or promote any Third-Party Brewer's Beer, which may be
defined as efforts designed to achieve and maintain the highest
practicable sales volume and retail placement of the Third Party
Brewer's Beer in a geographic area.'' Section V.D continues in relevant
part: ``Notwithstanding the foregoing, nothing in this Final Judgment
shall prohibit Defendant ABI from entering into or enforcing an
agreement with any Independent Distributor requiring the Independent
Distributor to use best efforts to sell, market, advertise, or promote
Defendant ABI's Beer, which may be defined as efforts designed to
achieve and maintain the highest practicable sales volume and retail
placement of Defendant ABI's Beer in a geographic area.'' An
Independent Distributor may provide its best efforts to competing
brands of Beer in its portfolio.
5. Comments Regarding the Restrictions on ABI's Ability to Disapprove
the General Managers and Successor General Managers of Independent
Distributors
a. Summary of Comments
Section V.E of the proposed Final Judgment prohibits ABI from
disapproving ``an Independent Distributor's selection of a general
manager or successor general manager based on the Independent
Distributor's sales, marketing, advertising, promotion, or retail
placement of a Third-Party Brewer's Beer.'' Three comments argued for
broadening or clarifying these restrictions. Virginia Beer Wholesaler
Association urged the Department to prohibit ABI from requiring that
the general manager of an Independent Distributor purchase an equity
stake in the Independent Distributor.\15\ Professor Calkins urged the
Department to prohibit ABI from disapproving an Independent
Distributor's selection of a general manager or successor general
manager based on the Independent Distributor's sale of craft beer or
failure to meet certain ABI-imposed thresholds for Beer sales or tap
handles.\16\ NBWA recommended that the language in Section V.E
describing ABI's disapproval rights be made identical to certain
language in Section V.F.\17\ None of these concerns should affect the
Court's public interest determination.
---------------------------------------------------------------------------
\15\ Virginia Beer Wholesalers Association comment at 3-4.
\16\ Professor Calkins comment at 4.
\17\ NBWA comment at 23.
---------------------------------------------------------------------------
b. Section V.E Appropriately Restricts ABI's Ability to Disapprove the
General Managers and Successor General Managers of Independent
Distributors
First, the fact that ABI may require a general manager of an
Independent Distributor to purchase an equity stake in the Independent
Distributor was not at issue in the ABI/SABMiller transaction. For that
reason, the Complaint does not allege and the CIS does not identify any
harm to competition resulting from requiring any such equity stake.
Accordingly, a remedy directed to such a requirement is beyond the
scope of this APPA proceeding, and the absence of such a remedy does
not provide a basis for rejecting the proposed Final Judgment. See US
Airways, 38 F. Supp. 3d at 76 (`` `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. . . .'
'' (quoting United
[[Page 10790]]
States v. Graftech Int'l, No. 10-cv-2039, 2011 WL 1566781, at *13
(D.D.C. Mar. 24, 2011)). The proposed Final Judgment should not be
measured by how it might resolve general industry concerns about
ownership of Independent Distributors that are not implicated in this
matter.
Second, while Section V.E of the proposed Final Judgment does not
refer to specific measures of an Independent Distributor's success in
selling ABI Beer such as ABI-imposed volume thresholds for Beer sales
or tap handles, it does restrict ABI's general manager disapproval
rights related to an Independent Distributor's success in selling
Third-Party Brewers' Beer. Accordingly, Section V.E properly balances
ABI's legitimate interest in ensuring that Independent Distributors
have managers that can successfully market and sell ABI Beer in their
respective distribution territories against the danger of allowing ABI
to disapprove a general manager or successor general manager based on
the Independent Distributor's sales, marketing, advertising, promotion,
or retail placement of a Third-Party Brewer's Beer.
Finally, with respect to commenter NBWA's characterization of the
restrictions on ABI in Section V.E as inconsistent with the
restrictions on ABI in V.F,\18\ no problematic inconsistency exists.
Both Sections V.E and V.F restrict ABI's ability to consider ``the
Independent Distributor's sales, marketing, advertising, promotion, or
retail placement of a Third-Party Brewer's Beer'' as appropriate to the
respective circumstance.
---------------------------------------------------------------------------
\18\ NBWA comment at 23.
---------------------------------------------------------------------------
Thus, giving deference to the Department's assessment, the
restrictions in the proposed Final Judgment on ABI's ability to
disapprove the general manager and successor general manager of
Independent Distributors are within the reaches of the public interest.
6. Comment Regarding Restrictions on ABI's Exercise of Rights Related
to the Transfer of Control, Ownership, or Equity of Distributors
a. Summary of Comment
Section V.F of the proposed Final Judgment places restrictions on
ABI in connection with its exercise of rights related to the transfer
of control, ownership, or equity of Distributors. Commenter D.G.
Yuengling & Son, Inc. (``Yuengling'') asks that ABI's ability to
exercise those rights be eliminated or, alternatively, that Section V.F
be broadened to require ABI to explain any decision that it makes when
exercising a right related to the transfer of control, ownership, or
equity of a Distributor and to set forth a procedure by which the
Department will review ABI's decision.\19\
---------------------------------------------------------------------------
\19\ Yuengling comment at 9-12, 14.
---------------------------------------------------------------------------
b. Section V.F Appropriately Restricts ABI's Exercise of Rights Related
to the Transfer of Control, Ownership, or Equity of Distributors
Section V.F restricts ABI's ability to exercise any rights related
to the transfer, ownership, control, or equity of Distributors by
prohibiting ABI from giving weight to or basing its decision to
exercise such rights on a Distributor's business relationship with a
Third-Party Brewer. These restrictions are intended to prevent ABI from
using its rights over management or ownership changes to promote
alignment by selecting new owners because they have demonstrated a
willingness not to carry or promote rival brands. Thus, the
restrictions help ensure that ABI cannot exercise its rights related to
the ownership or control of Distributors in a manner that harms
competition or disadvantages ABI's rivals. An absolute ban is
unnecessary, especially because competitively permissible reasons could
exist for ABI to seek to exercise such rights. In addition, pursuant to
Section VIII.B, a Monitoring Trustee will monitor ABI's compliance with
Section V.F and recommend appropriate remedial measures if the
Monitoring Trustee determines that ABI has violated its provisions.
Should the Monitoring Trustee or anyone else bring an alleged violation
to the Department's attention, the Department already has well-
established procedures for reviewing such allegations. No additional
procedures need be specified in the proposed Final Judgment.
Giving deference to the Department's assessment, imposing the
Section V.F restrictions on ABI's exercise of rights related to the
transfer of control, ownership, or equity in any Distributor to any
other Distributor is within the reaches of the public interest.
7. Comments Regarding Restrictions Related to ABI-Owned Distributors
a. Summary of Comments
Section V.B of the proposed Final Judgment prohibits ABI from
acquiring any equity interests in, or any ownership or control of the
assets of, a Distributor if more than 10% of ABI's Beer in the United
States would be sold by ABI-Owned Distributors after the acquisition.
Five comments called for the proposed Final Judgment to be amended to
place additional restrictions on ABI's ownership of Distributors,
ranging from a total ban on ABI's acquisition of additional
Distributors to a state-by-state rather than a nationwide volume cap to
requiring ABI to divest all ABI-Owned Distributors.\20\ Two comments
also called for a more expansive definition of ABI-Owned
Distributor.\21\
---------------------------------------------------------------------------
\20\ Beer Distributors of Oklahoma comment at 3-5; Consumer
Watchdog comment at 6; Brewers Association comment at 5-6; NBWA
comment at 13-15; Ninkasi comment at 1-2 (Attachment 10).
\21\ NBWA comment at 16-19; Wholesale Beer Association
Executives comment at 7-9.
---------------------------------------------------------------------------
b. Additional Restrictions Related to ABI-Owned Distributors Are Not
Necessary
Commenter Beer Distributors of Oklahoma urged that ABI be required
to divest all ABI-Owned Distributors,\22\ and commenters Consumer
Watchdog, Brewers Association, NBWA, and Ninkasi Brewing Company
(``Ninkasi'') urged that ABI be prevented from acquiring any additional
Distributors during the term of the proposed Final Judgment.\23\ Such
restrictions are not necessary to remedy the harms alleged in the
Complaint or identified in the CIS. See US Airways, 38 F. Supp. 3d at
76 (``[T]he court `must accord deference to the government's
predictions about the efficacy of its remedies.''' (quoting SBC
Commc'ns, 489 F. Supp. at 17)).
---------------------------------------------------------------------------
\22\ Beer Distributors of Oklahoma comment at 3-4.
\23\ Consumer Watchdog comment at 6; Brewers Association comment
at 5-6; NBWA comment at 15; Ninkasi comment at 1-2.
---------------------------------------------------------------------------
Moreover, nothing in the proposed Final Judgment provides ABI with
any antitrust exemption for acquisitions of Distributors--even if ABI
remains below the 10% limit set forth in Section V.B of the proposed
Final Judgment. To the contrary, the notification provisions in Section
XII of the proposed Final Judgment, which require ABI to notify the
Department about certain Distributor acquisitions that are not
otherwise reportable under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the ``HSR Act''), ensure that the Department
will have the opportunity to evaluate the likely competitive effects of
such Distributor acquisitions before they are completed--even if the
acquisition would keep ABI under the 10% cap.
Thus, giving deference to the Department's assessment, neglecting
to place a total ban on future Distributor acquisitions does not place
the proposed Final Judgment outside the reaches of the public interest.
[[Page 10791]]
c. Section V.B Appropriately Restricts ABI's Ability to Increase the
Volume of Beer Sold By ABI-Owned Distributors
(i) A Nationwide Restriction is Appropriate
Commenters Beer Distributors of Oklahoma, NBWA, and Consumer
Watchdog questioned the proposed Final Judgment for imposing a 10% cap
under Section V.B on a nationwide level, rather than imposing a 10% cap
in each state in which ABI-Owned Distributors operate.\24\ The fact
that the 10% cap is calculated based on ABI's national Beer sales does
not provide a basis for concluding that the proposed Final Judgment is
not in the public interest.
---------------------------------------------------------------------------
\24\ Beer Distributors of Oklahoma comment at 5-6; NBWA comment
at 13-15; Consumer Watchdog comment at 6.
---------------------------------------------------------------------------
The Department was aware when it negotiated the proposed Final
Judgment that ABI is prohibited in some states from owning Distributors
and, accordingly, in states where it is allowed to own Distributors,
ABI may sell more than 10% of its Beer volume through ABI-Owned
Distributors. The imposition of a 10% nationwide cap--where no cap
existed before--on the volume of Beer ABI can sell through ABI-Owned
Distributors is a meaningful restriction on ABI's ability to restrict
the sale of Third-Party Brewer's Beer through the acquisition of
Distributors, especially considering, as the Department alleged in the
Complaint, that ABI already sells approximately 9% of its beer in the
United States through ABI-Owned Distributors. See Compl. ] 25.
In addition, as discussed above, the proposed Final Judgment does
not convey antitrust immunity upon ABI for any future Distributor
acquisitions. Should a future proposed Distributor acquisition
implicate competitive concerns in a particular state or region due to
high concentration levels or other reasons, the Department will have
the opportunity to review such acquisition. And Section XII of the
proposed Final Judgment ensures that the Department will have the
necessary notice to do so.
Thus, giving deference to the Department's assessment, the 10%
nationwide cap placed on the volume of Beer ABI-Owned Distributors may
sell in the Territory is within the reaches of the public interest.
(ii) Safeguards Exist to Prevent ABI From Circumventing the Cap
Commenters NBWA and Brewers Association additionally suggested that
ABI could circumvent the 10% limit by selling existing ABI-Owned
Distributors to ``friendly'' Independent Distributors and then buying
more Distributors.\25\ The purpose of the Section V.B cap, however, is
to limit the volume of Beer sold by ABI-Owned Distributors; other
provisions in the proposed Final Judgment provide safeguards that
reduce ABI's influence and control over Independent Distributors,
including Sections V.D, V.E, and V.F.
---------------------------------------------------------------------------
\25\ NBWA comment at 13-14; Brewers Association comment at 5-6.
---------------------------------------------------------------------------
Commenter Professor Calkins asked the Department to clarify whether
ABI can circumvent the 10% cap by acquiring a Distributor that
specialized in non-ABI craft Beers and then, post-acquisition, having
the Distributor sell ABI craft Beers instead.\26\ The Department
clarifies that under the proposed Final Judgment, once a Distributor
becomes an ABI-Owned Distributor, the volume of ABI Beer the
Distributor sells will count toward the 10% cap.
---------------------------------------------------------------------------
\26\ Professor Calkins comment at 2.
---------------------------------------------------------------------------
Finally, commenter Wholesale Beer Association Executives urged the
Department to include in the Section V.B 10% calculation the sales
volume of any Distributor for which ABI exercises its ``match-and-
redirect'' right--that is, assigning to the Independent Distributor of
ABI's choice the ability to purchase another Distributor upon certain
agreed-upon terms--because ABI ``often [assigns] that right to a
preferred distributor who often conforms to the policies regarding
competing brand portfolios that are prohibited by the [proposed Final
Judgment].'' \27\
---------------------------------------------------------------------------
\27\ Wholesale Beer Association Executives comment at 9. The
commenter refers to ABI's ``match-and-redirect'' right as ABI's
right of first refusal.
---------------------------------------------------------------------------
As noted above with respect to NBWA and Brewers Association's
concerns about ABI circumventing the Section V.B cap, the purpose of
the cap is to limit the volume of Beer sold by ABI-Owned Distributors;
other provisions in the proposed Final Judgment provide safeguards that
reduce ABI's influence and control over Independent Distributors,
including ``friendly'' Independent Distributors and those who may
benefit from ABI's exercise of its ``match-and-redirect'' right. For
example, Section V.D.1 of the proposed Final Judgment prohibits ABI
from conditioning the availability of ABI's Beer on an Independent
Distributor's sales, marketing, advertising, promotion, or retail
placement of a Third-Party Brewer's Beer, and Section V.D.3 prohibits
ABI from conditioning any agreement or program with an Independent
Distributor on the fact that an Independent Distributor sells a Third-
Party Brewer's Beer outside of the geographic area in which the
Independent Distributor sells ABI's Beer.
(iii) The Definition of ABI-Owned Distributor is Appropriate
Commenters NBWA and Wholesale Beer Association Executives urged the
Department to broaden the definition of ABI-Owned Distributor to
include additional, partially-owned Distributors, because they contend
that ABI effectively controls Distributors in which it has a less-than-
50% ownership stake.\28\ The proposed Final Judgment defines an ABI-
Owned Distributor as ``any Distributor in which ABI owns more than 50%
of the outstanding equity interests or more than 50% of the assets.''
\29\ The 50% ownership threshold is appropriate because it provides
certainty for determining which Distributors are ABI-Owned Distributors
for purposes of enforcing the Final Judgment. A 50% ownership threshold
is also consistent with how the Department defined ABI-Owned
Distributors in the ABI/Grupo Modelo decree.\30\
---------------------------------------------------------------------------
\28\ NBWA comment at 16-19; Wholesale Beer Association
Executives comment at 8-9 (recommending a 25% ownership threshold).
\29\ Similarly, the proposed Final Judgment defines ABI to
include certain other entities ``in which there is majority (greater
than 50%) or total ownership or control between [ABI] and any other
person.'' Proposed Final Judgment at II.A. Thus, in response to
NBWA's request for clarification (see NBWA comment at 14), if ABI
owns a 31.6% share of Craft Brew Alliance, Craft Brew Alliance does
not meet the definition of ABI, and Craft Brew Alliance Beer thus
does not count as ABI Beer for the purpose of Section V.B's 10% cap.
\30\ See Final Judgment at 3, United States v. Anheuser-Busch
InBev SA/NV, 1:13-CV-00127 (Oct. 24, 2013) (```ABI-Owned
Distributor' means any Distributor in which ABI owns more than 50
percent of the outstanding equity interests as of the date of the
divestiture of the Divestiture Assets.'').
---------------------------------------------------------------------------
Additionally, safeguards in other parts of Section V that reduce
ABI's influence and control over Independent Distributors apply even
where ABI has less than 50% ownership. For example, Section V.E of the
proposed Final Judgment prohibits ABI from disapproving an Independent
Distributor's selection of a general manager or successor general
manager based on the Independent Distributor's sales, marketing,
advertising, promotion, or retail placement of a Third-Party Brewer's
Beer, and Section V.F provides that, when exercising any right related
to the transfer of control, ownership, or equity in any Distributor to
any other Distributor, ABI shall not give weight to or base any
decision to exercise such right upon either
[[Page 10792]]
Distributor's business relationship with a Third-Party Brewer--
including, but not limited to, such Distributor's sales, marketing,
advertising, promotion, or retail placement of a Third-Party Brewer's
Beer.
For these reasons, the ownership threshold for ABI-Owned
Distributors does not undermine the effectiveness of the proposed Final
Judgment.
8. Comments Requesting that Section V's Distribution Restrictions Also
be Made to Apply to Molson Coors
a. Summary of Comments
Four commenters asked that the distribution restrictions in Section
V of the proposed Final Judgment--which apply only to ABI--also be made
to apply to Molson Coors.\31\ In support of its comment, Wholesale Beer
Association Executives reported that Molson Coors has already begun to
implement tactics of concern similar to those of ABI, such as
aggressive acquisition of craft brewers.\32\
---------------------------------------------------------------------------
\31\ Virginia Beer Wholesalers Association comment at 3;
Wholesale Beer Association Executives comment at 10-11; NBWA comment
at 11-13; Consumer Watchdog comment at 7-8.
\32\ Wholesale Beer Association Executives comment at 10-11.
---------------------------------------------------------------------------
b. Molson Coors' Distribution Practices Are Outside the Scope of this
Proceeding
Molson Coors is neither a defendant in this case nor a party to the
proposed Final Judgment.\33\ Final judgments typically do not apply to
divestiture buyers, and this case does not warrant an exception. The
Complaint does not allege that either MillerCoors or Molson Coors--
unlike ABI--engaged in the type of restrictive distribution practices
alleged in the Complaint. In fact, at the time the Complaint was filed,
MillerCoors owned only one beer distributor in the United States, a
Coors distributor in Denver, Colorado, and Molson Coors owned none.
---------------------------------------------------------------------------
\33\ As required by Section V.A of the proposed Final Judgment,
however, Molson Coors--in an amendment to its purchase agreement
with ABI--has agreed not to cite the divestiture required by the
proposed Final Judgment as a basis for modifying, renegotiating, or
terminating any contract with any Distributor.
---------------------------------------------------------------------------
If in the future Molson Coors were to acquire distributors or
change its distribution practices in a manner that the Department
believes might be anticompetitive, or to otherwise implement
anticompetitive tactics as commenter Wholesale Beer Association
Executives complains, the Department would have the ability to
investigate those practices and seek appropriate relief if it
determines that the practices violated the antitrust laws. Limiting the
applicability of the proposed Final Judgment to ABI does not place the
proposed Final Judgment outside the reaches of the public interest.
9. Comment Related to ABI's Obligation to Inform Independent
Distributors of the Requirements of the Proposed Final Judgment
a. Summary of Comment
NBWA urged that the proposed Final Judgment be amended to require
ABI to (1) include the Final Judgment as an amendment to ABI's
agreements with Independent Distributors, and (2) state in its
agreements with Independent Distributors that the Final Judgment will
govern any conflict between the agreements and the Final Judgment.\34\
---------------------------------------------------------------------------
\34\ NBWA comment at 22-23; see also Wholesale Beer Association
Executives comment at 9-10.
---------------------------------------------------------------------------
b. The Proposed Final Judgment Adequately Requires ABI to Inform
Independent Distributors of the Requirements of the Final Judgment
Section V.I of the proposed Final Judgment requires that, within
ten days of the entry of the Final Judgment, ABI provide the United
States, for the United States to approve in its sole discretion, with a
proposed form of written notification to be provided to any Independent
Distributor that distributes ABI's Beer in the Territory. Such
notification must (1) explain the practices prohibited by Section V of
the Final Judgment, (2) describe the changes ABI is making to any
programs, agreements, or any interpretations of agreements required to
comply with Section V of the Final Judgment, and (3) inform the
Independent Distributor of its right, without fear of retaliation, to
bring to the attention of the Monitoring Trustee any actions by ABI
which the Independent Distributor believes may violate Section V of the
Final Judgment.
Requiring that the Final Judgment be made an amendment to ABI's
existing agreements with its Independent Distributors would not
increase the protections afforded to the Independent Distributors under
Section V of the proposed Final Judgment. Requiring agreements with
Independent Distributors to state that the Final Judgment will control
in the event of a conflict with the language of the agreements would
not increase the protections afforded to Independent Distributors. Nor
would either requirement provide additional levels of notice to
affected Distributors.
ABI will be required to provide notice of the Final Judgment to all
of its Independent Distributors \35\ and to comply with Section V of
the proposed Final Judgment irrespective of any language to the
contrary in its existing distribution agreements. Independent
Distributors can raise their concerns with the Department or the
Monitoring Trustee without fear of retaliation if ABI implements any
programs, policies, or practices that an Independent Distributor
believes violate Section V.
---------------------------------------------------------------------------
\35\ Independent Distributors will also be able to review the
proposed Final Judgment and other court filings in this matter on
the Department's public Web site. The Department will make the Final
Judgment publicly available once the Court enters it. See https://www.justice.gov/atr/case/us-v-anheuser-busch-inbev-sanv-and-sabmiller-plc.
---------------------------------------------------------------------------
10. Comment Related to ABI's Ability to Terminate Independent
Distributors
a. Summary of Comment
NBWA recommends that the proposed Final Judgment be modified to
explicitly state that ABI may not terminate Independent Distributors
based on their sales, promotion, advertising, marketing, or retail
placement of Third-Party Brewers' Beer.\36\
---------------------------------------------------------------------------
\36\ NBWA comment at 25.
---------------------------------------------------------------------------
b. The Proposed Final Judgment Already Prohibits ABI from Terminating
an Independent Distributor Based on the Distributor's Sales, Promotion,
Advertising, Marketing, or Retail Placement of a Third-Party Brewer's
Beer
The proposed Final Judgment already explicitly prohibits ABI from
terminating an Independent Distributor based on the latter's sales,
promotion, advertising, marketing, or retail placement of a Third-Party
Brewer's Beer. Section V.D prohibits ABI from penalizing or ``in any
other way condition[ing] its relationship with'' an Independent
Distributor based on ``the amount of sales the Independent Distributor
makes of a Third-Party Brewer's Beer or the marketing, advertising,
promotion, or retail placement of such Beer.'' Section V.H additionally
prohibits ABI from discriminating against, penalizing, or otherwise
retaliating against any Distributor because such Distributor raises,
alleges, or otherwise brings to the attention of the Department or the
Monitoring Trustee an actual, potential, or perceived violation of
Section V of the Final Judgment.
[[Page 10793]]
11. Other Comments Requesting that the Restrictions in Section V be
Broadened
a. Summary of Comments
In addition to the above, commenters requested that the relief in
Section V of the proposed Final Judgment be broadened in a variety of
ways. For example, commenters asked that:
ABI be prohibited from rewarding, penalizing, or otherwise
conditioning its relationship with Independent Distributors based on
their ``storage, warehousing, transportation or administration'' of
a Third-Party Brewer's Beers; \37\
---------------------------------------------------------------------------
\37\ NBWA comment at 20.
---------------------------------------------------------------------------
ABI be prohibited from exercising its match-and-redirect
right if the originally-proposed purchaser is otherwise qualified to
sell ABI's Beer; \38\
---------------------------------------------------------------------------
\38\ Wholesale Beer Executives Association comment at 9.
---------------------------------------------------------------------------
ABI be prohibited from exercising its match-and-redirect
right or required when exercising its match-and-redirect right to
pay the seller the full purchase price in consideration of its
release of all brand rights for Third-Party Brewers' Beer without
any additional consideration; \39\
---------------------------------------------------------------------------
\39\ Yuengling comment at 14.
---------------------------------------------------------------------------
ABI be barred from financing, directly or indirectly, the
operations of any Independent Distributor; \40\ and
---------------------------------------------------------------------------
\40\ Yuengling comment at 15.
---------------------------------------------------------------------------
ABI be barred from manipulating ``delivered price'' amounts
to similarly situated Independent Distributors as a way to
incentivize Independent Distributors to carry only ABI Beer
brands.\41\
---------------------------------------------------------------------------
\41\ Yuengling comment at 15.
b. Section V Meaningfully Restricts ABI's Ability to Reward or Penalize
Independent Distributors Based on Their Relationships with Third-Party
Brewers
As discussed in the preceding sections, the changes to ABI's
practices regarding Independent Distributors imposed by the proposed
Final Judgment appropriately address the competitive effects of the
transaction that are alleged in the Complaint and will increase Third-
Party Brewers' access to effective distribution to the substantial
benefit of millions of consumers nationwide. The failure to include the
additional restrictions suggested by these commenters does not move the
proposed Final Judgment outside the scope of the public interest.
B. Comments Related to ABI's Ownership of Craft Breweries
1. Summary of Comments
One commenter maintained that ABI should be prohibited from
acquiring any brewers during the period of the Final Judgment.\42\
Another commenter asked that craft beers owned by ABI be required to
identify ABI's ownership on their packaging.\43\
---------------------------------------------------------------------------
\42\ Consumer Watchdog comment at 6.
\43\ Ninkasi comment at 2.
---------------------------------------------------------------------------
2. The Proposed Final Judgment Adequately Ensures that the Department
May Evaluate ABI's Acquisition of Craft Brewers
Restricting ABI from acquiring craft breweries or requiring ABI to
label its craft beer as brewed by ABI is not necessary for the proposed
divestiture to be effective in remedying the harms alleged in the
Complaint. Although ABI has acquired multiple craft breweries over the
past several years, those acquisitions were not at issue with respect
to ABI's proposed acquisition of SABMiller, and the Complaint does not
contain any allegations related to those acquisitions. Beer labeling
similarly was not an issue implicated by the transaction and was not
made a part of the Complaint. Accordingly, a remedy directed to such
requirements is beyond the scope of this APPA proceeding, and the
absence of such a remedy does not provide a basis for rejecting the
proposed Final Judgment. See US Airways, 38 F. Supp. 3d at 76 (``
`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. . . .' '' (quoting Graftech, 2011 WL 1566781,
at *13)).
In addition, Section XII of the proposed Final Judgment provides
the Department with the ability to review ABI's acquisition of craft
brewers in the United States, even if those acquisitions do not
otherwise meet the filing thresholds of the HSR Act. As a result, the
Department will be able to evaluate the likely competitive effects of
any proposed acquisition of craft brewers by ABI and to challenge the
transaction if the Department concludes that the proposed acquisition--
whether by itself or in combination with other transactions or other
conduct--is likely to substantially lessen competition in the U.S. beer
industry.
C. Comments Related to the Eden Brewery
1. Summary of Comments
Both the North Carolina Department of Justice (``NC DOJ'') and the
International Brotherhood of Teamsters (``Teamsters'') submitted
comments asserting that the Department should have required the
divestiture of the MillerCoors brewery in Eden, North Carolina.
MillerCoors closed the Eden brewery in September 2016. Both the NC DOJ
and Teamsters assert that the Department should have required such
relief because the fact that MillerCoors announced the closure of its
Eden brewery two days before ABI and SABMiller announced their merger
negotiations raises concerns that MillerCoors had anticompetitive
motives when deciding to close this brewery and declining to sell it to
another brewer.\44\ As additional support for their comments, the NC
DOJ and the Teamsters also point to the Department's requirement in the
final judgment in the ABI/Grupo Modelo transaction \45\ that
Constellation Brands, the divestiture buyer in that transaction,
purchase and expand a legacy Grupo Modelo brewery in Mexico.
---------------------------------------------------------------------------
\44\ NC DOJ comment at 2 (Attachment 11); Teamsters comment at
23 (Attachment 12).
\45\ Final Judgment at 13-16, United States v. Anheuser-Busch
InBev SA/NV, 1:13-CV-00127 (Oct. 24, 2013).
---------------------------------------------------------------------------
2. The Requested Divestiture of the Eden Brewery is Outside the Scope
of this Action
The Department took the allegations about the closing of the Eden
brewery seriously and considered the circumstances surrounding that
closure during the Department's investigation of the transaction. Among
other things, the Department obtained and reviewed documents related to
the brewery closure, asked questions about its closure, and met with
the relevant parties. In reviewing such information, the Department did
not uncover evidence suggesting that MillerCoors' decision to close the
Eden brewery was related to ABI's proposed acquisition of SABMiller.
Accordingly, the Complaint did not allege that the Eden brewery closure
was an anticompetitive effect of the transaction, nor did the
Department seek relief related to the Eden brewery as part of the
proposed Final Judgment.
The Department understands that the NC DOJ is conducting its own
investigation into whether any competition-related laws have been
violated in connection with the closure of the Eden brewery.\46\ The NC
DOJ's comment indicates that the evidence it has reviewed to date
``confirms [the NC DOJ's concerns] that anticompetitive motives may
have played a part regarding the closure of the Eden brewery and the
accompanying lack of meaningful effort to sell it.'' \47\ The
Department has great respect for the NC DOJ and has worked with that
office cooperatively on many occasions. However, the Department made a
[[Page 10794]]
decision, based on the evidence available to it at the time, not to
allege that closure of the Eden brewery was a competitive effect of the
transaction. Should the NC DOJ develop additional evidence, nothing in
the proposed Final Judgment prevents the NC DOJ from seeking further
relief under applicable federal or state laws--including relief related
to the Eden brewery.
---------------------------------------------------------------------------
\46\ NC DOJ comment at 3.
\47\ NC DOJ comment at 3.
---------------------------------------------------------------------------
Additionally, the circumstances here are distinguishable from those
in the ABI/Grupo Modelo matter. In ABI/Grupo Modelo, the Department
required the divestiture buyer, Constellation, to purchase and expand
the brewery in question because, in order for the divestiture to be
effective, Constellation needed to be able to produce all Modelo-
branded beer in Mexico but did not have its own Mexican brewery. As the
Department noted in the Competitive Impact Statement in ABI/Grupo
Modelo: ``Requiring the buyer of divested assets to improve those
assets for the purposes of competing against the seller is an
exceptional remedy that the United States found appropriate under the
specific set of facts presented here. . . . No other combination of
Modelo's brewing assets would have properly addressed the competitive
harm caused by the proposed merger and allowed the acquirer of the
Divestiture Assets to compete as effectively and economically with ABI
as Modelo does today.'' \48\ By contrast, in this case, the ABI/
SABMiller transaction and divestiture to Molson Coors does not affect
the brewing capacity of MillerCoors in the United States.
---------------------------------------------------------------------------
\48\ Competitive Impact Statement at 13, United States v.
Anheuser-Busch InBev SA/NV, 1:13-CV-00127 (Apr. 19, 2013).
---------------------------------------------------------------------------
Accordingly, the NC DOJ's and the Teamsters' concerns about the
closure of the Eden brewery do not provide a basis for questioning the
Department's determination--which is entitled to deference--that the
proposed Final Judgment provides an effective and appropriate remedy
for the likely anticompetitive harm arising out of ABI's proposed
acquisition of SABMiller.
D. Other Comments
Commenters raised a variety of other procedural and substantive
concerns, recommending that the proposed Final Judgment be amended in
numerous respects. As discussed below, these recommendations include:
requiring ABI to adopt an updated antitrust compliance policy; \49\
expanding the role of the Monitoring Trustee; \50\ expressly stating
that any action taken by ABI remains subject to applicable antitrust
laws; \51\ preventing ABI-Owned Distributors from managing or making
recommendations concerning the schematics of retailers; \52\
restricting ABI from vertically integrating into the retail channel;
\53\ preventing ABI from using sales data from third parties to punish
distributors; \54\ modifying the term of the proposed Final Judgment;
\55\ and clarifying certain references to Third Party Brewers.\56\
Commenters also raised questions about the Department's use of certain
data sources in the Complaint and proposed Final Judgment \57\ and
recommended that in the future the Department publish on its public
website the end of the 60-day public comment period.\58\
---------------------------------------------------------------------------
\49\ Consumer Watchdog comment at 7; NBWA comment at 24-25.
\50\ Consumer Watchdog comment at 8; NBWA comment at 23-24.
\51\ Professor Calkins comment at 2-3.
\52\ Ninkasi comment at 2.
\53\ American Beverage Licensees comment at 1-3.
\54\ NBWA comment at 20-22.
\55\ NBWA comment at 24.
\56\ Brewers Association comment at 3.
\57\ American Beverage Licensees comment at 4; Beer Distributors
of Oklahoma comment at 2.
\58\ Professor Calkins comment at 1-2.
---------------------------------------------------------------------------
1. Comments Related to a Potential Antitrust Compliance Policy
a. Summary of Comments
Consumer Watchdog and NBWA urged the Court to require ABI to update
its antitrust compliance policy, with mandatory employee training.\59\
Consumer Watchdog contended that the Department should approve ABI's
antitrust compliance policy, while NBWA recommended that the Monitoring
Trustee be tasked with drafting and overseeing ABI's compliance policy.
NBWA noted that the Department required mandatory compliance programs
in United States v. Apple, Inc. and United States v. Bazaarvoice,
Inc.\60\
---------------------------------------------------------------------------
\59\ NBWA comment at 24-25; Consumer Watchdog comment at 7.
\60\ NBWA comment at 25; see Final Judgment at 11, United States
v. Apple, Inc., No. 1:12-cv-02826 (S.D.N.Y. Sept. 5, 2015) (``The
External Compliance Monitor shall have the power and authority to
review and evaluate Apple's existing internal antitrust compliance
policies and procedures and the training program required by Section
V.C of this Final Judgment, and to recommend to Apple changes to
address any perceived deficiencies in those policies, procedures,
and training.''); Third Amended Final Judgment at 9, United States
v. Bazaarvoice, Inc., No. 3:13-cv-00133 (N.D. Cal. Dec. 2, 2014)
(``Defendant shall designate, within ninety (90) days of entry of
this Final Judgment, an internal Compliance Officer who shall be an
employee of Defendant with responsibility for administering
Defendant's antitrust compliance program and helping to ensure
compliance with this Final Judgment.'').
---------------------------------------------------------------------------
b. The Absence of a Required Compliance Policy Does Not Undermine the
Effectiveness of the Proposed Final Judgment
The circumstances here do not warrant requiring ABI to have an
antitrust compliance policy approved by the Department or the
Monitoring Trustee. The Complaint does not allege that ABI has
previously violated the antitrust laws. Rather, it asserts that ABI's
acquisition of SABMiller would violate Section 7 of the Clayton Act.
Moreover, the Complaint does not contain any allegations related to
ABI's antitrust compliance policies.
Those circumstances distinguish this case from Apple and
Bazaarvoice. In Apple, the Department argued that ``serious violations
of the antitrust laws occurred at Apple while its current program was
in effect, and they were orchestrated by key executives and even a
member of Apple's legal team.'' \61\ In addition, Apple's counsel and a
person involved in the antitrust violation could not recall receiving
antitrust compliance training.\62\ Bazaarvoice involved a Final
Judgment that was ordered after a trial had determined that the
defendant had violated the antitrust laws.\63\ Neither of those
circumstances is analogous to this case where ABI has agreed to a
settlement with the Department without an allegation or finding that
ABI previously violated the antitrust laws. Thus, the lack of a
requirement for a compliance policy does not undermine the
effectiveness of the proposed Final Judgment.
---------------------------------------------------------------------------
\61\ Memorandum in Support of Plaintiffs' Revised Proposed
Injunction at 5-6, United States v. Apple, Inc., No 1:12-cv-02826
(S.D.N.Y. Aug. 13, 2013).
\62\ Memorandum in Support of Plaintiffs' Revised Proposed
Injunction at 6, United States v. Apple, Inc., No 1:12-cv-02826
(S.D.N.Y. Aug. 13, 2013).
\63\ See United States v. Bazaarvoice, Inc., No. 13-cv-00133,
2014 WL 203966 (N.D. Cal. Jan. 8, 2014).
---------------------------------------------------------------------------
2. Comments Related to the Monitoring Trustee
a. Summary of Comments
Consumer Watchdog recommended that the Monitoring Trustee be given
the ability to interpret the proposed Final Judgment broadly to prevent
ABI from ``getting around'' its terms.\64\ As discussed above, NBWA
recommended that the Monitoring Trustee be tasked with drafting and
overseeing the compliance policy that NBWA urged was necessary.\65\
NBWA also recommended that the Monitoring Trustee's appointment should
be for the full ten-year term of the proposed Final Judgment.\66\ The
Virginia Beer
[[Page 10795]]
Wholesalers Association urged that the proposed Final Judgment include
specific timelines for both the submission of recommendations by the
Monitoring Trustee and the acceptance, modification, or rejection of
those recommendations by the Department, and also that the proposed
Final Judgment be amended to require timely publication of the
Monitoring Trustee's recommendations to the Department and the ultimate
disposition of the recommendations.\67\
---------------------------------------------------------------------------
\64\ Consumer Watchdog comment at 8.
\65\ NBWA comment at 24-25.
\66\ NBWA comment at 23-24.
\67\ Virginia Beer Wholesalers Association comment at 2.
---------------------------------------------------------------------------
b. The Monitoring Trustee Already Has the Ability to Monitor ABI's
Compliance with the Proposed Final Judgment
The Monitoring Trustee has been appointed by the Department and
approved by the Court to help ensure that the proposed Final Judgment
will be properly enforced. (See Docket Entry 13 (Order approving United
States' appointment of Monitoring Trustee)). The Monitoring Trustee
works closely with and regularly reports to the Department and, as
appropriate, will report to the Court. If the Monitoring Trustee has
particular concerns, he can bring those concerns to the attention of
the Department and the Court. The Department and the Court can then
appropriately respond to those concerns or empower the Monitoring
Trustee to take appropriate actions to address those concerns. The
powers possessed by the Monitoring Trustee are adequate to effectively
monitor ABI's compliance with the proposed Final Judgment.
Under Section VIII.I of the proposed Final Judgment, the Monitoring
Trustee must serve until the sale of all the Divestiture Assets is
finalized, the Transition Services Agreements and the Interim Supply
Agreements have expired, and all other relief has been completed as
defined in Section V--unless the Department, in its sole discretion,
authorizes the early termination of the Monitoring Trustee's service.
Because ABI's obligations under Section V of the proposed Final
Judgment will continue throughout the ten-year term of the decree, the
Department may determine in its discretion that the Monitoring Trustee
should serve the full ten-year term. NBWA has provided no basis for the
Court to substitute NBWA's opinion that the Monitoring Trustee must be
appointed for the full ten-year term of the proposed Final Judgment for
the Department's discretion as to the appropriate length of the
Monitoring Trustee's appointment, which, as noted above, could last
throughout the duration of the decree.
Section VIII.H of the proposed Final Judgment requires the
Monitoring Trustee to file reports every 90 days--or more frequently as
needed--with the Department and, when appropriate, with the Court
setting forth ABI's efforts to comply with its obligations under the
proposed Final Judgment. Under Section VIII.B, if the Monitoring
Trustee determines that ABI has violated the Final Judgment or breached
a related agreement, the Monitoring Trustee must recommend an
appropriate remedy to the Department, which, in its sole discretion,
can accept, modify, or reject a recommendation to pursue a remedy.
There is no sound basis for the Court to substitute for the
Department's discretion a preference that the Monitoring Trustee's
recommendations, and their resolutions, be made public.
3. Comment Related to the Application of Law to ABI
a. Summary of Comment
Wayne State University Law Professor Stephen Calkins indicated that
the proposed Final Judgment should make clear that, notwithstanding the
proposed Final Judgment, ABI remains subject to all existing antitrust
laws.\68\
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\68\ Professor Calkins comment at 2-4.
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b. ABI Remains Subject to All Applicable Antitrust Laws
ABI remains subject to all applicable antitrust laws. The proposed
Final Judgment does not restrict the application of those laws to ABI
or provide an antitrust exemption to ABI for conduct addressed by the
proposed Final Judgment. In fact, Section XII of the proposed Final
Judgment, relating to future ABI acquisitions, places greater reporting
requirements on ABI than required under the HSR Act to help ensure its
compliance with applicable antitrust laws. Expressly stating in the
proposed Final Judgment that the proposed Final Judgment does not
supplant the antitrust laws is unnecessary.
4. Comment Related to ABI's Ability to Make Recommendations Regarding
Retailer Schematics
a. Summary of Comment
Ninkasi asked that ABI-Owned Distributors be prohibited from
managing shelf schematics at retailers that sell Beer.\69\ Ninkasi
states that ABI-Owned Distributors typically do not carry non-ABI Beer
brands and that they set retailers' shelves in a way that maximizes ABI
Beer sales ``over any rational set that would otherwise better serve
the retail customer and consumer.'' \70\
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\69\ Ninkasi comment at 2.
\70\ Ninkasi comment at 2.
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b. The Harms Alleged in the Complaint Do Not Justify the Requested
Restrictions on Retail Shelf Schematics
As discussed above, the 10% cap in Section V.B appropriately
restricts ABI's ability to use ABI-Owned Distributors to disadvantage
Third-Party Brewers. Moreover, the Complaint does not include
allegations related to ABI's influence over retailers, through ABI-
Owned Distributors or otherwise. Nor do such concerns arise from the
merger of ABI and SABMiller. Thus, Ninkasi's assertion that the
Department should restrict ABI-Owned Distributors from managing retail
shelf schematics concerns a matter outside the scope of this APPA
proceeding. See US Airways, 38 F. Supp. 3d at 76 (`` `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. . . .' '' (quoting Graftech, 2011 WL 1566781 at *13)).
5. Comment Related to ABI's Ability to Vertically Integrate into Retail
Sales
a. Summary of Comment
American Beverage Licensees expressed concern that the ABI/
SABMiller transaction, ``along with recent actions by ABI and the
market reactions they might trigger, could lead to increased vertical
integration and tied-house opportunities in the beverage alcohol
marketplace,'' which American Beverage Licensees argues would ``be to
the detriment of a competitive retail beverage alcohol environment.''
\71\ American Beverage Licensees stated that, over the past decade, ABI
has ``encroached on traditional beer retailing establishments across
the country, and now has direct brewery control of 30 or more on-
premise beer retailing establishments that include thousands of seats
with tied house opportunities.'' \72\ American Beverage Licensees
further stated that the proposed Final Judgment ``stops at the water's
edge and does not wade into concerns that [the ABI/SABMiller] merger
could have future anticompetitive implications for America's
independent beverage retailers.'' \73\
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\71\ American Beverage Licensees comment at 1.
\72\ American Beverage Licensees comment at 2.
\73\ American Beverage Licensees comment at 3.
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[[Page 10796]]
b. The Proposed Final Judgment Prevents ABI from Further Vertically
Integrating as a Result of the SABMiller Acquisition and Provides the
Department with Advance Notice of, and an Opportunity to Review, Future
Acquisitions by ABI
The proposed Final Judgment requires ABI to divest SABMiller's
entire U.S. business, which ABI did on October 12, 2016. Accordingly,
the proposed Final Judgment prevents ABI from further vertically
integrating through its acquisition of SABMiller. Moreover, Section XII
of the proposed Final Judgment requires ABI to provide the Department
with advance notice of, and an opportunity to evaluate, ABI's
acquisition of Beer brewers--including brewers that own restaurants or
tap rooms. This provision applies to acquisitions of brewers by ABI
that would not otherwise be reportable under the HSR Act. Accordingly,
the proposed Final Judgment provides the Department with an increased
ability to evaluate ABI's acquisitions of brewers that own retail
establishments and determine whether any such acquisitions could lead
to anticompetitive effects.
Moreover, ABI's previous acquisitions of on-premise beer retailers
were not at issue with respect to the ABI/SABMiller transaction, and
the Complaint does not allege any harm to competition resulting from
ABI's ownership of such retailers. Accordingly, a remedy directed to
ABI's existing ownership of on-premise beer retailers would be outside
of the scope of this APPA proceeding. See US Airways, 38 F. Supp. 3d at
76.
6. Comments Related to Use of Certain Data Sources in the Complaint and
Proposed Final Judgment
a. Summary of Comments
American Beverage Licensees and the Beer Distributors of Oklahoma
noted that in the Complaint, the Department uses IRI data to define
ABI's market share and claim that IRI data is not an appropriate
measure of market share because it focuses on large stores in the off-
premise channel.\74\ Separately, the Wholesale Beer Association
Executives and NBWA each expressed concern that Section V.B of the
Final Judgment relies on ABI's BudNet data to measure the percentage of
Beer volume sold through ABI-Owned Distributors. NBWA stated that
``currently, there is no method for independently verifying the
accuracy of ABI's self-reporting BudNet data and the accuracy of its
reporting to DOJ.'' \75\ Similarly, Wholesale Beer Association
Executives stated, ``ABI's BudNet system is completely reliant on ABI's
self-reporting, is not subject to transparent oversight, and could be
subject to manipulation by ABI in calculating whether future
acquisitions exceed the 10% threshold established by the [proposed
Final Judgment].'' \76\
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\74\ American Beverage Licensees comment at 4; Beer Distributors
of Oklahoma comment at 2.
\75\ NBWA comment at 15.
\76\ Wholesale Beer Association Executives comment at 7.
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b. The Data Sources Referenced in the Complaint and the Proposed Final
Judgment are Appropriate
The IRI data relied upon by the Department in calculating market
shares provided the best available indicator of brewers' future
competitive significance for the harms alleged in the Complaint. Using
IRI data was therefore appropriate. Moreover, the Department did not
use market share data to exclude any geographic areas from the required
divestiture. Rather, the proposed Final Judgment required ABI to divest
SABMiller's business throughout the United States. The Department's use
of IRI data to measure market shares therefore does not affect whether
the proposed Final Judgment was in the public interest.
The proposed Final Judgment does not require the use of BudNet data
to measure the percentage of ABI Beer sold through ABI-Owned
Distributors. Section V.B of the proposed Final Judgment prohibits ABI
from acquiring ``any equity interests in, or any ownership or control
of the assets of, a Distributor if (i) such acquisition would transform
said Distributor into an ABI-Owned Distributor, and (ii) as measured on
the day of entering into an agreement for such acquisition more than
ten percent (10%), by volume, of Defendant ABI's Beer sold in the
Territory would be sold through ABI-Owned Distributors after such
acquisition.'' Attachment C to the proposed Final Judgment states that
Beer volume shall be calculated based on ``the most comprehensive data
[used by ABI at the time of the calculation] (currently, ABI's BudNet
system), during the Relevant Period.'' As a result, the proposed Final
Judgment contemplates the use of the most comprehensive data ABI has
available. The Department believes that ABI, rather than a third party,
will possess the most robust data to show the volume of its Beer sales.
Moreover, both the Department and the Monitoring Trustee are well-
positioned to investigate whether BudNet remains the most comprehensive
data for ABI's Beer volume and ensure that ABI uses for this
calculation the most comprehensive data then available.
7. Comments Related to ABI's Use of Third-Party Sales Data
a. Summary of Comments
The NBWA and Professor Calkins asserted that the proposed Final
Judgment permits ABI to access sales information of its Independent
Distributors, including Independent Distributors' sales of the Beers of
Third-Party Brewers. They contended that ABI could use such information
to take action against Independent Distributors due to the Independent
Distributors' treatment of Third-Party Brewers or sales of Third-Party
Brewers' Beer.\77\
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\77\ NBWA comment at 22; Professor Calkins comment at 4.
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b. The Proposed Final Judgment Protects Distributors Against ABI's
Unauthorized Use of Third-Party Sales Data
The proposed Final Judgment limits the information that ABI can
request or require an Independent Distributor to report. Under Section
V.G, ABI cannot request or require that Independent Distributors
report, ``whether in aggregated or disaggregated form, the Independent
Distributor's revenues, profits, margins, costs, sales volumes, or
other financial information associated with the purchase, sale, or
distribution of a Third-Party Brewer's Beer.'' ABI can, however,
request that Independent Distributors report ``general financial
information . . . [for ABI] to assess the overall financial condition
and financial viability of such Independent Distributor, or the
percentage of total Beer revenues received by the Independent
Distributor in the prior year associated with the purchase, sale, or
distribution of Defendant ABI's Beer distributed by the Independent
Distributor.'' But, as Section V.G makes clear, ABI cannot request from
Independent Distributors information that would ``disclose or enable
Defendant ABI to infer the disaggregated revenues, profits, margins,
costs, or sales volumes associated with the Independent Distributor's
purchase, sale, or distribution of Third-Party Brewers' Beer.''
The information that ABI is permitted to receive under the proposed
Final Judgment is relevant to ABI's ordinary course business decisions
that are unrelated to an Independent Distributor's sale of Third-Party
Brewers' Beers. ABI has a legitimate interest in information about
Independent Distributors' sales of ABI
[[Page 10797]]
products. ABI also has a legitimate interest in assessing the financial
health of Independent Distributors, and an Independent Distributor's
total sales may be relevant to that assessment. The proposed Final
Judgment properly balances ABI's legitimate need for information about
its business partners against the danger of ABI's obtaining information
that it could use to punish Independent Distributors for their sales of
the Beers of Third-Party Brewers.
Nevertheless, the NBWA argues that the information that ABI is
permitted to receive ``allows ABI to infer the aggregated revenue
attributable to non-ABI beer'' and is thus ``sufficient to enable ABI
to continue to target distributors that carry and promote rival
brands.'' \78\ The NBWA requests that ``any actions taken against
distributors based on this information or any difference in treatment
between distributors with a high proportion of ABI sales and those with
a low proportion of ABI sales be seen as a violation of the [proposed
Final Judgment].'' \79\
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\78\ NBWA comment at 22.
\79\ NBWA comment at 22.
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In fact, Section V.D of the proposed Final Judgment prohibits ABI
from taking any adverse action against an Independent Distributor based
upon that distributor's sales of a Third-Party Brewer's Beer. The
proposed Final Judgment thus protects against the harm that the NBWA's
comment seeks to prevent.
8. Comment Requesting to Extend and Periodically Reopen the Period for
Public Comments
a. Summary of Comment
The Virginia Beer Wholesalers Association requested that the period
for public comment be extended until after the Final Judgment has been
entered and periodically reopened to allow interested parties the
opportunity to review and comment on the changes that ABI proposes to
make to its programs and agreements with Distributors to comply with
the proposed Final Judgment.\80\ The association writes that the
closing of the public comment period prior to ABI's issuance of
proposed amendments to its Distributor agreements and programs ``would
severely limit the ability of distributors and regulators in Virginia,
and in those states with similar franchise laws, to determine'' whether
the proposed amendments would comply with state laws.\81\
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\80\ Virginia Beer Wholesalers Association comment at 1.
\81\ Virginia Beer Wholesalers Association comment at 2.
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b. No Extension or Reopening of the Comment Period is Necessary Because
the Department Will Approve ABI's Descriptions of its Changes to its
Programs and Agreements with Distributors
The Tunney Act sets forth specific procedures for the Court to
approve consent judgments such as the proposed Final Judgment in this
case. See 15 U.S.C. Sec. Sec. 16(b)-(f). As Virginia Beer Wholesalers
Association suggested, those procedures contemplate that the period for
public comment will precede the entry of the Final Judgment. See 15
U.S.C. Sec. 16(b). No extension or reopening of the comment period is
necessary because the Department must approve ABI's descriptions of its
changes to its programs and agreements with Independent Distributors.
Section V.I requires ABI to obtain the Department's approval of the
notification that ABI must provide to Independent Distributors (1)
explaining the practices prohibited by Section V of the Final Judgment,
(2) describing the changes ABI is making to any programs, agreements,
or any interpretations of agreements required to comply with Section V
of the Final Judgment, and (3) informing the Independent Distributor of
its right, without fear of retaliation, to bring to the attention of
the Monitoring Trustee any actions by ABI which the Independent
Distributor believes may violate Section V. As discussed above, the
Monitoring Trustee will monitor ABI's compliance with the proposed
Final Judgment, including with respect to changes to its agreements and
programs with Independent Distributors. Industry participants and other
interested parties are also welcome to contact the Department to
express concerns about ABI's compliance with, or potential violations
of, the proposed Final Judgment. As expressly stated in Section XVII,
during the ten-year term of the proposed Final Judgment, the Department
may apply to the Court ``for further orders and directions as may be
necessary or appropriate to carry out or construe [the] Final Judgment,
to modify any of its provisions, to ensure and enforce compliance, and
to punish violations of its provisions.''
Finally, nothing in the proposed Final Judgment prevents state
regulators from determining whether ABI's programs or agreements with
Independent Distributors violate state franchise or other laws.
9. Comments Related to Use of the Terms ``Third-Party Brewer's Beer''
and ``Third-Party Brewers' Beers''
a. Summary of Comments
Commenter Brewers Association requested that the Department clarify
that the proposed Final Judgment's prohibitions related to ABI's
distributor incentive programs apply not only to programs that
specifically reference a particular Third-Party Brewer's Beer but
rather to incentive programs that apply to Third-Party Brewers' Beer in
the aggregate.\82\ Similarly, Professor Calkins requested that the
Department clarify that references to ``a Third-Party Brewer's Beer''
in proposed Final Judgment Sections V.D, V.E, and V.G apply
individually and collectively to Third-Party Brewers.\83\
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\82\ Brewers Association comment at 3.
\83\ Professor Calkins comment at 2-4.
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b. References to ``Third-Party Brewer's Beer'' Apply Individually and
Collectively to Third-Party Brewers
The Department hereby clarifies that references to Third-Party
Brewer's Beer apply individually and collectively to Third-Party
Brewers.
10. Comment Related to the Term of the Proposed Final Judgment
a. Summary of Comment
Commenter NBWA requested that the proposed Final Judgment terminate
not of its own accord at the end of a ten-year term but rather only
after the Department, with the assistance of the Monitoring Trustee,
has provided a report evaluating the competitive conditions in the U.S.
beer industry and the Court has determined that the proposed Final
Judgment has been effective.\84\
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\84\ NBWA comment at 24.
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b. The Ten-Year Term is Appropriate
The typical term of the Department's consent decrees resolving
violations of Section 7 of the Clayton Act is ten years. In addition,
Section XVIII contemplates that the ten-year term of the proposed Final
Judgment may be extended by the Court.
The purpose of the proposed Final Judgment is not to broadly ensure
that the U.S. beer market is competitive, but rather to cure the
antitrust violations alleged in the Complaint. Thus, it is not
appropriate to extend the term of the proposed Final Judgment based on
a determination that the competitive conditions of the U.S. beer
industry are unsatisfactory. Although the proposed
[[Page 10798]]
Final Judgment includes provisions that the Department believes will
preserve competition in the U.S. beer industry that would likely be
lost due to ABI's acquisition of SABMiller, generally improving the
competitive conditions in the U.S. beer industry is beyond the scope of
this APPA proceeding.
11. Comment Requesting the Department Publicize the Last Day of the 60-
day Public Comment Period
a. Summary of Comment
Commenter Professor Calkins requested that the Department state on
its public website the last day of the 60-day period for public
comments on proposed consent decrees.\85\
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\85\ Professor Calkins comment at 1-2.
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b. The APPA Does Not Require the Department to State on its Public
Website the Last Day for Public Comments on Consent Decrees
The APPA sets forth specific procedures for the Court to approve
consent judgments such as the proposed Final Judgment in this case. See
15 U.S.C. Sec. Sec. 16(b)-(f). Those requirements do not include
notice on the Department's public website of the last day of the 60-day
period for public comments. The Department nevertheless appreciates
Professor Calkins' suggestion and will consider implementing it in
connection with future proposed final judgments.
VI. CONCLUSION
After careful consideration of the public comments, the Department
continues to believe that the proposed Final Judgment, as drafted,
provides an effective and appropriate remedy for the antitrust
violations alleged in the Complaint, and is therefore in the public
interest. The Department will move this Court to enter the proposed
Final Judgment after the comments and this response are published
pursuant to 15 U.S.C. Sec. 16(d).
Dated: January 13, 2017
Respectfully submitted,
Michelle R. Seltzer (D.C. Bar No. 475482), David C. Kelly, David M.
Stoltzfus, Attorneys for the United States, Litigation I Section,
Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W.,
Suite 4100, Washington, DC 20530, Telephone: (202) 353-3865, Facsimile:
(202) 307-5802, E-mail: michelle.seltzer@usdoj.gov.
[FR Doc. 2017-03029 Filed 2-14-17; 8:45 am]
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