United States v. Anheuser-Busch InBev SA/NV, et al.; Proposed Final Judgment and Competitive Impact Statement, 68918-68932 [2020-24056]

Download as PDF jbell on DSKJLSW7X2PROD with NOTICES 68918 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices Also, Accio Energy, Inc., Ann Arbor, MI; ACE Clearwater Enterprises, Torrance, CA; Adapx, Inc., Seattle, WA; Advanced Tooling Corporation, Scottsville, VA; Altair Engineering, Inc., Troy, MI; American Foundry Society, Inc., Schaumburg, IL; ANSYS, Inc., Canonsburg, PA; Applied Technology Integration (ATI), Maumee, OH; Aspire Solutions, Inc., Eau Claire, WI; Barfield, Inc., Miami, FL; Baxter Healthcare Corporation, Deerfield, IL; BDM Associates, Norcross, GA; Black & Rossi, LLC, The Woodlands, TX; Caelynx, Inc., Ann Arbor, MI; CIARA Technologies, Montreal, QC, Canada; Claxton Logistics, Stafford, VA; Clemson University, Clemson, SC; The Columbia Group Inc., Alexandria, VA; Consumers Energy Company, Jackson, MI; Dassault Systemes, Dearborn, MI; Decision Incite Inc., Great Falls, VA; Deformation Control Technology, Inc., Cleveland, OH; EADS North America Test and Services, Irvine, CA; Eagle Systems, Inc., Waco, TX; Equipois, LLC, Manchester, NH; Faraday Technology, Inc., Sunnyvale, CA; FIATECH, New York, NY; FIVES Machining Systems Inc., Hebron, KY; Flight Support, Inc., North Haven, CA; Focus:HOPE, Detroit, MI; Ford Motor Company, Dearborn, MI; General Dynamics—OTS, Troy, MI; General Lasertronics Corporation, San Jose, CA; General Pattern Co. Inc., Blaine, MN; Great Lakes Composites Consortium, Inc., Dafter, MI; I.D. Systems, Inc., Woodcliffe Lake, NJ; Intel Corporation, Santa Clara, CA; Kitsap Economic Development Alliance, Silverdale, WA; L&L Products, Inc., Bruce Township, MI; Macro USA Corporation, New York, NY; MagneGas Corporation, Clearwater, FL; MessierDowty, Inc., Everett, WA; MET–L–FLO, Inc., Sugar Grove, IL; MichBio, Ann Arbor, MI; Michigan Manufacturing Technology Institute (MMTC), Troy, MI; Michigan Technological University, Houghton, MI; National Center for Defense Manufacturing and Machining (NCDMM), Blairsville, PA; Nimbis Services, Inc., Oro Valley, AZ; Northern Illinois University, DeKalb, IL; The Ohio State University, Columbus, OH; OMAX Corporation, Kent, WA; Original Equipment Suppliers Association (OESA), Southfield, MI; Perficient, Inc., Livonia, MI; Pratt & Whitney, East Hartford, CT; The Procter & Gamble Company, Cincinnati, OH; Profile Composites Inc., Sidney, BC, Canada; PYA Analytics, Knoxville, TN; R Systems NA, Inc., Champaign, IL; RGS Associates, Inc., Lancaster, MI; Rockwell Automation, Inc., Troy, MI; Russells Technical Products, Holland, MI; Saratoga Data Systems, Saratoga VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 Springs, NY; Services and Solutions Group, LLC, Falls Church, VA; Sikorsky Aircraft, Stratford, CT; SimaFore, Inc., Ann Arbor, MI; StandardAero Redesign Services, Inc., Scottsdale, AZ; Stratasys Inc., Farmington Hills, MI; Survivability Solutions LLC, Lacey WA; Sustainable Water Works, Detroit, MI; Tactical Edge, LLC, Clarksville, TN; Tata Technologies, Novi, MI; TechSolve, Inc., Cincinnati, OH; Topline Technology Solutions, LLC, Bedford, IN; Tracen Technologies, Inc., Manassas, VA; Troika Solutions, LLC, Reston, VA; United Global Group, Fredericksburg, VA; University of Alabama, Tuscaloosa, AL; University of Dayton Research Institute (UDRI), Dayton, OH; University of Michigan, Ann Arbor, MI; Vectron International, Hudson, NH; Whitney, Bradley & Brown, Inc., Dumfries, VA; WinTec Arrowmaker, Fort Washington, MD; and Ziota Technology, Inc., Saint-Hubert, QC, Canada have withdrawn as a party to this venture. No other changes have been made in either the membership or planned activity of the group research project. Membership in this group research project remains open, and NCMS intends to file additional written notifications disclosing all changes in membership. On February 20, 1987, NCMS filed its original notification pursuant to Section 6(a) of the Act. The Department of Justice published a notice in the Federal Register pursuant to Section 6(b) of the Act on March 17, 1987 (52 FR 8375). The last notification was filed with the Department on June 02, 2016. A notice was published in the Federal Register pursuant to Section 6(b) of the Act on July 6, 2016 (81 FR 44047). Suzanne Morris, Chief, Premerger and Division Statistics, Antitrust Division. [FR Doc. 2020–24072 Filed 10–29–20; 8:45 am] BILLING CODE 4410–11–P Antitrust Division Notice Pursuant To The National Cooperative Research And Production Act Of 1993—Integrated Photonics Institute For Manufacturing Innovation Operating Under The Name Of The American Institute For Manufacturing Integrated Photonics Notice is hereby given that, on October 2, 2020, pursuant to Section 6(a) of the National Cooperative Research and Production Act of 1993, 15 U.S.C. 4301 et seq. (‘‘the Act’’), the Integrated Photonics Institute for Frm 00086 Fmt 4703 Sfmt 4703 Suzanne Morris, Chief, Premerger and Division Statistics, Antitrust Division. [FR Doc. 2020–24068 Filed 10–29–20; 8:45 am] BILLING CODE 4410–11–P DEPARTMENT OF JUSTICE Antitrust Division United States v. Anheuser-Busch InBev SA/NV, et al.; Proposed Final Judgment and Competitive Impact Statement DEPARTMENT OF JUSTICE PO 00000 Manufacturing Innovation operating under the name of the American Institute for Manufacturing Integrated Photonics (‘‘AIM Photonics’’) has filed written notifications simultaneously with the Attorney General and the Federal Trade Commission disclosing changes in its membership. The notifications were filed for the purpose of extending the Act’s provisions limiting the recovery of antitrust plaintiffs to actual damages under specified circumstances. Specifically, The Pennsylvania State University, State College, PA; Bridgewater State University, Bridgewater, MA; Presco Engineering, Inc., Woodbridge, CT; and HD MicroSystems, LLC, Parlin, NJ have been added as parties to this venture. No other changes have been made in either the membership or planned activity of the group research project. Membership in this group research project remains open, and AIM Photonics intends to file additional written notifications disclosing all changes in membership. On June 16, 2016, AIM Photonics filed its original notification pursuant to Section 6(a) of the Act. The Department of Justice published a notice in the Federal Register pursuant to Section 6(b) of the Act on July 25, 2016 (81 FR 48450). The last notification was filed with the Department on May 1, 2020. A notice was published in the Federal Register pursuant to Section 6(b) of the Act on May 19, 2020 (85 FR 29977). Notice is hereby given pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)–(h), that a proposed Final Judgment, Stipulation, and Competitive Impact Statement have been filed with the United States District Court for the Eastern District of Missouri, in United States v. AnheuserBusch InBev SA/NV, et al., Civil Action No. 4:20–cv–01282–SRC. On September 18, 2020, the United States filed a Complaint alleging that the proposed acquisition by Anheuser-Busch Companies, LLC (‘‘AB Companies’’), a E:\FR\FM\30OCN1.SGM 30OCN1 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices minority shareholder in Craft Brew Alliance, Inc. (‘‘CBA’’), of the remaining shares of CBA would violate Section 7 of the Clayton Act, 15 U.S.C. 18. AB Companies is a wholly-owned subsidiary of Anheuser-Busch InBev SA/NV (‘‘ABI’’). The proposed Final Judgment, filed at the same time as the Complaint, requires ABI, AB Companies, and CBA to divest Kona Brewery, LLC, which houses CBA’s entire Kona brand business in the State of Hawaii, among other related tangible and intangible assets, and to license to the acquirer the Kona brand in Hawaii. The United States has approved PV Brewing Partners, LLC, as the acquirer. Copies of the Complaint, proposed Final Judgment, and Competitive Impact Statement are available for inspection on the Antitrust Division’s website at http://www.justice.gov/atr and at the Office of the Clerk of the United States District Court for the Eastern District of Missouri. Copies of these materials may be obtained from the Antitrust Division upon request and payment of the copying fee set by Department of Justice regulations. Public comment is invited within 60 days of the date of this notice. Such comments, including the name of the submitter, and responses thereto, will be posted on the Antitrust Division’s website, filed with the Court, and, under certain circumstances, published in the Federal Register. Comments should be directed to Robert A. Lepore, Chief, Transportation, Energy, and Agriculture Section, Antitrust Division, Department of Justice, 450 5th Street NW, Suite 8000, Washington, DC 20530 (telephone: 202–307–6349). Suzanne Morris, Chief, Premerger and Division Statistics, Antitrust Division. jbell on DSKJLSW7X2PROD with NOTICES UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI EASTERN DIVISION United States of America, Plaintiff, v. Anheuser-Busch INBEV SA/NV, AnheuserBusch Companies, LLC, and Craft Brew Alliance, Inc., Defendants. Civil Action No.: 4:20-cv-01282-SRC Judge Stephen R. Clark COMPLAINT 1. The United States of America brings this civil antitrust action to enjoin AnheuserBusch InBev SA/NV (‘‘ABI’’) and AnheuserBusch Companies, LLC (‘‘AB Companies’’), from acquiring Craft Brew Alliance, Inc. (‘‘CBA’’). The United States alleges as follows: I. NATURE OF THE ACTION 2. On November 11, 2019, ABI, which has been a minority shareholder in CBA, agreed to acquire all of CBA’s remaining shares in VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 a transaction valued at approximately $220 million. 3. ABI is a global brewing company with the largest beer sales worldwide and in the United States, including in the state of Hawaii. CBA is a national brewing company with the fifth-largest beer sales in Hawaii. As measured by 2019 revenue, ABI accounts for approximately 28% of all beer sales in Hawaii, and CBA accounts for approximately 13% of all beer sales in Hawaii.1 4. ABI proposes to acquire CBA through ABI’s wholly-owned subsidiary AB Companies, a Delaware limited liability company. ABI is already a minority shareholder in CBA, owning approximately 31% of CBA’s shares. ABI’s proposed acquisition of CBA would give ABI 100% ownership of CBA, resulting in ABI’s total control over all aspects of CBA’s competitive decision-making, including pricing, marketing, and promotions. 5. As a result, the transaction would eliminate important head-to-head competition between ABI and CBA in Hawaii, and would facilitate price coordination following the transaction. This reduction in competition would likely result in increased prices and reduced innovation for beer consumers in Hawaii. 6. For these reasons, ABI’s proposed acquisition of CBA violates Section 7 of the Clayton Act, 15 U.S.C. § 18, and should be permanently enjoined. II. JURISDICTION, VENUE, AND INTERSTATE COMMERCE 7. The United States brings this action pursuant to Section 15 of the Clayton Act, as amended, 15 U.S.C. § 25, to prevent and restrain Defendants ABI, AB Companies, and CBA from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. The Court has subject matter jurisdiction over this action pursuant to Section 15 of the Clayton Act, 15 U.S.C. § 25, and 28 U.S.C. §§ 1331, 1337(a), and 1345. 8. Venue is proper for ABI, a Belgian corporation, under Section 12 of the Clayton Act, 15 U.S.C. § 22, and 28 U.S.C. §§ 1391(b) and (c). Venue is proper for AB Companies, a Delaware limited liability company headquartered in St. Louis, Missouri, in this judicial district under 28 U.S.C. §§ 1391(b) and (c). Venue is proper for CBA, a Washington corporation, in this judicial district under Section 12 of the Clayton Act, 15 U.S.C. § 22, and 28 U.S.C. §§ 1391(b) and (c). 9. ABI, AB Companies, and CBA produce and sell beer in the flow of interstate commerce and their production and sale of beer substantially affect interstate commerce. ABI, AB Companies, and CBA have each consented to personal jurisdiction and venue in this judicial district for purposes of this action. III. THE DEFENDANTS AND THE UNITED STATES BEER INDUSTRY A. The Defendants 10. ABI is a corporation organized and existing under the laws of Belgium, with its 1 Market share calculations are based on distributor sales in Hawaii. PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 68919 headquarters in Leuven, Belgium. ABI owns numerous major beer brands sold in the United States, including in Hawaii. These brands include Bud Light, Budweiser, Busch Light, Natural Light, Michelob Ultra, Stella Artois, and Golden Road. 11. AB Companies is a wholly-owned subsidiary of ABI and a Delaware limited liability company with its headquarters in St. Louis, Missouri. On November 11, 2019, it agreed to acquire all of CBA’s outstanding shares in a transaction valued at approximately $220 million. 12. CBA is a corporation organized and existing under the laws of Washington, with its headquarters in Portland, Oregon. CBA owns several beer brands sold in the United States, including Widmer Brothers, Omission, Redhook, and Kona, a brand that originated in Hawaii and is especially popular in that state. 13. ABI currently holds approximately 31% of CBA’s outstanding shares, delivers CBA brands of beer to wholesalers throughout the United States, and has a contract with CBA to brew some CBA brands of beer at ABI breweries. ABI also has the right to appoint two of the eight seats on CBA’s Board of Directors. B. Beer Segments and Pricing 14. Beer brands sold in Hawaii, like those sold in the United States in general, are often segmented based on price and quality. ABI groups beer into five segments: value, core, core-plus, premium, and super-premium (listed in order of increasing price and quality). 15. ABI owns beer brands in each beer segment in Hawaii: value (where its brands include Busch Light and Natural Light), core (where its brands include Bud Light and Budweiser), core-plus (where its brands include Michelob Ultra and Bud Light Lime), premium (where its brands include Michelob Ultra Pure Gold), and super-premium (where its brands include Stella Artois and Golden Road). 16. CBA’s Kona brand is generally considered a premium beer. Consumers may ‘‘trade up’’ or ‘‘trade down’’ between segments in response to changes in price. For example, as the prices of core-plus brands approach the prices of premium brands, consumers are increasingly willing to ‘‘trade up’’ from core-plus brands to premium brands. Therefore, the competition provided by CBA’s Kona in the premium segment serves as an important constraint on the ability of ABI to raise its beer prices not only in the premium segment, but also in coreplus and other beer segments. IV. THE RELEVANT MARKET A. Relevant Product Market 17. The relevant product market for analyzing the effects of the proposed acquisition is beer. Beer is usually made from a malted cereal grain, flavored with hops, and brewed via a fermentation process. Beer’s taste, alcohol content, image (e.g., marketing and consumer perception), price, and other factors make it substantially different from other alcoholic beverages. 18. Other alcoholic beverages, such as wine and distilled spirits, are not reasonable E:\FR\FM\30OCN1.SGM 30OCN1 68920 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices substitutes that would discipline a small but significant and non-transitory increase in the price of beer, and relatively few consumers would substantially reduce their beer purchases or turn to alternatives in the event of such a price increase. Therefore, a hypothetical monopolist producer of beer likely would increase its prices by at least a small but significant and non-transitory amount. B. Relevant Geographic Market 19. The relevant geographic market for analyzing the effects of the proposed acquisition is no larger than the state of Hawaii. The relevant geographic market is best defined by the locations of the customers who purchase beer, rather than by the locations of breweries that produce beer. Brewers develop pricing and promotional strategies based on an assessment of local demand for their beer, local competitive conditions, and the local strength of different beer brands. Consumers buy beer near their homes and typically do not travel great distances to buy beer even when prices rise. Consumers in Hawaii are particularly unlikely to travel outside the state to buy beer, as they are located approximately 2,000 miles from the mainland United States. 20. For these reasons, a hypothetical monopolist of beer sold in Hawaii likely would increase its prices in that market by at least a small but significant and nontransitory amount. Therefore, Hawaii is a relevant geographic market and ‘‘section of the country’’ within the meaning of Section 7 of the Clayton Act. jbell on DSKJLSW7X2PROD with NOTICES V. ABI’S ACQUISITION OF CBA IS LIKELY TO RESULT IN ANTICOMPETITIVE EFFECTS A. The Transaction Would Increase Market Concentration Significantly 21. The proposed acquisition would increase market concentration significantly for beer in Hawaii. ABI and CBA would have a combined share of approximately 41% in the relevant market following the transaction. Market concentration is often one useful indicator of the level of competitive vigor in a market and the likely competitive effects of a merger. The more concentrated a market, and the more a transaction would increase concentration in a market, the more likely it is that the transaction would result in harm to consumers by meaningfully reducing competition. 22. Concentration in relevant markets is typically measured by the HerfindahlHirschman Index (or ‘‘HHI,’’ defined and explained in Appendix A). Markets in which the HHI is between 1,500 and 2,500 are considered moderately concentrated. Mergers that increase the HHI by more than 100 points and result in a moderately concentrated market potentially raise significant competitive concerns. See U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines § 5.3 (revised Aug. 19, 2010) (‘‘Merger Guidelines’’), https://www.justice.gov/atr/horizontalmerger-guidelines-08192010. 23. The transaction would result in a moderately concentrated market with a postacquisition HHI of nearly 2,500 points, just VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 below the threshold denoting a highly concentrated market. Moreover, the HHI would increase as a result of the transaction by more than 700 points. Therefore, ABI’s proposed acquisition of CBA potentially raises significant competitive concerns. See Merger Guidelines § 5.3. 24. These concentration measures likely understate the extent to which the transaction would result in anticompetitive effects such as higher prices and less innovation in the relevant market. As explained in Section V.C., the market for beer in Hawaii shows signs of vulnerability to coordinated conduct, and the transaction is likely to enhance that vulnerability. Those conditions make the transaction more likely to raise significant competitive concerns than the measures of concentration alone would indicate. See Merger Guidelines § 7.1. B. ABI’s Acquisition of CBA Would Eliminate Head-to-Head Competition Between ABI and CBA 25. Today, ABI and CBA compete directly against each other in Hawaii. In that state, CBA’s Kona brand competes closely with ABI’s Stella Artois and Michelob Ultra brands, and also competes with ABI’s Bud Light and Budweiser brands. Recent developments and product innovations have further enhanced the degree of competition between ABI and CBA. For example, CBA recently introduced Kona Light, a lower calorie brand similar to ABI’s low-calorie offerings like ABI’s Michelob Ultra and Bud Light. CBA’s share of the beer market in Hawaii has been among the fastest growing in the state over the past seven years. ABI’s proposed acquisition of CBA likely would substantially lessen this current head-to-head competition between ABI and CBA in Hawaii, in violation of Section 7 of the Clayton Act. 26. Moreover, competition between ABI and CBA in Hawaii is poised to increase in the future. CBA is investing in its business in Hawaii, and it has plans to grow its share of beer volume sold in Hawaii by about 25% by 2021. CBA is also constructing a new brewery in Hawaii that is scheduled to become operational in the next few months. 27. ABI has plans to grow its share of beer in the premium segment. In recent years, consumer preferences have shifted toward the premium and super-premium segments. Because ABI’s positions in the value, core, and core-plus segments are stronger than its positions in the premium and superpremium segments, this trend toward the premium and super-premium segments has threatened ABI’s overall market share of beer and made ABI’s plans to expand its share of beer in the premium segment more urgent. These plans include the introduction of new premium brands and other brand innovations. CBA’s Kona is positioned as a premium beer in Hawaii. Therefore, ABI’s increased focus on the premium segment would increase competition with CBA’s Kona. 28. For these reasons, competition between ABI and CBA in Hawaii likely would grow significantly in the absence of the proposed acquisition. ABI’s acquisition of CBA, therefore, is likely to substantially lessen this PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 future potential competition between ABI and CBA, also in violation of Section 7 of the Clayton Act. C. ABI’s Acquisition of CBA Would Facilitate Price Coordination 29. Historically, ABI has employed a ‘‘price leadership’’ strategy throughout the United States, including in Hawaii. According to this strategy, ABI, with the largest beer sales in the United States and Hawaii, seeks to generate industry-wide price increases by pre-announcing its own price increases and purposefully making those price increases transparent to the market so its primary competitors will follow its lead. These announced price increases, which can vary by geography because of different competitive conditions, typically cover a broad range of beer brands and packages (e.g., container and size). After announcing price increases, ABI tracks the degree to which its primary competitors match its price increases. Depending on the competitive response, ABI will either maintain, adjust, or rescind an announced price increase. 30. For many years, Molson Coors Beverage Company (‘‘Molson Coors’’), the brewer with the second-largest beer sales in the United States and owner of many brands sold in Hawaii such as Miller Lite, Coors Light, and Blue Moon, has followed ABI’s announced price increases in Hawaii to a significant degree. Molson Coors’s willingness to follow ABI’s announced price increases is constrained, however, by the diversion of sales to other competitors who are seeking to gain share, including CBA and its Kona brand. 31. By acquiring CBA, ABI would gain control over Kona’s pricing and would likely increase Kona’s price, thereby eliminating a significant constraint on Molson Coors’s willingness to follow ABI’s announced price increases in Hawaii. By reducing Kona’s constraint on Molson Coors’s willingness to increase prices, the acquisition likely increases the ability of ABI to facilitate price coordination, thereby resulting in higher prices for beer sold in Hawaii. For this reason, ABI’s acquisition of CBA likely would substantially lessen competition in Hawaii in violation of Section 7 of the Clayton Act. VI. ABSENCE OF COUNTERVAILING FACTORS 32. New entry and expansion by competitors likely will not be timely and sufficient in scope to prevent the acquisition’s likely anticompetitive effects. Barriers to entry and expansion within Hawaii include: (i) the substantial time and expense required to build a brand’s reputation; (ii) the substantial sunk costs for promotional and advertising activity needed to secure the distribution and placement of a new entrant’s beer in retail outlets; (iii) the time and cost of building new breweries and other facilities; and (iv) the difficulty of developing an effective network of beer distributors with incentives to promote and expand a new entrant’s sales. 33. The anticompetitive effects of the proposed acquisition are not likely to be eliminated or mitigated by any efficiencies the proposed acquisition may achieve. E:\FR\FM\30OCN1.SGM 30OCN1 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices VII. VIOLATION ALLEGED 34. The United States hereby incorporates the allegations of paragraphs 1 through 33 above as if set forth fully herein. 35. The proposed transaction likely would substantially lessen competition in interstate trade and commerce, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18, and likely would have the following anticompetitive effects, among others: (a) head-to-head competition between ABI and CBA for beer in Hawaii would be substantially lessened; (b) the ability and incentive of ABI to coordinate higher prices for beer in Hawaii would be substantially increased; and (c) competition generally in the market for beer in Hawaii would be substantially lessened. REQUESTED RELIEF The United States requests: 1. That the proposed acquisition be adjudged to violate Section 7 of the Clayton Act, 15 U.S.C. § 18; 2. That Defendants be permanently enjoined and restrained from carrying out the proposed transaction or from entering into or carrying out any other agreement, understanding, or plan by which ABI would acquire CBA, be acquired by, or merge with CBA; 3. That the United States be awarded its costs for this action; and 4. That the United States be awarded such other relief as the Court may deem just and proper. Dated: September 18, 2020 Respectfully submitted, jbell on DSKJLSW7X2PROD with NOTICES FOR PLAINTIFF UNITED STATES OF AMERICA: lllllllllllllllllllll MAKAN DELRAHIM Assistant Attorney General for Antitrust lllllllllllllllllllll BERNARD A. NIGRO, JR. Principal Deputy Assistant Attorney General lllllllllllllllllllll MICHAEL F. MURRAY Deputy Assistant Attorney General lllllllllllllllllllll KATHLEEN S. O’NEILL Senior Director of Investigations & Litigation lllllllllllllllllllll ROBERT A. LEPORE Chief, Transportation, Energy & Agriculture Section lllllllllllllllllllll PATRICIA C. CORCORAN Assistant Chief, Transportation, Energy & Agriculture Section Jeffrey B. Jensen United States Attorney, Eastern District of Missouri lllllllllllllllllllll NICHOLAS P. LLEWELLYN (MO#43839) Assistant United States Attorney, Chief, Civil Division Thomas F. Eagleton U.S. Courthouse, 111 S. 10th Street, 20th Floor, St. Louis, MO 63102, VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 Tel: (314) 539–7637, Fax: (314) 539–2287, Email: Nicholas.Llewellyn@usdoj.gov lllllllllllllllllllll JILL C. MAGUIRE* (DC#979595) Assistant Chief, Healthcare & Consumer Products Section DON P. AMLIN GRANT A. BERMANN DAVID C. KELLY WILLIAM M. MARTIN MICHAEL T. NASH U.S. Department of Justice, Antitrust Division, 450 Fifth Street NW, Suite 4100, Washington, DC 20530, Tel: (202) 598–8805, Fax: (202) 307–5802, Email: jill.maguire@usdoj.gov Attorneys for the United States *Attorney of Record APPENDIX A DEFINITION OF THE HERFINDAHLHIRSCHMAN INDEX ‘‘HHI’’ means the Herfindahl-Hirschman Index, a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For example, for a market consisting of four firms with shares of 30 percent, 30 percent, 20 percent, and 20 percent, the HHI is 2,600 (302 + 302 + 202 + 202 = 2,600). The HHI takes into account the relative size distribution of the firms in a market and approaches zero when a market consists of a large number of small firms. The HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms increases. Markets in which the HHI is between 1,500 and 2,500 are considered to be moderately concentrated. See U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines § 5.3 (revised Aug. 19, 2010), https://www.justice.gov/atr/horizontalmerger-guidelines-08192010. Transactions that increase the HHI by more than 100 points in moderately concentrated markets potentially raise significant competitive concerns under the guidelines issued by the U.S. Department of Justice and Federal Trade Commission. See id. UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI EASTERN DIVISION United States of America, Plaintiff, v. Anheuser-Busch Inbev SA/NV, AnheuserBusch Companies, LLC, and Craft Brew Alliance, Inc., Defendants. Civil Action No.: 4:20-cv-01282-SRC Judge Stephen R. Clark PROPOSED FINAL JUDGMENT WHEREAS, Plaintiff, United States of America, filed its Complaint on September 18, 2020; AND WHEREAS, the United States and Defendants, Anheuser-Busch InBev SA/NV (‘‘ABI’’), Anheuser-Busch Companies, LLC (‘‘AB Companies’’), and Craft Brew Alliance, Inc. (‘‘CBA’’), have consented to entry of this Final Judgment without the taking of testimony, without trial or adjudication of any issue of fact or law, and without this Final Judgment constituting any evidence PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 68921 against or admission by any party regarding any issue of fact or law; AND WHEREAS, Defendants agree to make a divestiture to remedy the loss of competition alleged in the Complaint; AND WHEREAS, Defendants represent that the divestiture and other relief required by this Final Judgment can and will be made and that Defendants will not later raise a claim of hardship or difficulty as grounds for asking the Court to modify any provision of this Final Judgment; NOW THEREFORE, it is ORDERED, ADJUDGED, AND DECREED: I. JURISDICTION The Court has jurisdiction over the subject matter of and each of the parties to this action. The Complaint states a claim upon which relief may be granted against Defendants under Section 7 of the Clayton Act, as amended (15 U.S.C. § 18). II. DEFINITIONS As used in this Final Judgment: A. ‘‘Acquirer’’ means PV Brewing or any other entity to which Defendants divest the Divestiture Assets. B. ‘‘ABI’’ means Defendant AnheuserBusch InBev SA/NV, a Belgian corporation with its headquarters in Leuven, Belgium, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees. C. ‘‘AB Companies’’ means Defendant Anheuser-Busch Companies, LLC, a whollyowned subsidiary of ABI and a Delaware limited liability company with its headquarters in St. Louis, Missouri, its successors and assigns, and its subsidiaries (including the Hawaii WOD), divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees. D. ‘‘CBA’’ means Defendant Craft Brew Alliance, Inc., a Washington corporation with its headquarters in Portland, Oregon, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees. E. ‘‘Covered Entity’’ means any Beer brewer, importer, distributor, or brand owner (other than ABI) that derives more than $3.75 million in annual gross revenue from Beer sold for further resale in the State of Hawaii, or from license fees generated by such Beer sales in the State of Hawaii. F. ‘‘Covered Interest’’ means ownership or control of any Beer brewing assets of, or any Beer brand assets of, or any Beer distribution assets of, or any interest in (including any financial, security, loan, equity, intellectual property, or management interest), a Covered Entity; except that a Covered Interest shall not include (i) a Beer brewery or Beer brand located outside the State of Hawaii that does not generate at least $3.75 million in annual gross revenue from Beer sold for resale in the State of Hawaii; (ii) a license to distribute a non-ABI Beer brand where said distribution license does not generate at least $1 million in annual gross revenue in the State of Hawaii; or (iii) a Beer distributor which does not generate at least $1 million in annual gross revenue in the State of Hawaii. E:\FR\FM\30OCN1.SGM 30OCN1 jbell on DSKJLSW7X2PROD with NOTICES 68922 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices G. ‘‘PV Brewing’’ means PV Brewing Partners, LLC, a Delaware limited liability company with its headquarters in Overland Park, Kansas, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees. H. ‘‘Kona Hawaii’’ means Kona Brewery LLC, a Hawaii limited liability company with its headquarters in Kailua-Kona, Hawaii, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees. I. ‘‘Divestiture Assets’’ means all of Defendants’ rights, titles, and interests in and to all property and assets, tangible and intangible, wherever located, related to or used or held for use in connection with Kona Hawaii, including, but not limited to: 1. the following facilities (the ‘‘Divestiture Facilities’’): a. the restaurant located at 7192 Kalaniana’ole Highway, Honolulu, Hawaii 96825 (‘‘Koko Marina Pub’’); b. the brewery and brewpub located at 74– 5612 Pawai Place, Kailua-Kona, Hawaii, 96740 (the ‘‘Kona Pub and Brewery’’); and c. the New Kona Brewery; 2. all rights of the Acquirer under the Kona IP License; 3. all tangible personal property, including, but not limited to, machinery and manufacturing equipment, tooling and fixed assets, vehicles, inventory, merchandise, office equipment and furniture, materials, computer hardware and supplies; 4. all contracts, contractual rights, and customer relationships; and all other agreements, commitments, and understandings, including, but not limited to, teaming arrangements, leases, certifications, and supply agreements; 5. all licenses, permits, certifications, approvals, consents, registrations, waivers, and authorizations issued or granted by any governmental organization, and all pending applications or renewals; 6. all records and data, including (a) customer lists, accounts, sales, and credit records, (b) production, repair, maintenance, and performance records, (c) manuals and technical information CBA provides to its own employees, customers, suppliers, agents, or licensees, (d) records and research data concerning historic and current research and development activities, including, but not limited, to designs of experiments and the results of successful and unsuccessful designs and experiments, and (e) drawings, blueprints, and designs; 7. all intellectual property owned, licensed, or sublicensed, either as licensor or licensee, including (a) patents, patent applications, and inventions and discoveries that may be patentable, (b) registered and unregistered copyrights and copyright applications, and (c) registered and unregistered trademarks, trade dress, service marks, service names, trade names, and trademark applications; and 8. all other intangible property, including (a) commercial names and d/b/a names, (b) technical information, (c) computer software VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 and related documentation, know-how, trade secrets, design protocols, specifications for materials, specifications for parts, specifications for devices, safety procedures (e.g., for the handling of materials and substances), quality assurance and control procedures, (d) design tools and simulation capabilities, and (e) rights in internet web sites and internet domain names. Provided, however, that the assets specified in Paragraphs II.I.1.-8., do not include (a) ownership of the Kona IP; (b) intellectual property associated with the sale of Kona Products outside the State of Hawaii; (c) Defendants’ facilities located outside Hawaii that are used to brew, develop, package, import, distribute, market, promote, or sell Kona Products; or (d) AB Companies’ whollyowned distributor located in the State of Hawaii. J. ‘‘Beer’’ is defined for purposes herein as any fermented beverage, brewed or produced from malt, wholly or in part, or from rice, grain of any kind, bran, glucose, sugar, and molasses when such items are used as a substitute for malt, or from honey, fruit, fruit juice, fruit concentrate, herbs, spices, or other food materials. For the avoidance of doubt, Beer, as defined herein, does not include any distilled alcoholic beverages (as defined as of September 1, 2020 in 27 C.F.R. Section 5.11) or wine (as defined as of September 1, 2020 in 27 C.F.R. 410, except that irrespective of the foregoing definition, hard cider shall be included within the definition of Beer herein). K. ‘‘Distributor’’ means a wholesaler in the State of Hawaii who acts as an intermediary between a brewer or importer of Beer and a retailer of Beer. L. ‘‘Hawaii WOD’’ means Anheuser-Busch Sales of Hawaii, Inc., which is AB Companies’ wholly-owned distributor in the State of Hawaii. M. ‘‘Kona Products’’ means (1) all products produced by Defendants using the ‘‘Kona’’ brand name at any time after November 11, 2019, and (2) all products produced by Acquirer using the ‘‘Kona’’ brand name. N. ‘‘Kona IP’’ means all intellectual property used or held for use in connection with the brewing, developing, packaging, importing, distributing, marketing, promoting, or selling of Kona Products in Hawaii. This includes intellectual property connected to the ‘‘Kona’’ brand name (and all associated trademarks, service marks, and services names) used or held for use in connection with the brewing, developing, packaging, importing, distributing, marketing, promoting, or selling of Kona Products in the State of Hawaii. O. ‘‘Kona IP License’’ means an exclusive, irrevocable, fully paid-up, royalty-free, perpetual license to the Kona IP for use in the State of Hawaii. P. ‘‘New Brewery Completion’’ means the achievement by Defendants of an average production capacity of 1,500 barrels of saleable Beer each calendar week for three consecutive calendar weeks at the New Kona Brewery. Q. ‘‘New Kona Brewery’’ means the brewery located at Lot 16 in Kailua-Kona, Hawaii. R. ‘‘Relevant Personnel’’ means all fulltime, part-time, or contract employees of PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 Kona Hawaii, wherever located, whose job responsibilities relate in any way to the brewing, developing, packaging, importing, distributing, marketing, promoting, or selling of Kona Products in the State of Hawaii, at any time between November 11, 2019, and the date on which the Divestiture Assets are divested to Acquirer. S. ‘‘Transaction’’ means AB Companies’ proposed acquisition of the remaining shares of CBA that AB Companies does not already own. III. APPLICABILITY A. This Final Judgment applies to ABI, AB Companies, and CBA, as defined above, and all other persons in active concert or participation with any Defendant who receive actual notice of this Final Judgment. B. If, prior to complying with Section IV and Section V of this Final Judgment, Defendants sell or otherwise dispose of all or substantially all of their assets or of business units that include the Divestiture Assets, Defendants must require any purchaser to be bound by the provisions of this Final Judgment. Defendants need not obtain such an agreement from Acquirer. IV. DIVESTITURE A. Defendants are ordered and directed, within 10 calendar days after the Court’s entry of the Asset Preservation and Hold Separate Stipulation and Order in this matter, to divest the Divestiture Assets in a manner consistent with this Final Judgment to PV Brewing or to another Acquirer acceptable to the United States, in its sole discretion. The United States, in its sole discretion, may agree to one or more extensions of this time period not to exceed 60 calendar days in total and will notify the Court of any extensions. B. Defendants are ordered and directed, within 180 calendar days after the Court’s entry of the Asset Preservation and Hold Separate Stipulation and Order in this matter, to achieve New Brewery Completion in a manner consistent with this Final Judgment to PV Brewing or to another Acquirer acceptable to the United States, in its sole discretion. C. Defendants must use their best efforts to divest the Divestiture Assets as expeditiously as possible and may not take any action to impede the permitting, operation, or divestiture of the Divestiture Assets. To incentivize Defendants to achieve New Brewery Completion within 180 calendar days after the Court’s entry of the Asset Preservation and Hold Separate Stipulation and Order in this matter, beginning on calendar day 181 Defendants are ordered to pay to the United States $25,000 per day until they achieve New Brewery Completion. If Defendants demonstrate to the United States that unanticipated material difficulties have resulted in unavoidable additional delays to New Brewery Completion, the United States may, in its sole discretion, agree to forgo some or all of the payments. D. Unless the United States otherwise consents in writing, divestiture pursuant to this Final Judgment must include the entire Divestiture Assets and must be accomplished in such a way as to satisfy the United States, E:\FR\FM\30OCN1.SGM 30OCN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices in its sole discretion, that the Divestiture Assets can and will be used by Acquirer as part of a viable, ongoing business of the brewing, developing, packaging, importing, distributing, marketing, promoting, and selling of Beer in the State of Hawaii, and that the divestiture to Acquirer will remedy the competitive harm alleged in the Complaint. E. The divestiture must be made to an Acquirer that, in the United States’ sole judgment, has the intent and capability (including the necessary managerial, operational, technical, and financial capability) to compete effectively in the brewing, developing, packaging, importing, distributing, marketing, promoting, and selling of Beer in the State of Hawaii. F. The divestiture must be accomplished so as to satisfy the United States, in its sole discretion, that none of the terms of any agreement between Acquirer and Defendants gives Defendants the ability unreasonably to raise Acquirer’s costs, to lower Acquirer’s efficiency, or otherwise to interfere in the ability of Acquirer to compete effectively. G. In the event Defendants are attempting to divest the Divestiture Assets to an Acquirer other than PV Brewing, Defendants promptly must make known, by usual and customary means, the availability of the Divestiture Assets. Defendants must inform any person making an inquiry regarding a possible purchase of the Divestiture Assets that the Divestiture Assets are being divested in accordance with this Final Judgment and must provide that person with a copy of this Final Judgment. Defendants must offer to furnish to all prospective Acquirers, subject to customary confidentiality assurances, all information and documents relating to the Divestiture Assets that are customarily provided in a due-diligence process; provided, however, that Defendants need not provide information or documents subject to the attorney-client privilege or work-product doctrine. Defendants must make all information and documents available to the United States at the same time that the information and documents are made available to any other person. H. Defendants must provide prospective Acquirers with (1) access to make inspections of the Divestiture Assets; (2) access to all environmental, zoning, and other permitting documents and information; and (3) access to all financial, operational, or other documents and information customarily provided as part of a due diligence process. Defendants also must disclose all encumbrances on any part of the Divestiture Assets, including on intangible property. I. Defendants must cooperate with and assist Acquirer to identify and hire all Relevant Personnel. 1. Within 10 business days following the filing of the Complaint in this matter, Defendants must identify all Relevant Personnel to Acquirer and the United States, including by providing organization charts covering all Relevant Personnel. 2. Within 10 business days following receipt of a request by Acquirer or the United States, Defendants must provide to Acquirer and the United States the following additional information related to Relevant VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 Personnel: name; job title; current salary and benefits including most recent bonus paid, aggregate annual compensation, current target or guaranteed bonus, if any, and any other payments due to or promises made to the employee; descriptions of reporting relationships, past experience, responsibilities, and training and educational histories; lists of all certifications; and all job performance evaluations. If Defendants are barred by any applicable law from providing any of this information, Defendants must provide, within 10 business days following receipt of the request, the requested information to the full extent permitted by law and also must provide a written explanation of Defendants’ inability to provide the remaining information. 3. At the request of Acquirer, Defendants must promptly make Relevant Personnel available for private interviews with Acquirer during normal business hours at a mutually agreeable location. 4. Defendants must not interfere with any effort by Acquirer to employ any Relevant Personnel. Interference includes, but is not limited to, offering to increase the salary or improve the benefits of Relevant Personnel unless the offer is part of a company-wide increase in salary or benefits that was announced prior to November 11, 2019, or has been approved by the United States, in its sole discretion. Defendants’ obligations under this Paragraph IV.I.4. will expire six months after the divestiture of the Divestiture Assets pursuant to this Final Judgment. 5. For Relevant Personnel who elect employment with Acquirer within six months of the date on which the Divestiture Assets are divested to Acquirer, Defendants must waive all non-compete and nondisclosure agreements, vest all unvested pension and other equity rights, and provide all benefits that those Relevant Personnel otherwise would have been provided had the Relevant Personnel continued employment with Defendants, including, but not limited to, any retention bonuses or payments. Defendants may maintain reasonable restrictions on disclosure by Relevant Personnel of Defendants’ proprietary nonpublic information that is unrelated to the Divestiture Assets and not otherwise required to be disclosed by this Final Judgment. 6. For a period of 12 months from the date on which the Divestiture Assets are divested to Acquirer, Defendants may not solicit to rehire Relevant Personnel who were hired by Acquirer within six months of the date on which the Divestiture Assets are divested to Acquirer unless (a) an individual is terminated or laid off by Acquirer or (b) Acquirer agrees in writing that Defendants may solicit to rehire that individual. Nothing in this Paragraph IV.I.6. prohibits Defendants from advertising employment openings using general solicitations or advertisements and rehiring Relevant Personnel who apply for an employment opening through a general solicitation or advertisement. J. Defendants must warrant to Acquirer that the New Kona Brewery will be operational and without material defect upon the date of New Brewery Completion. K. Defendants must warrant to Acquirer that (1) except as provided in Paragraph IV.J. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 68923 above, the Divestiture Assets will be operational and without material defect on the date of their transfer to Acquirer; (2) there are no material defects in the environmental, zoning, or other permits pertaining to the operation of the Divestiture Assets; and (3) Defendants have disclosed all encumbrances on any part of the Divestiture Assets, including on intangible property. Following the sale of the Divestiture Assets, Defendants must not undertake, directly or indirectly, challenges to the environmental, zoning, or other permits pertaining to the operation of the Divestiture Assets. L. Defendants must assign, subcontract, or otherwise transfer all contracts, agreements, and customer relationships (or portions of such contracts, agreements, and customer relationships) included in the Divestiture Assets, including all supply and sales contracts, to Acquirer; provided, however, that for any contract or agreement that requires the consent of another party to assign, subcontract, or otherwise transfer, Defendants must use best efforts to accomplish the assignment, subcontracting, or transfer. Defendants must not interfere with any negotiations between Acquirer and a contracting party. M. Defendants must make best efforts to assist Acquirer to obtain all necessary licenses, registrations, and permits to operate Kona Hawaii, including, but not limited to, the New Kona Brewery. Until Acquirer obtains the necessary licenses, registrations, and permits, Defendants must provide Acquirer with the benefit of Defendants’ licenses, registrations, and permits to the full extent permissible by law. N. At the option of Acquirer, and subject to approval by the United States in its sole discretion, on or before the date on which the Divestiture Assets are divested to Acquirer, Defendants must enter into a non-exclusive supply contract or contracts for the production, packaging, and delivery of Beer sufficient to meet Acquirer’s needs, as determined by Acquirer, for a period of up to three years, on terms and conditions reasonably related to market conditions for the production, packaging, and delivery of Beer. All amendments to or modifications of any provision of any such supply contract are subject to approval by the United States, in its sole discretion. If the Acquirer is PV Brewing, the Acquirer, in its sole discretion, may renew any such supply contract for two one-year periods. For any Acquirer that is not PV Brewing, the United States, in its sole discretion, may approve one or more extensions of any such supply contract, for a total of up to an additional two years. If Acquirer seeks an extension of the term of any supply contract, Defendants must notify the United States in writing at least two months prior to the date the supply contract expires. O. At the option of Acquirer, and subject to approval by the United States in its sole discretion, on or before the date on which the Divestiture Assets are divested to Acquirer, the Hawaii WOD must enter into a distribution agreement for distribution of Beer in the State of Hawaii sufficient to meet Acquirer’s needs, as determined by Acquirer, for a term determined by Acquirer, on terms E:\FR\FM\30OCN1.SGM 30OCN1 68924 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES and conditions reasonably related to market conditions for the distribution of Beer in the State of Hawaii. Beginning one year after the effective date of such distribution agreement, Acquirer shall have the right, upon 60 days’ written notice to the Hawaii WOD, to terminate without cause that distribution agreement. All amendments to or modifications of any provision of such distribution agreement are subject to approval by the United States, in its sole discretion. P. At the option of Acquirer, and subject to approval by the United States in its sole discretion, on or before the date on which the Divestiture Assets are divested to Acquirer, Defendants must enter into a contract to provide transition services for finance and accounting services, human resources services, supply and procurement services, brewpub consulting, on-island merchandising, brewing engineering, and information technology services and support, for a period of up to 18 months on terms and conditions reasonably related to market conditions for the provision of the transition services. Any amendments to or modifications of any provision of a contract to provide transition services are subject to approval by the United States, in its sole discretion. Acquirer may terminate a transition services agreement, or any portion of a transition services agreement, without cost or penalty at any time upon commercially reasonable notice. The employee(s) of Defendants tasked with providing transition services must not share any competitively sensitive information of Acquirer with any other employee of Defendants. Q. If any term of an agreement between Defendants and Acquirer, including, but not limited to, an agreement to effectuate the divestiture required by this Final Judgment, varies from a term of this Final Judgment, to the extent that Defendants cannot fully comply with both, this Final Judgment determines Defendants’ obligations. V. APPOINTMENT OF DIVESTITURE TRUSTEE A. If Defendants have not divested the Divestiture Assets within the period specified in Paragraph IV.A., Defendants must immediately notify the United States of that fact in writing. Upon application of the United States, which Defendants may not oppose, the Court will appoint a divestiture trustee selected by the United States and approved by the Court to effect the divestiture of the Divestiture Assets. B. After the appointment of a divestiture trustee by the Court, only the divestiture trustee will have the right to sell the Divestiture Assets. The divestiture trustee will have the power and authority to accomplish the divestiture to an Acquirer acceptable to the United States, in its sole discretion, at a price and on terms as are then obtainable upon reasonable effort by the divestiture trustee, subject to the provisions of Sections IV, V, and VI of this Final Judgment, and will have other powers as the Court deems appropriate. The divestiture trustee must sell the Divestiture Assets as quickly as possible. VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 C. Defendants may not object to a sale by the divestiture trustee on any ground other than malfeasance by the divestiture trustee. Objections by Defendants must be conveyed in writing to the United States and the divestiture trustee within 10 calendar days after the divestiture trustee has provided the notice of proposed divestiture required under Section VI. D. The divestiture trustee will serve at the cost and expense of Defendants pursuant to a written agreement, on terms and conditions, including confidentiality requirements and conflict of interest certifications, that are approved by the United States. E. The divestiture trustee may hire at the cost and expense of Defendants any agents or consultants, including, but not limited to, investment bankers, attorneys, and accountants, that are reasonably necessary in the divestiture trustee’s judgment to assist with the divestiture trustee’s duties. These agents or consultants will be accountable solely to the divestiture trustee and will serve on terms and conditions, including terms and conditions governing confidentiality requirements and conflict-of-interest certifications, that are approved by the United States in its sole discretion. F. The compensation of the divestiture trustee and agents or consultants hired by the divestiture trustee must be reasonable in light of the value of the Divestiture Assets and based on a fee arrangement that provides the divestiture trustee with incentives based on the price and terms of the divestiture and the speed with which it is accomplished. If the divestiture trustee and Defendants are unable to reach agreement on the divestiture trustee’s compensation or other terms and conditions of engagement within 14 calendar days of the appointment of the divestiture trustee by the Court, the United States may, in its sole discretion, take appropriate action, including by making a recommendation to the Court. Within three business days of hiring an agent or consultant, the divestiture trustee must provide written notice of the hiring and rate of compensation to Defendants and the United States. G. The divestiture trustee must account for all monies derived from the sale of the Divestiture Assets sold by the divestiture trustee and all costs and expenses incurred. Within 30 calendar days of the date of the sale of the Divestiture Assets, the divestiture trustee must submit that accounting to the Court for approval. After approval by the Court of the divestiture trustee’s accounting, including fees for unpaid services and those of agents or consultants hired by the divestiture trustee, all remaining money must be paid to Defendants and the trust will then be terminated. H. Defendants must use their best efforts to assist the divestiture trustee to accomplish the required divestiture. Subject to reasonable protection for trade secrets, other confidential research, development, or commercial information, or any applicable privileges, Defendants must provide the divestiture trustee and agents or consultants retained by the divestiture trustee with full and complete access to all personnel, books, records, and facilities of the Divestiture PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 Assets. Defendants also must provide or develop financial and other information relevant to the Divestiture Assets that the divestiture trustee may reasonably request. Defendants may not take any action to interfere with or to impede the divestiture trustee’s accomplishment of the divestiture. I. The divestiture trustee must maintain complete records of all efforts made to sell the Divestiture Assets, including by filing monthly reports with the United States setting forth the divestiture trustee’s efforts to accomplish the divestiture ordered by this Final Judgment. The reports must include the name, address, and telephone number of each person who, during the preceding month, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring any interest in the Divestiture Assets and must describe in detail each contact with any such person. J. If the divestiture trustee has not accomplished the divestiture ordered by this Final Judgment within six months of appointment, the divestiture trustee must promptly provide the United States with a report setting forth: (1) the divestiture trustee’s efforts to accomplish the required divestiture; (2) the reasons, in the divestiture trustee’s judgment, why the required divestiture has not been accomplished; and (3) the divestiture trustee’s recommendations for completing the divestiture. Following receipt of that report, the United States may make additional recommendations consistent with the purpose of the trust to the Court. The Court thereafter may enter such orders as it deems appropriate to carry out the purpose of this Final Judgment, which may include extending the trust and the term of the divestiture trustee’s appointment by a period requested by the United States. K. The divestiture trustee will serve until divestiture of all Divestiture Assets is completed or for a term otherwise ordered by the Court. L. If the United States determines that the divestiture trustee is not acting diligently or in a reasonably cost-effective manner, the United States may recommend that the Court appoint a substitute divestiture trustee. VI. NOTICE OF PROPOSED DIVESTITURE A. Within two business days following execution of a definitive divestiture agreement, Defendants or the divestiture trustee, whichever is then responsible for effecting the divestiture, must notify the United States of a proposed divestiture required by this Final Judgment. If the divestiture trustee is responsible for completing the divestiture, the divestiture trustee also must notify Defendants. The notice must set forth the details of the proposed divestiture and list the name, address, and telephone number of each person not previously identified who offered or expressed an interest in or desire to acquire any ownership interest in the Divestiture Assets. B. Within 15 calendar days of receipt by the United States of this notice, the United States may request from Defendants, the proposed Acquirer, other third parties, or the divestiture trustee additional information E:\FR\FM\30OCN1.SGM 30OCN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices concerning the proposed divestiture, the proposed Acquirer, and other prospective Acquirers. Defendants and the divestiture trustee must furnish the additional information requested within 15 calendar days of the receipt of the request unless the United States provides written agreement to a different period. C. Within 45 calendar days after receipt of the notice required by Paragraph VI.A. or within 20 calendar days after the United States has been provided the additional information requested pursuant to Paragraph VI.B., whichever is later, the United States will provide written notice to Defendants and any divestiture trustee that states whether or not the United States, in its sole discretion, objects to Acquirer or any other aspect of the proposed divestiture. Without written notice that the United States does not object, a divestiture may not be consummated. If the United States provides written notice that it does not object, the divestiture may be consummated, subject only to Defendants’ limited right to object to the sale under Paragraph V.C. of this Final Judgment. Upon objection by Defendants pursuant to Paragraph V.C., a divestiture by the divestiture trustee may not be consummated unless approved by the Court. D. No information or documents obtained pursuant to this Section VI may be divulged by the United States to any person other than an authorized representative of the executive branch of the United States, except in the course of legal proceedings to which the United States is a party, including grand-jury proceedings, for the purpose of evaluating a proposed Acquirer or securing compliance with this Final Judgment, or as otherwise required by law. E. In the event of a request by a third party for disclosure of information under the Freedom of Information Act, 5 U.S.C. § 552, the Antitrust Division will act in accordance with that statute, and the Department of Justice regulations at 28 C.F.R. part 16, including the provision on confidential commercial information, at 28 C.F.R. § 16.7. Persons submitting information to the Antitrust Division should designate the confidential commercial information portions of all applicable documents and information under 28 C.F.R. § 16.7. Designations of confidentiality expire ten years after submission, ‘‘unless the submitter requests and provides justification for a longer designation period.’’ See 28 C.F.R. § 16.7(b). F. If at the time that a person furnishes information or documents to the United States pursuant to this Section VI, that person represents and identifies in writing information or documents for which a claim of protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure, and marks each pertinent page of such material, ‘‘Subject to claim of protection under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,’’ the United States must give that person ten calendar days’ notice before divulging the material in any legal proceeding (other than a grand-jury proceeding). VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 VII. FINANCING Defendants may not finance all or any part of Acquirer’s purchase of all or part of the Divestiture Assets made pursuant to this Final Judgment. VIII. ASSET PRESERVATION AND HOLD SEPARATE OBLIGATIONS Until the divestiture required by this Final Judgment has been accomplished, Defendants must take all steps necessary to comply with the Asset Preservation and Hold Separate Stipulation and Order entered by the Court. Defendants must take no action that would jeopardize the divestiture ordered by the Court. IX. AFFIDAVITS A. Within 20 calendar days of the filing of the Complaint in this matter, and every 30 calendar days thereafter until the divestiture required by this Final Judgment has been completed, Defendants each must deliver to the United States an affidavit, signed by AB Companies’ and CBA’s Chief Financial Officer and General Counsel, respectively, describing the fact and manner of Defendants’ compliance with this Final Judgment. The United States, in its sole discretion, may approve different signatories for the affidavits. B. Each affidavit must include: (1) the name, address, and telephone number of each person who, during the preceding 30 calendar days, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring, an interest in the Divestiture Assets and describe in detail each contact with such persons during that period; (2) a description of the efforts Defendants have taken to solicit buyers for and complete the sale of the Divestiture Assets and to provide required information to prospective Acquirers; and (3) a description of any limitations placed by Defendants on information provided to prospective Acquirers. Objection by the United States to information provided by Defendants to prospective Acquirers must be made within 14 calendar days of receipt of the affidavit, except that the United States may object at any time if the information set forth in the affidavit is not true or complete. C. Defendants must keep all records of any efforts made to divest the Divestiture Assets until one year after the divestiture has been completed. D. Within 20 calendar days of the filing of the Complaint in this matter, Defendants also must each deliver to the United States an affidavit signed by AB Companies’ and CBA’s Chief Financial Officer and General Counsel, respectively, that describes in reasonable detail all actions Defendants have taken and all steps Defendants have implemented on an ongoing basis to comply with Section VIII of this Final Judgment. The United States, in its sole discretion, may approve different signatories for the affidavits. E. If Defendants make any changes to the efforts and actions outlined in any earlier affidavits provided pursuant to Paragraph IX.D., Defendants must, within 15 calendar days after any change is implemented, deliver to the United States an affidavit describing those changes. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 68925 F. Defendants must keep all records of any efforts made to preserve the Divestiture Assets until one year after the divestiture has been completed. G. Within 15 calendar days after New Brewery Completion, Defendants also must each deliver to the United States an affidavit, signed by AB Companies’ Chief Financial Officer and General Counsel and CBA’s Chief Operating Officer and General Counsel, respectively, describing the fact and manner of Defendants’ compliance with (1) New Brewery Completion, and (2) satisfaction of the warranty to Acquirer under Paragraph IV.J., including that the New Kona Brewery is operational and without material defect on the date of New Brewery Completion. The United States, in its sole discretion, may approve different signatories for this affidavit. X. COMPLIANCE INSPECTION A. For the purposes of determining or securing compliance with this Final Judgment or of related orders such as the Asset Preservation and Hold Separate Stipulation and Order or of determining whether this Final Judgment should be modified or vacated, upon written request of an authorized representative of the Assistant Attorney General for the Antitrust Division, and reasonable notice to Defendants, Defendants must permit, from time to time and subject to legally recognized privileges, authorized representatives, including agents retained by the United States: (1) to have access during Defendants’ office hours to inspect and copy, or at the option of the United States, to require Defendants to provide electronic copies of all books, ledgers, accounts, records, data, and documents in the possession, custody, or control of Defendants relating to any matters contained in this Final Judgment; and (2) to interview, either informally or on the record, Defendants’ officers, employees, or agents, who may have their individual counsel present, regarding such matters. The interviews must be subject to the reasonable convenience of the interviewee and without restraint or interference by Defendants. B. Upon the written request of an authorized representative of the Assistant Attorney General for the Antitrust Division, Defendants must submit written reports or respond to written interrogatories, under oath if requested, relating to any of the matters contained in this Final Judgment. C. No information or documents obtained pursuant to this Section X may be divulged by the United States to any person other than an authorized representative of the executive branch of the United States, except in the course of legal proceedings to which the United States is a party, including grand jury proceedings, for the purpose of securing compliance with this Final Judgment, or as otherwise required by law. D. In the event of a request by a third party for disclosure of information under the Freedom of Information Act, 5 U.S.C. § 552, the Antitrust Division will act in accordance with that statute, and the Department of Justice regulations at 28 C.F.R. part 16, E:\FR\FM\30OCN1.SGM 30OCN1 68926 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES including the provision on confidential commercial information, at 28 C.F.R. § 16.7. Defendants submitting information to the Antitrust Division should designate the confidential commercial information portions of all applicable documents and information under 28 C.F.R. § 16.7. Designations of confidentiality expire ten years after submission, ‘‘unless the submitter requests and provides justification for a longer designation period.’’ See 28 C.F.R. § 16.7(b). E. If at the time that Defendants furnish information or documents to the United States pursuant to this Section X, Defendants represent and identify in writing information or documents for which a claim of protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure, and Defendants mark each pertinent page of such material, ‘‘Subject to claim of protection under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,’’ the United States must give Defendants ten (10) calendar days’ notice before divulging the material in any legal proceeding (other than a grand jury proceeding). XI. NOTIFICATION A. Unless a transaction is otherwise subject to the reporting and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a (the ‘‘HSR Act’’), Defendants may not, without first providing at least thirty (30) calendar days advance notification to the United States, directly or indirectly acquire or license a Covered Interest in or from a Covered Entity. B. Defendants must provide the notification required by this Section XI in the same format as, and in accordance with the instructions relating to, the Notification and Report Form set forth in the Appendix to Part 803 of Title 16 of the Code of Federal Regulations, as amended, except that the information requested in Items 5 through 8 of the instructions must be provided only about the brewing, developing, packaging, importing, distributing, marketing, promoting, or selling of Beer in the State of Hawaii. C. Notification must be provided at least 30 calendar days before acquiring any assets or interest, and must include, beyond the information required by the instructions, the names of the principal representatives who negotiated the transaction on behalf of each party, and all management or strategic plans discussing the proposed transaction. If, within the 30 calendar days following notification, representatives of the United States make a written request for additional information, Defendants may not consummate the proposed transaction until 30 calendar days after submitting all requested information. D. Early termination of the waiting periods set forth in this Section XI may be requested and, where appropriate, granted in the same manner as is applicable under the requirements and provisions of the HSR Act and rules promulgated thereunder. This Section XI must be broadly construed, and any ambiguity or uncertainty regarding whether to file a notice under this Section XI should be resolved in favor of filing notice. VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 XII. NO REACQUISITION Defendants may not reacquire any part of or any interest in the Divestiture Assets during the term of this Final Judgment. XIII. RETENTION OF JURISDICTION The Court retains jurisdiction to enable any party to this Final Judgment to apply to the Court at any time for further orders and directions as may be necessary or appropriate to carry out or construe this Final Judgment, to modify any of its provisions, to enforce compliance, and to punish violations of its provisions. XIV. ENFORCEMENT OF FINAL JUDGMENT A. The United States retains and reserves all rights to enforce the provisions of this Final Judgment, including the right to seek an order of contempt from the Court. Defendants agree that in a civil contempt action, a motion to show cause, or a similar action brought by the United States regarding an alleged violation of this Final Judgment, the United States may establish a violation of this Final Judgment and the appropriateness of a remedy therefor by a preponderance of the evidence, and Defendants waive any argument that a different standard of proof should apply. B. This Final Judgment should be interpreted to give full effect to the procompetitive purposes of the antitrust laws and to restore the competition the United States alleged was harmed by the challenged conduct. Defendants agree that they may be held in contempt of, and that the Court may enforce, any provision of this Final Judgment that, as interpreted by the Court in light of these procompetitive principles and applying ordinary tools of interpretation, is stated specifically and in reasonable detail, whether or not it is clear and unambiguous on its face. In any such interpretation, the terms of this Final Judgment should not be construed against either party as the drafter. C. In an enforcement proceeding in which the Court finds that Defendants have violated this Final Judgment, the United States may apply to the Court for a one-time extension of this Final Judgment, together with other relief that may be appropriate. In connection with a successful effort by the United States to enforce this Final Judgment against a Defendant, whether litigated or resolved before litigation, that Defendant agrees to reimburse the United States for the fees and expenses of its attorneys, as well as all other costs including experts’ fees, incurred in connection with that enforcement effort, including in the investigation of the potential violation. D. For a period of four years following the expiration of this Final Judgment, if the United States has evidence that a Defendant violated this Final Judgment before it expired, the United States may file an action against that Defendant in this Court requesting that the Court order: (1) Defendant to comply with the terms of this Final Judgment for an additional term of at least four years following the filing of the enforcement action; (2) all appropriate contempt remedies; (3) additional relief needed to ensure the Defendant complies PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 with the terms of this Final Judgment; and (4) fees or expenses as called for by this Section XIV. XV. EXPIRATION OF FINAL JUDGMENT Unless the Court grants an extension, this Final Judgment will expire 10 years from the date of its entry , except that after five years from the date of its entry, this Final Judgment may be terminated upon notice by the United States to the Court and Defendants that the divestiture has been completed and the continuation of this Final Judgment is no longer necessary or in the public interest. XVI. PUBLIC INTEREST DETERMINATION Entry of this Final Judgment is in the public interest. The parties have complied with the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16, including by making available to the public copies of this Final Judgment and the Competitive Impact Statement, public comments thereon, and the United States’ response to comments. Based upon the record before the Court, which includes the Competitive Impact Statement and any comments and response to comments filed with the Court, entry of this Final Judgment is in the public interest. Date: llllllllllllllllll [Court Approval Subject to Procedures of Antitrust Procedures and Penalties Act, 15 U.S.C. § 16] lllllllllllllllllllll United States District Judge UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI EASTERN DIVISION United States of America, Plaintiff, v. Anheuser-Busch INBEV SA/NV, AnheuserBusch Companies, LLC, and Craft Brew Alliance, Inc., Defendants. Civil Action No.: 4:20–cv–01282–SRC Judge Stephen R. Clark COMPETITIVE IMPACT STATEMENT The United States of America, under Section 2(b) of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16(b)–(h) (the ‘‘APPA’’ or ‘‘Tunney Act’’), files this Competitive Impact Statement relating to the proposed Final Judgment submitted for entry in this civil antitrust proceeding. I. NATURE AND PURPOSE OF THE PROCEEDING On November 11, 2019, Defendant Anheuser-Busch Companies, LLC (‘‘AB Companies’’), a minority shareholder in Defendant Craft Brew Alliance, Inc. (‘‘CBA’’), agreed to acquire all of CBA’s remaining shares in a transaction valued at approximately $220 million. AB Companies is a wholly-owned subsidiary of Defendant Anheuser-Busch InBev SA/NV (‘‘ABI’’). The United States filed a civil antitrust Complaint on September 18, 2020, seeking to enjoin the proposed acquisition. See Dkt. No. 1. The Complaint alleges that the proposed acquisition would likely eliminate important head-to-head competition in the state of Hawaii between ABI’s beer brands and CBA’s beer brands, particularly CBA’s Kona brand. E:\FR\FM\30OCN1.SGM 30OCN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices The Complaint alleges that the acquisition would also likely facilitate price coordination. This likely reduction in competition would result in increased prices and reduced innovation for beer consumers in Hawaii. The Complaint thus alleges that the likely effect of this acquisition would be to substantially lessen competition for beer in the state of Hawaii in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. At the same time the Complaint was filed, the United States filed an Asset Preservation and Hold Separate Stipulation and Order (‘‘Stipulation and Order’’) and proposed Final Judgment, which are designed to address the anticompetitive effects alleged in the Complaint. See Dkt. No. 2. On September 25, 2020, the Court entered the Stipulation and Order. See Dkt. No. 14. Under the proposed Final Judgment, which is explained more fully below, Defendants are required to divest Kona Brewery, LLC (‘‘Kona Hawaii’’), which houses CBA’s entire Kona brand business in the state of Hawaii, as well as other related tangible and intangible assets. Kona Hawaii competes in the brewing, developing, packaging, importing, distributing, marketing, promoting, and selling of Beer 1 in the state of Hawaii. Its assets include a restaurant, brewery and brewpub, and a new brewery that is currently under construction and scheduled to become operational in the next few months. As part of the divestiture, Defendants are required to provide an exclusive and perpetual license to all intellectual property used or held for use in connection with the brewing, developing, packaging, importing, distributing, marketing, promoting, or selling of Kona products in Hawaii, including the ‘‘Kona’’ brand name. Because the competitive harm alleged in the Complaint is centered in the state of Hawaii, the proposed remedy is also centered in the state of Hawaii. The United States has approved PV Brewing Partners, LLC (‘‘PV Brewing’’), as the acquirer. Under the terms of the Stipulation and Order, until the divestiture required by the proposed Final Judgment was accomplished, Defendants were required to take certain steps to ensure that Kona Hawaii was operated as a competitively independent, economically viable, and ongoing business concern, that remained independent and uninfluenced by Defendants, and that competition was maintained during the pendency of the required divestiture. The required divestiture to PV Brewing occurred on October 6, 2020, as permitted under the terms of the Stipulation and Order, which was entered by the Court on September 25, 2020 (see Dkt. No. 14). The United States and Defendants have stipulated that the proposed Final Judgment may be entered after compliance with the APPA. Entry of the proposed Final Judgment will terminate this action, except that the Court will retain jurisdiction to construe, modify, or enforce the provisions of the 1 In this Competitive Impact Statement, the term ‘‘Beer,’’ when capitalized within a sentence, has the same definition as set forth in the proposed Final Judgment at Paragraph II.J. Section III, infra, at pgs. 11–12, explains the difference between the terms beer and ‘‘Beer.’’ VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 proposed Final Judgment and to punish violations thereof. II. DESCRIPTION OF EVENTS GIVING RISE TO THE ALLEGED VIOLATION A. The Defendants and the Proposed Transaction ABI is a corporation organized and existing under the laws of Belgium, with its headquarters in Leuven, Belgium. ABI owns numerous major beer brands sold in the United States, including in Hawaii. These brands include Bud Light, Budweiser, Busch Light, Natural Light, Michelob Ultra, Stella Artois, and Golden Road. AB Companies is a wholly-owned subsidiary of ABI and a Delaware limited liability company with its headquarters in St. Louis, Missouri. CBA is a corporation organized and existing under the laws of Washington, with its headquarters in Portland, Oregon. CBA owns several beer brands sold in the United States, including Widmer Brothers, Omission, Redhook, and Kona, a brand that originated in Hawaii and is especially popular in that state. ABI, through its wholly-owned subsidiary AB Companies, currently holds approximately 31% of CBA’s outstanding shares, delivers CBA beer brands to wholesalers throughout the United States, and has a contract with CBA to brew some CBA beer brands at ABI breweries. ABI also has the right to appoint two of the eight seats on CBA’s Board of Directors. On November 11, 2019, AB Companies agreed to acquire all of CBA’s outstanding shares in a transaction valued at approximately $220 million. B. Beer Segments and Pricing Beer brands sold in Hawaii, like those sold in the United States in general, are often segmented based on price and quality. ABI currently groups beer into five segments: value, core, core-plus, premium, and superpremium (listed in order of increasing price and quality). ABI owns beer brands in each beer segment in Hawaii: value (where its brands include Busch Light and Natural Light), core (where its brands include Bud Light and Budweiser), core-plus (where its brands include Michelob Ultra and Bud Light Lime), premium (where its brands include Michelob Ultra Pure Gold), and superpremium (where its brands include Stella Artois and Golden Road). CBA’s Kona brand is generally considered a premium beer. As the Complaint alleges, beer consumers may ‘‘trade up’’ or ‘‘trade down’’ between segments in response to changes in price. For example, as the prices of core-plus brands approach the prices of premium brands, consumers are increasingly willing to ‘‘trade up’’ from core-plus brands to premium brands. Therefore, the Complaint alleges that the competition provided by CBA’s Kona in the premium segment serves as an important constraint on the ability of ABI to raise its beer prices not only in the premium segment, but also in core-plus and other beer segments. C. The Competitive Effects of the Transaction on the Market for Beer in the State of Hawaii ABI is a global brewing company with the largest beer sales worldwide and in the PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 68927 United States, including in the state of Hawaii. CBA is a national brewing company with the fifth-largest beer sales in Hawaii. As measured by 2019 revenue, ABI accounts for approximately 28% of all beer sales in Hawaii, and CBA accounts for approximately 13% of all beer sales in Hawaii, of which its Kona brand constitutes the vast majority.2 ABI’s proposed acquisition of CBA would give ABI 100% ownership of CBA, resulting in ABI’s total control over all aspects of CBA’s competitive decision-making, including pricing, marketing, and promotions. As a result, the Complaint alleges that the transaction would likely eliminate important head-to-head competition between ABI and CBA in Hawaii, and would likely facilitate price coordination following the transaction. The Complaint alleges that this likely reduction in competition would result in increased prices and reduced innovation for beer consumers in Hawaii. 1. The Relevant Market The Complaint alleges that the relevant product market for analyzing the effects of the proposed acquisition is beer. Beer is usually made from a malted cereal grain, flavored with hops, and brewed via a fermentation process. It is packaged in cans, bottles, and kegs (draft beer). Beer’s taste, alcohol content, image (e.g., marketing and consumer perception), price, and other factors make it substantially different from other alcoholic beverages. The Complaint alleges that other alcoholic beverages, such as wine and distilled spirits, are not reasonable substitutes for beer that would discipline a small but significant and non-transitory increase in the price of beer (e.g., five percent), and relatively few consumers would substantially reduce their beer purchases or turn to alternatives in the event of such a price increase. Therefore, the Complaint alleges that a hypothetical monopolist producer of beer likely would increase its prices by at least a small but significant and non-transitory amount. See U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines § 4.1.1 (revised Aug. 19, 2010) (‘‘Merger Guidelines’’), https://www.justice.gov/atr/horizontalmerger-guidelines-08192010. The Complaint alleges that the relevant geographic market for analyzing the effects of the proposed acquisition is no larger than the state of Hawaii. The relevant geographic market is best defined by the locations of the customers who purchase beer, rather than by the locations of breweries that produce beer. Brewers develop pricing and promotional strategies based on an assessment of local demand for their beer, local competitive conditions, and the local strength of different beer brands. Consumers buy beer near their homes and typically do not travel great distances to buy beer even when prices rise. Consumers in Hawaii are particularly unlikely to travel outside the state to buy beer. For these reasons, the Complaint alleges that a hypothetical monopolist producer of 2 Market share calculations are based on distributor sales in Hawaii. E:\FR\FM\30OCN1.SGM 30OCN1 68928 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices beer sold in Hawaii likely would find it profitable to increase its prices in that market by at least a small but significant and nontransitory amount because customers could not economically purchase their beer in more distant locations. Therefore, Hawaii is a relevant geographic market and ‘‘section of the country’’ within the meaning of Section 7 of the Clayton Act. Thus, the relevant market is beer in the state of Hawaii. jbell on DSKJLSW7X2PROD with NOTICES 2. The Transaction Would Increase Market Concentration Significantly The proposed acquisition would increase market concentration significantly for beer in the state of Hawaii. The Complaint alleges that ABI and CBA would have a combined share of approximately 41% in the relevant market following the transaction. Market concentration is often one useful indicator of the level of competitive vigor in a market and the likely competitive effects of a merger. The more concentrated a market, and the more a transaction would increase concentration in a market, the more likely it is that the transaction would result in harm to consumers by meaningfully reducing competition. Concentration in relevant markets is typically measured by the HerfindahlHirschman Index (‘‘HHI’’). Markets in which the HHI is between 1,500 and 2,500 are considered moderately concentrated. Mergers that increase the HHI by more than 100 points and result in a moderately concentrated market potentially raise significant competitive concerns. See Merger Guidelines § 5.3. ABI’s proposed acquisition of CBA would result in a moderately concentrated market with a post-acquisition HHI of nearly 2,500 points, just below the threshold denoting a highly concentrated market. Moreover, the HHI would increase as a result of the transaction by more than 700 points. These HHI measures potentially raise significant competitive concerns. See Merger Guidelines § 5.3. As the Complaint alleges, these concentration measures likely understate the extent to which the transaction would result in anticompetitive effects such as higher prices and less innovation in the relevant market. As explained in Section II.C.4. below, the Complaint alleges that the market for beer in Hawaii shows signs of vulnerability to coordinated conduct, and the transaction is likely to enhance that vulnerability. Those conditions make the transaction more likely to raise significant competitive concerns than the measures of concentration alone would indicate. See Merger Guidelines § 7.1. 3. ABI’s Acquisition of CBA Would Eliminate Head-to-Head Competition Between ABI and CBA The Complaint alleges that ABI and CBA compete directly against each other in Hawaii. In that state, CBA’s Kona brand competes closely with ABI’s Stella Artois and Michelob Ultra brands, and also competes with ABI’s Bud Light and Budweiser brands. Recent developments and product innovations have further enhanced the degree of competition between ABI and CBA. VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 For example, CBA recently introduced Kona Light, a lower calorie brand similar to ABI’s low-calorie offerings like Michelob Ultra and Bud Light. CBA’s share of the beer market in Hawaii has been among the fastest growing in the state over the past seven years. The Complaint thus alleges that ABI’s proposed acquisition of CBA likely would substantially lessen this current head-to-head competition between ABI and CBA in Hawaii, in violation of Section 7 of the Clayton Act. Moreover, competition between ABI and CBA in Hawaii is poised to increase in the future. The Complaint alleges that CBA is investing in its business in Hawaii, and it has plans to grow its share of beer volume sold in Hawaii by about 25% by 2021. CBA is also constructing a new brewery in Hawaii that is scheduled to become operational in the next few months. As the Complaint alleges, ABI has plans to grow its share of beer in the premium segment. In recent years, consumer preferences have shifted toward the premium and super-premium segments. Because ABI’s positions in the value, core, and core-plus segments are stronger than its positions in the premium and super-premium segments, this trend toward the premium and superpremium segments has threatened ABI’s overall market share of beer and made ABI’s plans to expand its share of beer in the premium segment more urgent. These plans include the introduction of new premium brands and other brand innovations. CBA’s Kona brand is positioned as a premium beer in Hawaii. Therefore, ABI’s increased focus on the premium segment would increase competition with CBA’s Kona brand. For these reasons, the Complaint alleges that competition between ABI and CBA in Hawaii likely would grow significantly in the absence of the proposed acquisition. ABI’s acquisition of CBA, therefore, is likely to substantially lessen this future potential competition between ABI and CBA, also in violation of Section 7 of the Clayton Act. 4. ABI’s Acquisition of CBA Would Facilitate Price Coordination The Complaint alleges that ABI has historically employed a ‘‘price leadership’’ strategy throughout the United States, including in Hawaii. According to this strategy, ABI, with the largest beer sales in the United States and Hawaii, seeks to generate industry-wide price increases by pre-announcing its own price increases and purposefully making those price increases transparent to the market so its primary competitors are more likely to follow its lead. These announced price increases, which can vary by geography because of different competitive conditions, typically cover a broad range of beer brands and packages (e.g., container and size). After announcing price increases, ABI tracks the degree to which its primary competitors follow its price increases. Depending on the competitive response, ABI will either maintain, adjust, or rescind an announced price increase. The Complaint alleges that, for many years, Molson Coors Beverage Company (‘‘Molson Coors’’), the brewer with the second-largest beer sales in the United States and owner of many brands sold in Hawaii such as Miller PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 Lite, Coors Light, and Blue Moon, has followed ABI’s announced price increases in Hawaii to a significant degree. Molson Coors’s willingness to follow ABI’s announced price increases is constrained, however, by the diversion of sales to other competitors who are seeking to gain share, including CBA and its Kona brand. As alleged in the Complaint, by acquiring CBA, ABI would gain control over Kona’s pricing and would likely increase Kona’s price, thereby eliminating a significant constraint on Molson Coors’s willingness to follow ABI’s announced price increases in Hawaii. By reducing Kona’s constraint on Molson Coors’s willingness to increase prices, the acquisition likely increases the ability of ABI to facilitate price coordination, thereby resulting in higher prices for beer sold in Hawaii. For these reasons, the Complaint alleges that ABI’s acquisition of CBA likely would substantially lessen competition in Hawaii in violation of Section 7 of the Clayton Act. D. Difficulty of Entry or Expansion As alleged in the Complaint, new entry and expansion by competitors likely will neither be timely nor sufficient in scope to prevent the acquisition’s likely anticompetitive effects. Barriers to entry and expansion within the state of Hawaii include: (i) the significant time and expense required to build a brand’s reputation; (ii) the substantial sunk costs for promotional and advertising activity needed to secure the distribution and placement of a new entrant’s beer in retail outlets; (iii) the considerable time and cost of building new breweries and other facilities; and (iv) the difficulty of developing an effective network of beer distributors with incentives to promote and expand a new entrant’s sales. The Complaint also alleges that the anticompetitive effects of the proposed acquisition are not likely to be eliminated or mitigated by any efficiencies the proposed acquisition may achieve. III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT The divestiture required by the proposed Final Judgment will remedy the loss of competition alleged in the Complaint by establishing an independent and economically viable competitor in the market for beer in the state of Hawaii. As described in more detail below, the proposed Final Judgment requires Defendants, within 10 calendar days after the entry of the Stipulation and Order by the Court (to which the United States granted an extension of seven calendar days, see Dkt. No. 15), to divest Kona Hawaii, and all tangible and intangible assets related to or used in connection with the brewing, developing, packaging, importing, distributing, marketing, promoting, and selling of Beer in the state of Hawaii. The Stipulation and Order was entered by the Court on September 25, 2020 (see Dkt. No. 14), and the required divestiture to PV Brewing occurred on October 6, 2020. The divestiture assets also include an exclusive and perpetual license to Kona intellectual property, including the ‘‘Kona’’ brand name. The divestiture will E:\FR\FM\30OCN1.SGM 30OCN1 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices transfer to PV Brewing the brewing capacity, assets, and rights necessary to compete with ABI brands in Hawaii. In the proposed Final Judgment, ‘‘Beer’’ is defined to include not only brewed products made from malted cereal grain as beer is described in the Complaint, but also ‘‘fermented beverages, brewed or produced from malt, wholly or in part, or from rice, grain of any kind, bran, glucose, sugar, and molasses when such items are used as a substitute for malt, or from honey, fruit, fruit juice, fruit concentrate, herbs, spices, or other food materials’’ (excluding distilled alcoholic beverages and wine). This definition in the proposed Final Judgment is necessary because Kona Hawaii currently produces hard seltzer. To the extent PV Brewing produces hard seltzer or innovates other products that fall within the proposed Final Judgment’s definition of ‘‘Beer,’’ this broader definition will ensure that Defendants’ obligations under the proposed Final Judgment extend to those products (e.g., such products would be subject to a distribution agreement per Paragraph IV.O. of the proposed Final Judgment), thus further establishing PV Brewing as an independent and economically viable competitor in the state of Hawaii. jbell on DSKJLSW7X2PROD with NOTICES A. Divestiture Assets Paragraph IV.A. of the proposed Final Judgment requires Defendants to divest to PV Brewing the Divestiture Assets as defined in Paragraphs II.I.1–8 of the proposed Final Judgment. The Divestiture Assets will provide PV Brewing with the facilities, equipment, materials, and legal rights it needs to compete against Defendants and other brewers in Hawaii. 1. Kona Hawaii and the New Brewery The Divestiture Assets include Kona Hawaii (including its restaurant located in Honolulu, Hawaii, a brewery (with brewing capacity of 10,000 barrels) and brewpub located in Kailua-Kona, Hawaii, and a new brewery also located in Kailua-Kona, Hawaii, that is currently under construction), and all tangible and intangible assets, as described in Paragraphs II.I.1–8 of the proposed Final Judgment, related to or used in connection with Kona Hawaii. Kona Hawaii comprises CBA’s entire Kona brand business in the state of Hawaii. Kona Hawaii’s new brewery encompasses 30,000 square feet and is expected to have a brewing capacity of 100,000 barrels, along with canning operations. Once the new brewery is operational, PV Brewing will be able to brew beer and package beer in both kegs and cans for sale in Hawaii. Although ownership of the new brewery transferred to PV Brewing at the time of the divestiture, the new brewery is not yet fully constructed or capable of producing saleable beer. When fully operational, it is expected that the new brewery will produce enough beer to meet present demand for Kona beer packaged in cans and kegs for sale in Hawaii. Since the new brewery is not yet operational, the proposed Final Judgment requires Defendants to continue construction of the new brewery and to achieve a specific production milestone within 180 calendar VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 days after the Court’s entry of the Stipulation and Order. Specifically, under Paragraph IV.B. of the proposed Final Judgment, Defendants must achieve an average production capacity of 1,500 barrels of saleable Beer each calendar week for three consecutive calendar weeks at the new brewery within 180 calendar days after the Court’s entry of the Stipulation and Order. In addition, upon achieving this production milestone, under Paragraph IV.J. of the proposed Final Judgment, Defendants must warrant to PV Brewing that the new brewery is operational and without material defect. If Defendants fail to achieve this production milestone within the 180-day period, beginning on calendar day 181, Defendants shall pay to the United States $25,000 per day until they achieve the proposed Final Judgment’s production milestone. The payments beginning on day 181 are designed to incentivize Defendants to promptly satisfy this metric so that PV Brewing can start using the new brewery to brew Kona products for sale in Hawaii. Requiring Defendants to make incentive payments if they do not meet the proposed Final Judgment’s production milestone is appropriate under the specific set of facts presented here because, in order for PV Brewing to successfully replace CBA as a competitor independent of ABI, the new brewery must be operational soon after the divestiture so that PV Brewing can brew Kona products for sale in Hawaii. At PV Brewing’s option, the proposed Final Judgment requires Defendants to brew Konabranded products for PV Brewing while the new brewery is under construction. 2. Kona IP and Brand License The Divestiture Assets, as defined in Paragraphs II.I.1–8 of the proposed Final Judgment, also include an exclusive, irrevocable, fully paid-up, royalty-free, perpetual license to all intellectual property used or held for use in connection with the brewing, developing, packaging, importing, distributing, marketing, promoting, or selling of Kona products in Hawaii. This Kona license includes intellectual property connected to the ‘‘Kona’’ brand name (and all associated trademarks, service marks, and services names). The license applies to all products produced by Defendants using the ‘‘Kona’’ brand name at any time after November 11, 2019, and all products produced by PV Brewing using the ‘‘Kona’’ brand name at any time in the future. The proposed Final Judgment requires Defendants to license—rather than divest— the Kona intellectual property and brand name because Defendants retain the right to brew, market, and sell Kona-branded products outside of the state of Hawaii. With this license, PV Brewing will have the exclusive rights to brew, market, and sell Kona products in Hawaii, while Defendants will have those rights outside of Hawaii. For example, with this license, PV Brewing may innovate and develop new beer brand extensions or packages using the Kona brand name and sell them in Hawaii. In addition, at its option, PV Brewing may adopt and sell in Hawaii Kona-branded products that Defendants produce and sell outside of PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 68929 Hawaii. Under the proposed Final Judgment, the license extends beyond Beer. If, for example, PV Brewing wants to sell Konabranded T-shirts (as CBA does now) to help market and promote its new brewery (or sell Kona-branded salad dressing at its brewpub), it could do so using the license required by the proposed Final Judgment. The license thus allows PV Brewing to innovate and to adapt to changing market conditions in Hawaii to compete effectively against Defendants in the state of Hawaii. B. Supply, Distribution, and Transition Services Agreements As explained below, the proposed Final Judgment also contemplates PV Brewing, at its option, entering into a supply agreement, distribution agreement, and transition services agreement with Defendants to enable it to become an independent and economically viable competitor in the market for beer in the state of Hawaii. 1. Supply Agreement Until the new brewery in Hawaii is operational, PV Brewing will need to arrange for another brewer to brew its canned and keg beer in order to compete in Hawaii. In addition, CBA does not have the facilities in Hawaii to brew bottled beer; CBA currently brews, or ABI contract brews for CBA, bottled beer outside of Hawaii and ships it to Hawaii. Similarly, post-divestiture, PV Brewing will not have the facilities in Hawaii to brew bottled beer and will need to source bottled beer from outside of Hawaii, to the extent it continues selling bottled beer in Hawaii. Very little beer brewed in Hawaii is bottled in Hawaii because there are no glass beer bottles produced on the islands and importing empty glass bottles is prohibitively expensive. As a result, at PV Brewing’s option, Paragraph IV.N. of the proposed Final Judgment requires Defendants to enter into a non-exclusive supply contract for the production, packaging, and delivery of Beer sufficient to meet PV Brewing’s needs, as PV Brewing determines. The supply agreement may be for a period of up to three years and PV Brewing, in its sole discretion, may renew any such supply contract for two one-year periods. As described in the Complaint, ABI currently contract brews some CBA beer brands, including Kona beer (kegs, cans, and bottles) for CBA to sell in Hawaii. Defendants are thus already familiar with the recipes and brewing processes for Kona brands. Defendants can provide brewing capacity for canned and keg beer until the new brewery in Hawaii is able to produce saleable Beer, and can provide brewing capacity for bottled beer while PV Brewing considers other options. PV Brewing may contract with other brewers to brew its Beer for sale in Hawaii— in addition to or in lieu of a supply agreement with Defendants. PV Brewing need not purchase minimum or maximum volumes under the supply agreement with Defendants, meaning it can have Defendants brew as little or as much Beer as PV Brewing requires. These provisions give PV Brewing flexibility to source its Kona-branded E:\FR\FM\30OCN1.SGM 30OCN1 68930 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices products from Defendants or from one of several other mainland brewers that offer contract brewing services. This supply agreement is also time-limited to ensure that PV Brewing will become a fully independent competitor to Defendants. Lastly, to the extent PV Brewing or Defendants seek to amend or modify any supply agreement, the United States must approve any changes. jbell on DSKJLSW7X2PROD with NOTICES 2. Distribution Agreement Beer distributors play an important role in marketing and promoting beer with retailers to help grow beer sales. Thus, effective distribution is important for a brewer to be competitive in the beer industry. As described in the Complaint, ABI currently delivers CBA beer brands to distributors throughout the United States. AnheuserBusch Sales of Hawaii, Inc., which is AB Companies’ wholly-owned distributor in the state of Hawaii (‘‘Hawaii WOD’’), currently distributes Kona products, in addition to other CBA products, throughout the state of Hawaii. The Hawaii WOD is the secondlargest beer distributor in Hawaii. At PV Brewing’s option, Paragraph IV.O. of the proposed Final Judgment requires the Hawaii WOD to enter into a distribution agreement for distribution of PV Brewing’s Beer in the state of Hawaii sufficient to meet PV Brewing’s needs, as PV Brewing determines, and for a period of time as determined by PV Brewing. The proposed Final Judgment further requires that under such a distribution agreement, beginning one year after the agreement’s effective date, PV Brewing shall have the right, upon 60 days’ written notice to the Hawaii WOD, to terminate without cause the distribution agreement. The proposed Final Judgment thus enables PV Brewing, at its option, to remain with the Hawaii WOD, which has been distributing Kona products throughout the state of Hawaii for some time. It also provides a mechanism by which PV Brewing can terminate the distribution agreement without cause and move to another distributor in Hawaii. With the no-cause-termination provision, the Hawaii WOD will have the incentive to promote and sell Kona products in order to retain the profitable and popular Kona brands in its portfolio. If it fails to perform to PV Brewing’s satisfaction, PV Brewing can move its popular Kona products to another distributor in Hawaii. Lastly, as with the supply agreement, to the extent PV Brewing or Defendants seek to amend or modify any distribution agreement, the United States must approve any changes. 3. Transition Services Agreement At PV Brewing’s option, Paragraph IV.P. of the proposed Final Judgment requires Defendants to enter into a transition services agreement. Under such an agreement, Defendants will provide to PV Brewing transition services for finance and accounting services, human resources services, supply and procurement services, brewpub consulting, on-island merchandising, brewing engineering, and information technology services and support. Transition services as to brewing engineering are VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 particularly important to PV Brewing to ensure that it can run the new brewery and produce saleable Beer—which is critical to PV Brewing competing effectively in Hawaii. Any transition services agreement may last for a period of up to 18 months. PV Brewing may terminate such a transition services agreement (or any portion), without cost or penalty, at any time upon notice to Defendants. This paragraph further provides that employees of Defendants tasked with supporting any transition services agreement must not share any competitively sensitive information of PV Brewing with any other employees of Defendants. Any transition services agreement must be time-limited to incentivize PV Brewing to become a fully independent competitor of Defendants. Lastly, as with the supply and distribution agreements, to the extent PV Brewing or Defendants seek to amend or modify any transition services agreement, the United States must approve any changes. C. Other Provisions In order to preserve competition and facilitate the success of PV Brewing, the proposed Final Judgment contains additional obligations for Defendants. With the divestiture, PV Brewing will become the owner of Kona Hawaii, which employs personnel that currently operate Kona Hawaii’s restaurant and brewery and brewpub, and will also operate the new brewery that is currently under construction. Paragraph IV.I. of the proposed Final Judgment requires Defendants to cooperate with and assist PV Brewing to identify and hire all full-time, part-time, or contract employees of Kona Hawaii, wherever located, whose job responsibilities relate in any way to the brewing, developing, packaging, importing, distributing, marketing, promoting, or selling of Kona products in the state of Hawaii. In particular, the proposed Final Judgment requires that Defendants provide PV Brewing and the United States with organization charts and information relating to the employees and make employees available for interviews. It also provides that Defendants must not interfere with PV Brewing’s retention of those employees. For employees who elect to continue employment with Kona Hawaii, Defendants must waive all non-compete and non-disclosure agreements, vest all unvested pension and other equity rights, and provide all benefits that the employees would generally have been provided if the employees had continued employment with Defendants. In addition, Paragraph IV.I.6. further provides that the Defendants may not solicit to rehire any employee of Kona Hawaii who was hired by PV Brewing within six months of the divestiture, unless that individual is terminated or laid off by PV Brewing or PV Brewing agrees in writing that the Defendants may solicit to rehire that individual. The non-solicitation period runs for 12 months from the date of the divestiture. These provisions will help ensure that PV Brewing will be able to retain qualified employees for Kona Hawaii. Section XI of the proposed Final Judgment requires Defendants to notify the United PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 States in advance of executing certain transactions that would not otherwise be reportable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a (‘‘HSR Act’’). The transactions covered by these provisions include the acquisition or license of any interest in non-ABI Beer brewing or distribution assets or brands, excluding acquisitions of: (1) a Beer brewery or brand located outside of the state of Hawaii that does not generate at least $3.75 million in annual gross revenue from Beer sold for resale in the state of Hawaii; (2) distribution licenses for non-ABI Beer brands that do not generate at least $1 million in annual gross revenue in the state of Hawaii; and (3) Beer distributors that do not generate at least $1 million in annual gross revenue in the state of Hawaii. This provision significantly broadens Defendants’ pre-merger reporting requirements because the $1 million and $3.75 million threshold amounts are significantly lower than the HSR Act’s ‘‘size of the transaction’’ reporting threshold. Section XI will provide the United States with advance notice of, and an opportunity to evaluate, Defendants’ acquisition of both Beer distributors and Beer brewers in the state of Hawaii. Notification of distributor acquisitions in Hawaii allows the United States to evaluate changes to the Hawaii beer market, including potential implications for PV Brewing’s distribution agreement with Defendants. Similarly, notification of brewer acquisitions in Hawaii allows the United States to evaluate any acquisition by ABI of, among other things, craft breweries. ABI has acquired multiple craft breweries over the past several years; some of these acquisitions were not reportable under the HSR Act. Acquisitions of this nature, individually or collectively, have the potential to substantially lessen competition, and the proposed Final Judgment gives the United States an opportunity to evaluate such transactions in advance of their closing even if the purchase price is below the HSR Act’s thresholds.3 Paragraph XI.B. of the proposed Final Judgment requires Defendants to provide such notification to the Antitrust Division of the United States Department of Justice (‘‘Antitrust Division’’) in the same format as, and in accordance with the instructions relating to, the Notification and Report Form set forth in the Appendix to Part 803 of Title 16 of the Code of Federal Regulations, as amended. Pursuant to Paragraph XI.C. of the proposed Final Judgment, Defendants must provide such notification at least 30 calendar days prior to acquiring any such interest. If, within the 30-day period after notification, 3 The Division notes that similar notification obligations apply to ABI by virtue of the Modified Final Judgment in United States v. Anheuser-Busch InBev SA/NV, No. 1:16-cv-01483-EGS (D.D.C. 2016), which involved ABI’s prior transaction with brewer SABMiller. Under the ABI-SABMiller consent decree, ABI must provide notice of certain distributor and brewer transactions in the United States. The monetary thresholds are higher in the ABI-SABMiller consent decree than in the instant proposed Final Judgment, and the ABI-SABMiller consent decree is set to expire in 2026. E:\FR\FM\30OCN1.SGM 30OCN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices the Antitrust Division makes a written request for additional information, Defendants shall be precluded from consummating the proposed transaction or agreement until 30 calendar days after submitting all requested additional information. Early termination of these waiting periods may be requested and, where appropriate, granted in the same manner as is applicable under the requirements and provisions of the HSR Act and rules promulgated thereunder. Section XII of the proposed Final Judgment prevents Defendants from reacquiring any part of or interest in the Divestiture Assets during the term of the Final Judgment. Thus, ABI may not seek to reacquire the Kona brand in the state of Hawaii. Additionally, the proposed Final Judgment also contains provisions designed to promote compliance and make enforcement of the Final Judgment as effective as possible. Paragraph XIV.A. provides that the United States retains and reserves all rights to enforce the Final Judgment, including the right to seek an order of contempt from the Court. Under the terms of this paragraph, Defendants have agreed that in any civil contempt action, any motion to show cause, or any similar action brought by the United States regarding an alleged violation of the Final Judgment, the United States may establish the violation and the appropriateness of any remedy by a preponderance of the evidence and that Defendants have waived any argument that a different standard of proof should apply. This provision aligns the standard for compliance with the Final Judgment with the standard of proof that applies to the underlying offense that the Final Judgment addresses. Paragraph XIV.B. provides additional clarification regarding the interpretation of the provisions of the proposed Final Judgment. The proposed Final Judgment was drafted to restore competition the United States alleged would otherwise be harmed by the transaction. Defendants agree that they will abide by the proposed Final Judgment, and that they may be held in contempt of this Court for failing to comply with any provision of the proposed Final Judgment that is stated specifically and in reasonable detail, as interpreted in light of this procompetitive purpose. Paragraph XIV.C. of the proposed Final Judgment provides that if the Court finds in an enforcement proceeding that Defendants have violated the Final Judgment, the United States may apply to the Court for a one-time extension of the Final Judgment, together with such other relief as may be appropriate. In addition, to compensate American taxpayers for any costs associated with investigating and enforcing violations of the Final Judgment, Paragraph XIV.C. provides that in any successful effort by the United States to enforce the Final Judgment against a Defendant, whether litigated or resolved before litigation, that Defendants will reimburse the United States for attorneys’ fees, experts’ fees, and other costs incurred in connection with any effort to enforce the Final Judgment, including the investigation of the potential violation. VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 Paragraph XIV.D. states that the United States may file an action against a Defendant for violating the Final Judgment for up to four years after the Final Judgment has expired or been terminated. This provision is meant to address circumstances such as when evidence that a violation of the Final Judgment occurred during the term of the Final Judgment is not discovered until after the Final Judgment has expired or been terminated or when there is not sufficient time for the United States to complete an investigation of an alleged violation until after the Final Judgment has expired or been terminated. This provision, therefore, makes clear that, for four years after the Final Judgment has expired or been terminated, the United States may still challenge a violation that occurred during the term of the Final Judgment. Finally, Section XV of the proposed Final Judgment provides that the Final Judgment will expire ten years from the date of its entry, except that after five years from the date of its entry, the Final Judgment may be terminated upon notice by the United States to the Court and Defendants that the divestiture has been completed and that the continuation of the Final Judgment is no longer necessary or in the public interest. IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS Section 4 of the Clayton Act, 15 U.S.C. § 15, provides that any person who has been injured as a result of conduct prohibited by the antitrust laws may bring suit in federal court to recover three times the damages the person has suffered, as well as costs and reasonable attorneys’ fees. Entry of the proposed Final Judgment neither impairs nor assists the bringing of any private antitrust damage action. Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. § 16(a), the proposed Final Judgment has no prima facie effect in any subsequent private lawsuit that may be brought against Defendants. V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT The United States and Defendants have stipulated that the proposed Final Judgment may be entered by the Court after compliance with the provisions of the APPA, provided that the United States has not withdrawn its consent. The APPA conditions entry upon the Court’s determination that the proposed Final Judgment is in the public interest. The APPA provides a period of at least 60 days preceding the effective date of the proposed Final Judgment within which any person may submit to the United States written comments regarding the proposed Final Judgment. Any person who wishes to comment should do so within 60 days of the date of publication of this Competitive Impact Statement in the Federal Register, or the last date of publication in a newspaper of the summary of this Competitive Impact Statement, whichever is later. All comments received during this period will be considered by the U.S. Department of Justice, which remains free to withdraw its consent to the proposed Final Judgment at any time PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 68931 before the Court’s entry of the Final Judgment. The comments and the response of the United States will be filed with the Court. In addition, comments will be posted on the U.S. Department of Justice, Antitrust Division’s internet website and, under certain circumstances, published in the Federal Register. Written comments should be submitted to: Robert A. Lepore, Chief, Transportation, Energy, and Agriculture Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, NW, Suite 8000, Washington, DC 20530 The proposed Final Judgment provides that the Court retains jurisdiction over this action, and the parties may apply to the Court for any order necessary or appropriate for the modification, interpretation, or enforcement of the Final Judgment. VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT As an alternative to the proposed Final Judgment, the United States considered a full trial on the merits against Defendants. The United States could have continued the litigation and sought preliminary and permanent injunctions against AB Companies’ acquisition of all of CBA’s remaining shares. The United States is satisfied, however, that the divestiture of assets described in the proposed Final Judgment will remedy the anticompetitive effects alleged in the Complaint, preserving competition for beer in the state of Hawaii. Thus, the proposed Final Judgment achieves all or substantially all of the relief the United States would have obtained through litigation, but avoids the time, expense, and uncertainty of a full trial on the merits of the Complaint. VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT The Clayton Act, as amended by the APPA, requires that proposed consent judgments in antitrust cases brought by the United States be subject to a 60-day 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, in accordance with the statute as amended in 2004, 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. E:\FR\FM\30OCN1.SGM 30OCN1 jbell on DSKJLSW7X2PROD with NOTICES 68932 Federal Register / Vol. 85, No. 211 / Friday, October 30, 2020 / Notices 15 U.S.C. § 16(e)(1)(A) & (B). In considering these statutory factors, the Court’s inquiry is necessarily a limited one as the government is entitled to ‘‘broad discretion to settle with the defendant within the reaches of the public interest.’’ United States v. Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); United States v. Associated Milk Producers, Inc., 534 F.2d 113, 117 (8th Cir. 1976) (‘‘It is axiomatic that the Attorney General must retain considerable discretion in controlling government litigation and in determining what is in the public interest.’’); United States v. U.S. Airways Grp., Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (explaining that the ‘‘court’s inquiry is limited’’ in Tunney Act settlements); United States v. InBev N.V./ S.A., No. 08-1965 (JR), 2009 U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that a 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 mechanism to enforce the final judgment are clear and manageable’’). Under the APPA, a court considers, among other things, the relationship between the remedy secured and the specific allegations in the government’s complaint, whether the proposed Final Judgment is sufficiently clear, whether its enforcement mechanisms are sufficient, and whether it may positively harm third parties. See Microsoft, 56 F.3d at 1458–62. With respect to the adequacy of the relief secured by the proposed Final Judgment, a court may not ‘‘ ‘make de novo determination of facts and issues.’ ’’ United States v. W. Elec. Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993) (quoting United States v. Mid-Am. Dairymen, Inc., No. 73 CV 681-W1, 1977 WL 4352, at *9 (W.D. Mo. May 17, 1977)); see also Microsoft, 56 F.3d at 1460– 62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 F. Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Instead, ‘‘[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.’’ W. Elec. Co., 993 F.2d at 1577 (quotation marks omitted). ‘‘The court should bear in mind the flexibility of the public interest inquiry: the court’s function is not to determine whether the resulting array of rights and liabilities is one that will best serve society, but only to confirm that the resulting settlement is within the reaches of the public interest.’’ Microsoft, 56 F.3d at 1460 (quotation marks omitted); see also United States v. Deutsche Telekom AG, No. 19–2232 (TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More demanding requirements would ‘‘have enormous practical consequences for the government’s ability to negotiate future settlements,’’ contrary to congressional intent. Id. at 1456. ‘‘The Tunney Act was not intended to create a disincentive to the use of the consent decree.’’ Id.; see also United States v. Mid-Am. Dairymen, Inc., No. 73 CV 681-W-1, 1977 WL 4352, at *9 (W.D. Mo. May 17, 1977) (‘‘It was the intention of Congress in enacting [the] APPA to preserve VerDate Sep<11>2014 21:10 Oct 29, 2020 Jkt 253001 consent decrees as a viable enforcement option in antitrust cases.’’). The United States’ predictions about the efficacy of the remedy are to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at 1461 (recognizing courts should give ‘‘due respect to the Justice Department’s . . . view of the nature of its case’’); United States v. Iron Mountain, Inc., 217 F. Supp. 3d 146, 152–53 (D.D.C. 2016) (‘‘In evaluating objections to settlement agreements under the Tunney Act, a court must be mindful that [t]he government need not prove that the settlements will perfectly remedy the alleged antitrust harms[;] it need only provide a factual basis for concluding that the settlements are reasonably adequate remedies for the alleged harms.’’) (internal citations omitted); United States v. Republic Servs., Inc., 723 F. Supp. 2d 157, 160 (D.D.C. 2010) (noting ‘‘the deferential review to which the government’s proposed remedy is accorded’’); United States v. Archer-DanielsMidland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (‘‘A district court must accord due respect to the government’s prediction as to the effect of proposed remedies, its perception of the market structure, and its view of the nature of the case’’); see also MidAm. Dairymen, 1977 WL 4352, at *9 (‘‘The APPA codifies the case law which established that the Department of Justice has a range of discretion in deciding the terms upon which an antitrust case will be settled’’). The ultimate question is whether ‘‘the remedies [obtained by the Final Judgment are] so inconsonant with the allegations charged as to fall outside of the ‘reaches of the public interest.’ ’’ Microsoft, 56 F.3d at 1461 (quoting W. Elec. Co., 900 F.2d at 309). 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, and does not authorize the Court to ‘‘construct [its] own hypothetical case and then evaluate the decree against that case.’’ Microsoft, 56 F.3d at 1459; see also U.S. Airways, 38 F. Supp. 3d at 75 (noting that the court must simply determine whether there is a factual foundation for the government’s decisions such that its conclusions regarding the proposed settlements are reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (‘‘[T]he ‘public interest’ is not to be measured by comparing the violations alleged in the complaint against those the court believes could have, or even should have, been alleged’’). Because the ‘‘court’s authority to review the decree depends entirely on the government’s exercising its prosecutorial discretion by bringing a case in the first place,’’ it follows that ‘‘the court is only authorized to review the decree itself,’’ and not to ‘‘effectively redraft the complaint’’ to inquire into other matters that the United States did not pursue. Microsoft, 56 F.3d at 1459–60. In its 2004 amendments to the APPA, Congress made clear its intent to preserve the practical benefits of using consent judgments proposed by the United States in antitrust enforcement, Pub. L. 108-237 § 221, and added the unambiguous instruction that ‘‘[n]othing in this section shall be construed PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 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); see also U.S. Airways, 38 F. Supp. 3d at 76 (indicating that a court is not required to hold an evidentiary hearing or to permit intervenors as part of its review under the Tunney Act). This language explicitly wrote into the statute what Congress intended when it first enacted the Tunney Act in 1974. As Senator Tunney explained: ‘‘[t]he court is nowhere compelled to go to trial or to engage in extended proceedings which might have the effect of vitiating the benefits of prompt and less costly settlement through the consent decree process.’’ 119 Cong. Rec. 24,598 (1973) (statement of Sen. Tunney). ‘‘A court can make its public interest determination based on the competitive impact statement and response to public comments alone.’’ U.S. Airways, 38 F. Supp. 3d at 76 (citing Enova Corp., 107 F. Supp. 2d at 17). VIII. DETERMINATIVE DOCUMENTS There are no determinative materials or documents within the meaning of the APPA that were considered by the United States in formulating the proposed Final Judgment. Dated: October 26, 2020 Respectfully submitted, FOR PLAINTIFF UNITED STATES OF AMERICA lllllllllllllllllllll JILL C. MAGUIRE (DC#979595) U.S. Department of Justice, Antitrust Division, Assistant Chief, Healthcare & Consumer Products Section, 450 Fifth Street, NW, Suite 4100, Washington, DC 20530, Tel: (202) 598-8805, Fax: (202) 307-5802, Email: jill.maguire@usdoj.gov [FR Doc. 2020–24056 Filed 10–29–20; 8:45 am] BILLING CODE 4410–11–P DEPARTMENT OF JUSTICE Notice of Lodging of Proposed Consent Decree Under the Comprehensive Environemental Response, Compensation and Liability Act On October 23, 2020, the Department of Justice lodged a proposed Consent Decree with the United States District Court for the District of Montana in the lawsuit entitled United States v. Atlantic Richfield Company, Civil Action No. CV89–039–BU–SEH. The proposed Consent Decree would partially resolve claims the United States and State of Montana have brought pursuant to Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9607(a), against the Atlantic Richfield Company related to the Anaconda Smelter National Priorities List Site. The Consent Decree requires Atlantic Richfield to construct enhanced E:\FR\FM\30OCN1.SGM 30OCN1

Agencies

[Federal Register Volume 85, Number 211 (Friday, October 30, 2020)]
[Notices]
[Pages 68918-68932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24056]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Anheuser-Busch InBev SA/NV, et al.; Proposed 
Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation, and Competitive Impact Statement have been filed with the 
United States District Court for the Eastern District of Missouri, in 
United States v. Anheuser-Busch InBev SA/NV, et al., Civil Action No. 
4:20-cv-01282-SRC. On September 18, 2020, the United States filed a 
Complaint alleging that the proposed acquisition by Anheuser-Busch 
Companies, LLC (``AB Companies''), a

[[Page 68919]]

minority shareholder in Craft Brew Alliance, Inc. (``CBA''), of the 
remaining shares of CBA would violate Section 7 of the Clayton Act, 15 
U.S.C. 18. AB Companies is a wholly-owned subsidiary of Anheuser-Busch 
InBev SA/NV (``ABI''). The proposed Final Judgment, filed at the same 
time as the Complaint, requires ABI, AB Companies, and CBA to divest 
Kona Brewery, LLC, which houses CBA's entire Kona brand business in the 
State of Hawaii, among other related tangible and intangible assets, 
and to license to the acquirer the Kona brand in Hawaii. The United 
States has approved PV Brewing Partners, LLC, as the acquirer.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection on the Antitrust 
Division's website at http://www.justice.gov/atr and at the Office of 
the Clerk of the United States District Court for the Eastern District 
of Missouri. Copies of these materials may be obtained from the 
Antitrust Division upon request and payment of the copying fee set by 
Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, including the name of the submitter, and 
responses thereto, will be posted on the Antitrust Division's website, 
filed with the Court, and, under certain circumstances, published in 
the Federal Register. Comments should be directed to Robert A. Lepore, 
Chief, Transportation, Energy, and Agriculture Section, Antitrust 
Division, Department of Justice, 450 5th Street NW, Suite 8000, 
Washington, DC 20530 (telephone: 202-307-6349).

Suzanne Morris,
Chief, Premerger and Division Statistics, Antitrust Division.

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI 
EASTERN DIVISION

    United States of America, Plaintiff, v. Anheuser-Busch INBEV SA/
NV, Anheuser-Busch Companies, LLC, and Craft Brew Alliance, Inc., 
Defendants.

Civil Action No.: 4:20-cv-01282-SRC
Judge Stephen R. Clark

COMPLAINT

    1. The United States of America brings this civil antitrust 
action to enjoin Anheuser-Busch InBev SA/NV (``ABI'') and Anheuser-
Busch Companies, LLC (``AB Companies''), from acquiring Craft Brew 
Alliance, Inc. (``CBA''). The United States alleges as follows:

I. NATURE OF THE ACTION

    2. On November 11, 2019, ABI, which has been a minority 
shareholder in CBA, agreed to acquire all of CBA's remaining shares 
in a transaction valued at approximately $220 million.
    3. ABI is a global brewing company with the largest beer sales 
worldwide and in the United States, including in the state of 
Hawaii. CBA is a national brewing company with the fifth-largest 
beer sales in Hawaii. As measured by 2019 revenue, ABI accounts for 
approximately 28% of all beer sales in Hawaii, and CBA accounts for 
approximately 13% of all beer sales in Hawaii.\1\
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    \1\ Market share calculations are based on distributor sales in 
Hawaii.
---------------------------------------------------------------------------

    4. ABI proposes to acquire CBA through ABI's wholly-owned 
subsidiary AB Companies, a Delaware limited liability company. ABI 
is already a minority shareholder in CBA, owning approximately 31% 
of CBA's shares. ABI's proposed acquisition of CBA would give ABI 
100% ownership of CBA, resulting in ABI's total control over all 
aspects of CBA's competitive decision-making, including pricing, 
marketing, and promotions.
    5. As a result, the transaction would eliminate important head-
to-head competition between ABI and CBA in Hawaii, and would 
facilitate price coordination following the transaction. This 
reduction in competition would likely result in increased prices and 
reduced innovation for beer consumers in Hawaii.
    6. For these reasons, ABI's proposed acquisition of CBA violates 
Section 7 of the Clayton Act, 15 U.S.C. Sec.  18, and should be 
permanently enjoined.

II. JURISDICTION, VENUE, AND INTERSTATE COMMERCE

    7. The United States brings this action pursuant to Section 15 
of the Clayton Act, as amended, 15 U.S.C. Sec.  25, to prevent and 
restrain Defendants ABI, AB Companies, and CBA from violating 
Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec.  18. The 
Court has subject matter jurisdiction over this action pursuant to 
Section 15 of the Clayton Act, 15 U.S.C. Sec.  25, and 28 U.S.C. 
Sec. Sec.  1331, 1337(a), and 1345.
    8. Venue is proper for ABI, a Belgian corporation, under Section 
12 of the Clayton Act, 15 U.S.C. Sec.  22, and 28 U.S.C. Sec. Sec.  
1391(b) and (c). Venue is proper for AB Companies, a Delaware 
limited liability company headquartered in St. Louis, Missouri, in 
this judicial district under 28 U.S.C. Sec. Sec.  1391(b) and (c). 
Venue is proper for CBA, a Washington corporation, in this judicial 
district under Section 12 of the Clayton Act, 15 U.S.C. Sec.  22, 
and 28 U.S.C. Sec. Sec.  1391(b) and (c).
    9. ABI, AB Companies, and CBA produce and sell beer in the flow 
of interstate commerce and their production and sale of beer 
substantially affect interstate commerce. ABI, AB Companies, and CBA 
have each consented to personal jurisdiction and venue in this 
judicial district for purposes of this action.

III. THE DEFENDANTS AND THE UNITED STATES BEER INDUSTRY

A. The Defendants

    10. ABI is a corporation organized and existing under the laws 
of Belgium, with its headquarters in Leuven, Belgium. ABI owns 
numerous major beer brands sold in the United States, including in 
Hawaii. These brands include Bud Light, Budweiser, Busch Light, 
Natural Light, Michelob Ultra, Stella Artois, and Golden Road.
    11. AB Companies is a wholly-owned subsidiary of ABI and a 
Delaware limited liability company with its headquarters in St. 
Louis, Missouri. On November 11, 2019, it agreed to acquire all of 
CBA's outstanding shares in a transaction valued at approximately 
$220 million.
    12. CBA is a corporation organized and existing under the laws 
of Washington, with its headquarters in Portland, Oregon. CBA owns 
several beer brands sold in the United States, including Widmer 
Brothers, Omission, Redhook, and Kona, a brand that originated in 
Hawaii and is especially popular in that state.
    13. ABI currently holds approximately 31% of CBA's outstanding 
shares, delivers CBA brands of beer to wholesalers throughout the 
United States, and has a contract with CBA to brew some CBA brands 
of beer at ABI breweries. ABI also has the right to appoint two of 
the eight seats on CBA's Board of Directors.

B. Beer Segments and Pricing

    14. Beer brands sold in Hawaii, like those sold in the United 
States in general, are often segmented based on price and quality. 
ABI groups beer into five segments: value, core, core-plus, premium, 
and super-premium (listed in order of increasing price and quality).
    15. ABI owns beer brands in each beer segment in Hawaii: value 
(where its brands include Busch Light and Natural Light), core 
(where its brands include Bud Light and Budweiser), core-plus (where 
its brands include Michelob Ultra and Bud Light Lime), premium 
(where its brands include Michelob Ultra Pure Gold), and super-
premium (where its brands include Stella Artois and Golden Road).
    16. CBA's Kona brand is generally considered a premium beer. 
Consumers may ``trade up'' or ``trade down'' between segments in 
response to changes in price. For example, as the prices of core-
plus brands approach the prices of premium brands, consumers are 
increasingly willing to ``trade up'' from core-plus brands to 
premium brands. Therefore, the competition provided by CBA's Kona in 
the premium segment serves as an important constraint on the ability 
of ABI to raise its beer prices not only in the premium segment, but 
also in core-plus and other beer segments.

IV. THE RELEVANT MARKET

A. Relevant Product Market

    17. The relevant product market for analyzing the effects of the 
proposed acquisition is beer. Beer is usually made from a malted 
cereal grain, flavored with hops, and brewed via a fermentation 
process. Beer's taste, alcohol content, image (e.g., marketing and 
consumer perception), price, and other factors make it substantially 
different from other alcoholic beverages.
    18. Other alcoholic beverages, such as wine and distilled 
spirits, are not reasonable

[[Page 68920]]

substitutes that would discipline a small but significant and non-
transitory increase in the price of beer, and relatively few 
consumers would substantially reduce their beer purchases or turn to 
alternatives in the event of such a price increase. Therefore, a 
hypothetical monopolist producer of beer likely would increase its 
prices by at least a small but significant and non-transitory 
amount.

B. Relevant Geographic Market

    19. The relevant geographic market for analyzing the effects of 
the proposed acquisition is no larger than the state of Hawaii. The 
relevant geographic market is best defined by the locations of the 
customers who purchase beer, rather than by the locations of 
breweries that produce beer. Brewers develop pricing and promotional 
strategies based on an assessment of local demand for their beer, 
local competitive conditions, and the local strength of different 
beer brands. Consumers buy beer near their homes and typically do 
not travel great distances to buy beer even when prices rise. 
Consumers in Hawaii are particularly unlikely to travel outside the 
state to buy beer, as they are located approximately 2,000 miles 
from the mainland United States.
    20. For these reasons, a hypothetical monopolist of beer sold in 
Hawaii likely would increase its prices in that market by at least a 
small but significant and non-transitory amount. Therefore, Hawaii 
is a relevant geographic market and ``section of the country'' 
within the meaning of Section 7 of the Clayton Act.

V. ABI'S ACQUISITION OF CBA IS LIKELY TO RESULT IN ANTICOMPETITIVE 
EFFECTS

A. The Transaction Would Increase Market Concentration Significantly

    21. The proposed acquisition would increase market concentration 
significantly for beer in Hawaii. ABI and CBA would have a combined 
share of approximately 41% in the relevant market following the 
transaction. Market concentration is often one useful indicator of 
the level of competitive vigor in a market and the likely 
competitive effects of a merger. The more concentrated a market, and 
the more a transaction would increase concentration in a market, the 
more likely it is that the transaction would result in harm to 
consumers by meaningfully reducing competition.
    22. Concentration in relevant markets is typically measured by 
the Herfindahl-Hirschman Index (or ``HHI,'' defined and explained in 
Appendix A). Markets in which the HHI is between 1,500 and 2,500 are 
considered moderately concentrated. Mergers that increase the HHI by 
more than 100 points and result in a moderately concentrated market 
potentially raise significant competitive concerns. See U.S. Dep't 
of Justice & Fed. Trade Comm'n, Horizontal Merger Guidelines Sec.  
5.3 (revised Aug. 19, 2010) (``Merger Guidelines''), https://www.justice.gov/atr/horizontal-merger-guidelines-08192010.
    23. The transaction would result in a moderately concentrated 
market with a post-acquisition HHI of nearly 2,500 points, just 
below the threshold denoting a highly concentrated market. Moreover, 
the HHI would increase as a result of the transaction by more than 
700 points. Therefore, ABI's proposed acquisition of CBA potentially 
raises significant competitive concerns. See Merger Guidelines Sec.  
5.3.
    24. These concentration measures likely understate the extent to 
which the transaction would result in anticompetitive effects such 
as higher prices and less innovation in the relevant market. As 
explained in Section V.C., the market for beer in Hawaii shows signs 
of vulnerability to coordinated conduct, and the transaction is 
likely to enhance that vulnerability. Those conditions make the 
transaction more likely to raise significant competitive concerns 
than the measures of concentration alone would indicate. See Merger 
Guidelines Sec.  7.1.

B. ABI's Acquisition of CBA Would Eliminate Head-to-Head Competition 
Between ABI and CBA

    25. Today, ABI and CBA compete directly against each other in 
Hawaii. In that state, CBA's Kona brand competes closely with ABI's 
Stella Artois and Michelob Ultra brands, and also competes with 
ABI's Bud Light and Budweiser brands. Recent developments and 
product innovations have further enhanced the degree of competition 
between ABI and CBA. For example, CBA recently introduced Kona 
Light, a lower calorie brand similar to ABI's low-calorie offerings 
like ABI's Michelob Ultra and Bud Light. CBA's share of the beer 
market in Hawaii has been among the fastest growing in the state 
over the past seven years. ABI's proposed acquisition of CBA likely 
would substantially lessen this current head-to-head competition 
between ABI and CBA in Hawaii, in violation of Section 7 of the 
Clayton Act.
    26. Moreover, competition between ABI and CBA in Hawaii is 
poised to increase in the future. CBA is investing in its business 
in Hawaii, and it has plans to grow its share of beer volume sold in 
Hawaii by about 25% by 2021. CBA is also constructing a new brewery 
in Hawaii that is scheduled to become operational in the next few 
months.
    27. ABI has plans to grow its share of beer in the premium 
segment. In recent years, consumer preferences have shifted toward 
the premium and super-premium segments. Because ABI's positions in 
the value, core, and core-plus segments are stronger than its 
positions in the premium and super-premium segments, this trend 
toward the premium and super-premium segments has threatened ABI's 
overall market share of beer and made ABI's plans to expand its 
share of beer in the premium segment more urgent. These plans 
include the introduction of new premium brands and other brand 
innovations. CBA's Kona is positioned as a premium beer in Hawaii. 
Therefore, ABI's increased focus on the premium segment would 
increase competition with CBA's Kona.
    28. For these reasons, competition between ABI and CBA in Hawaii 
likely would grow significantly in the absence of the proposed 
acquisition. ABI's acquisition of CBA, therefore, is likely to 
substantially lessen this future potential competition between ABI 
and CBA, also in violation of Section 7 of the Clayton Act.

C. ABI's Acquisition of CBA Would Facilitate Price Coordination

    29. Historically, ABI has employed a ``price leadership'' 
strategy throughout the United States, including in Hawaii. 
According to this strategy, ABI, with the largest beer sales in the 
United States and Hawaii, seeks to generate industry-wide price 
increases by pre-announcing its own price increases and purposefully 
making those price increases transparent to the market so its 
primary competitors will follow its lead. These announced price 
increases, which can vary by geography because of different 
competitive conditions, typically cover a broad range of beer brands 
and packages (e.g., container and size). After announcing price 
increases, ABI tracks the degree to which its primary competitors 
match its price increases. Depending on the competitive response, 
ABI will either maintain, adjust, or rescind an announced price 
increase.
    30. For many years, Molson Coors Beverage Company (``Molson 
Coors''), the brewer with the second-largest beer sales in the 
United States and owner of many brands sold in Hawaii such as Miller 
Lite, Coors Light, and Blue Moon, has followed ABI's announced price 
increases in Hawaii to a significant degree. Molson Coors's 
willingness to follow ABI's announced price increases is 
constrained, however, by the diversion of sales to other competitors 
who are seeking to gain share, including CBA and its Kona brand.
    31. By acquiring CBA, ABI would gain control over Kona's pricing 
and would likely increase Kona's price, thereby eliminating a 
significant constraint on Molson Coors's willingness to follow ABI's 
announced price increases in Hawaii. By reducing Kona's constraint 
on Molson Coors's willingness to increase prices, the acquisition 
likely increases the ability of ABI to facilitate price 
coordination, thereby resulting in higher prices for beer sold in 
Hawaii. For this reason, ABI's acquisition of CBA likely would 
substantially lessen competition in Hawaii in violation of Section 7 
of the Clayton Act.

VI. ABSENCE OF COUNTERVAILING FACTORS

    32. New entry and expansion by competitors likely will not be 
timely and sufficient in scope to prevent the acquisition's likely 
anticompetitive effects. Barriers to entry and expansion within 
Hawaii include: (i) the substantial time and expense required to 
build a brand's reputation; (ii) the substantial sunk costs for 
promotional and advertising activity needed to secure the 
distribution and placement of a new entrant's beer in retail 
outlets; (iii) the time and cost of building new breweries and other 
facilities; and (iv) the difficulty of developing an effective 
network of beer distributors with incentives to promote and expand a 
new entrant's sales.
    33. The anticompetitive effects of the proposed acquisition are 
not likely to be eliminated or mitigated by any efficiencies the 
proposed acquisition may achieve.

[[Page 68921]]

VII. VIOLATION ALLEGED

    34. The United States hereby incorporates the allegations of 
paragraphs 1 through 33 above as if set forth fully herein.
    35. The proposed transaction likely would substantially lessen 
competition in interstate trade and commerce, in violation of 
Section 7 of the Clayton Act, 15 U.S.C. Sec.  18, and likely would 
have the following anticompetitive effects, among others:

(a) head-to-head competition between ABI and CBA for beer in Hawaii 
would be substantially lessened;
(b) the ability and incentive of ABI to coordinate higher prices for 
beer in Hawaii would be substantially increased; and
(c) competition generally in the market for beer in Hawaii would be 
substantially lessened.

REQUESTED RELIEF

The United States requests:

1. That the proposed acquisition be adjudged to violate Section 7 of 
the Clayton Act, 15 U.S.C. Sec.  18;
2. That Defendants be permanently enjoined and restrained from 
carrying out the proposed transaction or from entering into or 
carrying out any other agreement, understanding, or plan by which 
ABI would acquire CBA, be acquired by, or merge with CBA;
3. That the United States be awarded its costs for this action; and
4. That the United States be awarded such other relief as the Court 
may deem just and proper.

Dated: September 18, 2020

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA:

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MAKAN DELRAHIM

Assistant Attorney General for Antitrust
-----------------------------------------------------------------------

BERNARD A. NIGRO, JR.

Principal Deputy Assistant Attorney General
-----------------------------------------------------------------------

MICHAEL F. MURRAY

Deputy Assistant Attorney General
-----------------------------------------------------------------------

KATHLEEN S. O'NEILL

Senior Director of Investigations & Litigation
-----------------------------------------------------------------------

ROBERT A. LEPORE

Chief, Transportation, Energy & Agriculture Section
-----------------------------------------------------------------------

PATRICIA C. CORCORAN

Assistant Chief, Transportation, Energy & Agriculture Section

Jeffrey B. Jensen

United States Attorney, Eastern District of Missouri
-----------------------------------------------------------------------

NICHOLAS P. LLEWELLYN (MO43839)

Assistant United States Attorney, Chief, Civil Division

Thomas F. Eagleton U.S. Courthouse, 111 S. 10th Street, 20th Floor, 
St. Louis, MO 63102, Tel: (314) 539-7637, Fax: (314) 539-2287, 
Email: [email protected]
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JILL C. MAGUIRE* (DC979595)

Assistant Chief, Healthcare & Consumer Products Section

DON P. AMLIN
GRANT A. BERMANN
DAVID C. KELLY
WILLIAM M. MARTIN
MICHAEL T. NASH

U.S. Department of Justice, Antitrust Division, 450 Fifth Street NW, 
Suite 4100, Washington, DC 20530, Tel: (202) 598-8805, Fax: (202) 
307-5802, Email: [email protected]

Attorneys for the United States
*Attorney of Record

APPENDIX A

DEFINITION OF THE HERFINDAHL-HIRSCHMAN INDEX

    ``HHI'' means the Herfindahl-Hirschman Index, a commonly 
accepted measure of market concentration. It is calculated by 
squaring the market share of each firm competing in the market and 
then summing the resulting numbers. For example, for a market 
consisting of four firms with shares of 30 percent, 30 percent, 20 
percent, and 20 percent, the HHI is 2,600 (30\2\ + 30\2\ + 20\2\ + 
20\2\ = 2,600). The HHI takes into account the relative size 
distribution of the firms in a market and approaches zero when a 
market consists of a large number of small firms. The HHI increases 
both as the number of firms in the market decreases and as the 
disparity in size between those firms increases. Markets in which 
the HHI is between 1,500 and 2,500 are considered to be moderately 
concentrated. See U.S. Dep't of Justice & Fed. Trade Comm'n, 
Horizontal Merger Guidelines Sec.  5.3 (revised Aug. 19, 2010), 
https://www.justice.gov/atr/horizontal-merger-guidelines-08192010. 
Transactions that increase the HHI by more than 100 points in 
moderately concentrated markets potentially raise significant 
competitive concerns under the guidelines issued by the U.S. 
Department of Justice and Federal Trade Commission. See id.

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI 
EASTERN DIVISION

    United States of America, Plaintiff, v. Anheuser-Busch Inbev SA/
NV, Anheuser-Busch Companies, LLC, and Craft Brew Alliance, Inc., 
Defendants.

Civil Action No.: 4:20-cv-01282-SRC
Judge Stephen R. Clark

PROPOSED FINAL JUDGMENT

    WHEREAS, Plaintiff, United States of America, filed its 
Complaint on September 18, 2020;
    AND WHEREAS, the United States and Defendants, Anheuser-Busch 
InBev SA/NV (``ABI''), Anheuser-Busch Companies, LLC (``AB 
Companies''), and Craft Brew Alliance, Inc. (``CBA''), have 
consented to entry of this Final Judgment without the taking of 
testimony, without trial or adjudication of any issue of fact or 
law, and without this Final Judgment constituting any evidence 
against or admission by any party regarding any issue of fact or 
law;
    AND WHEREAS, Defendants agree to make a divestiture to remedy 
the loss of competition alleged in the Complaint;
    AND WHEREAS, Defendants represent that the divestiture and other 
relief required by this Final Judgment can and will be made and that 
Defendants will not later raise a claim of hardship or difficulty as 
grounds for asking the Court to modify any provision of this Final 
Judgment;
    NOW THEREFORE, it is ORDERED, ADJUDGED, AND DECREED:

I. JURISDICTION

    The Court has jurisdiction over the subject matter of and each 
of the parties to this action. The Complaint states a claim upon 
which relief may be granted against Defendants under Section 7 of 
the Clayton Act, as amended (15 U.S.C. Sec.  18).

II. DEFINITIONS

    As used in this Final Judgment:
    A. ``Acquirer'' means PV Brewing or any other entity to which 
Defendants divest the Divestiture Assets.
    B. ``ABI'' means Defendant Anheuser-Busch InBev SA/NV, a Belgian 
corporation with its headquarters in Leuven, Belgium, its successors 
and assigns, and its subsidiaries, divisions, groups, affiliates, 
partnerships, and joint ventures, and their directors, officers, 
managers, agents, and employees.
    C. ``AB Companies'' means Defendant Anheuser-Busch Companies, 
LLC, a wholly-owned subsidiary of ABI and a Delaware limited 
liability company with its headquarters in St. Louis, Missouri, its 
successors and assigns, and its subsidiaries (including the Hawaii 
WOD), divisions, groups, affiliates, partnerships, and joint 
ventures, and their directors, officers, managers, agents, and 
employees.
    D. ``CBA'' means Defendant Craft Brew Alliance, Inc., a 
Washington corporation with its headquarters in Portland, Oregon, 
its successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    E. ``Covered Entity'' means any Beer brewer, importer, 
distributor, or brand owner (other than ABI) that derives more than 
$3.75 million in annual gross revenue from Beer sold for further 
resale in the State of Hawaii, or from license fees generated by 
such Beer sales in the State of Hawaii.
    F. ``Covered Interest'' means ownership or control of any Beer 
brewing assets of, or any Beer brand assets of, or any Beer 
distribution assets of, or any interest in (including any financial, 
security, loan, equity, intellectual property, or management 
interest), a Covered Entity; except that a Covered Interest shall 
not include (i) a Beer brewery or Beer brand located outside the 
State of Hawaii that does not generate at least $3.75 million in 
annual gross revenue from Beer sold for resale in the State of 
Hawaii; (ii) a license to distribute a non-ABI Beer brand where said 
distribution license does not generate at least $1 million in annual 
gross revenue in the State of Hawaii; or (iii) a Beer distributor 
which does not generate at least $1 million in annual gross revenue 
in the State of Hawaii.

[[Page 68922]]

    G. ``PV Brewing'' means PV Brewing Partners, LLC, a Delaware 
limited liability company with its headquarters in Overland Park, 
Kansas, its successors and assigns, and its subsidiaries, divisions, 
groups, affiliates, partnerships, and joint ventures, and their 
directors, officers, managers, agents, and employees.
    H. ``Kona Hawaii'' means Kona Brewery LLC, a Hawaii limited 
liability company with its headquarters in Kailua-Kona, Hawaii, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    I. ``Divestiture Assets'' means all of Defendants' rights, 
titles, and interests in and to all property and assets, tangible 
and intangible, wherever located, related to or used or held for use 
in connection with Kona Hawaii, including, but not limited to:
    1. the following facilities (the ``Divestiture Facilities''):

    a. the restaurant located at 7192 Kalaniana'ole Highway, 
Honolulu, Hawaii 96825 (``Koko Marina Pub'');
    b. the brewery and brewpub located at 74-5612 Pawai Place, 
Kailua-Kona, Hawaii, 96740 (the ``Kona Pub and Brewery''); and
    c. the New Kona Brewery;

    2. all rights of the Acquirer under the Kona IP License;
    3. all tangible personal property, including, but not limited 
to, machinery and manufacturing equipment, tooling and fixed assets, 
vehicles, inventory, merchandise, office equipment and furniture, 
materials, computer hardware and supplies;
    4. all contracts, contractual rights, and customer 
relationships; and all other agreements, commitments, and 
understandings, including, but not limited to, teaming arrangements, 
leases, certifications, and supply agreements;
    5. all licenses, permits, certifications, approvals, consents, 
registrations, waivers, and authorizations issued or granted by any 
governmental organization, and all pending applications or renewals;
    6. all records and data, including (a) customer lists, accounts, 
sales, and credit records, (b) production, repair, maintenance, and 
performance records, (c) manuals and technical information CBA 
provides to its own employees, customers, suppliers, agents, or 
licensees, (d) records and research data concerning historic and 
current research and development activities, including, but not 
limited, to designs of experiments and the results of successful and 
unsuccessful designs and experiments, and (e) drawings, blueprints, 
and designs;
    7. all intellectual property owned, licensed, or sublicensed, 
either as licensor or licensee, including (a) patents, patent 
applications, and inventions and discoveries that may be patentable, 
(b) registered and unregistered copyrights and copyright 
applications, and (c) registered and unregistered trademarks, trade 
dress, service marks, service names, trade names, and trademark 
applications; and
    8. all other intangible property, including (a) commercial names 
and d/b/a names, (b) technical information, (c) computer software 
and related documentation, know-how, trade secrets, design 
protocols, specifications for materials, specifications for parts, 
specifications for devices, safety procedures (e.g., for the 
handling of materials and substances), quality assurance and control 
procedures, (d) design tools and simulation capabilities, and (e) 
rights in internet web sites and internet domain names.
    Provided, however, that the assets specified in Paragraphs 
II.I.1.-8., do not include (a) ownership of the Kona IP; (b) 
intellectual property associated with the sale of Kona Products 
outside the State of Hawaii; (c) Defendants' facilities located 
outside Hawaii that are used to brew, develop, package, import, 
distribute, market, promote, or sell Kona Products; or (d) AB 
Companies' wholly-owned distributor located in the State of Hawaii.
    J. ``Beer'' is defined for purposes herein as any fermented 
beverage, brewed or produced from malt, wholly or in part, or from 
rice, grain of any kind, bran, glucose, sugar, and molasses when 
such items are used as a substitute for malt, or from honey, fruit, 
fruit juice, fruit concentrate, herbs, spices, or other food 
materials. For the avoidance of doubt, Beer, as defined herein, does 
not include any distilled alcoholic beverages (as defined as of 
September 1, 2020 in 27 C.F.R. Section 5.11) or wine (as defined as 
of September 1, 2020 in 27 C.F.R. 410, except that irrespective of 
the foregoing definition, hard cider shall be included within the 
definition of Beer herein).
    K. ``Distributor'' means a wholesaler in the State of Hawaii who 
acts as an intermediary between a brewer or importer of Beer and a 
retailer of Beer.
    L. ``Hawaii WOD'' means Anheuser-Busch Sales of Hawaii, Inc., 
which is AB Companies' wholly-owned distributor in the State of 
Hawaii.
    M. ``Kona Products'' means (1) all products produced by 
Defendants using the ``Kona'' brand name at any time after November 
11, 2019, and (2) all products produced by Acquirer using the 
``Kona'' brand name.
    N. ``Kona IP'' means all intellectual property used or held for 
use in connection with the brewing, developing, packaging, 
importing, distributing, marketing, promoting, or selling of Kona 
Products in Hawaii. This includes intellectual property connected to 
the ``Kona'' brand name (and all associated trademarks, service 
marks, and services names) used or held for use in connection with 
the brewing, developing, packaging, importing, distributing, 
marketing, promoting, or selling of Kona Products in the State of 
Hawaii.
    O. ``Kona IP License'' means an exclusive, irrevocable, fully 
paid-up, royalty-free, perpetual license to the Kona IP for use in 
the State of Hawaii.
    P. ``New Brewery Completion'' means the achievement by 
Defendants of an average production capacity of 1,500 barrels of 
saleable Beer each calendar week for three consecutive calendar 
weeks at the New Kona Brewery.
    Q. ``New Kona Brewery'' means the brewery located at Lot 16 in 
Kailua-Kona, Hawaii.
    R. ``Relevant Personnel'' means all full-time, part-time, or 
contract employees of Kona Hawaii, wherever located, whose job 
responsibilities relate in any way to the brewing, developing, 
packaging, importing, distributing, marketing, promoting, or selling 
of Kona Products in the State of Hawaii, at any time between 
November 11, 2019, and the date on which the Divestiture Assets are 
divested to Acquirer.
    S. ``Transaction'' means AB Companies' proposed acquisition of 
the remaining shares of CBA that AB Companies does not already own.

III. APPLICABILITY

    A. This Final Judgment applies to ABI, AB Companies, and CBA, as 
defined above, and all other persons in active concert or 
participation with any Defendant who receive actual notice of this 
Final Judgment.
    B. If, prior to complying with Section IV and Section V of this 
Final Judgment, Defendants sell or otherwise dispose of all or 
substantially all of their assets or of business units that include 
the Divestiture Assets, Defendants must require any purchaser to be 
bound by the provisions of this Final Judgment. Defendants need not 
obtain such an agreement from Acquirer.

IV. DIVESTITURE

    A. Defendants are ordered and directed, within 10 calendar days 
after the Court's entry of the Asset Preservation and Hold Separate 
Stipulation and Order in this matter, to divest the Divestiture 
Assets in a manner consistent with this Final Judgment to PV Brewing 
or to another Acquirer acceptable to the United States, in its sole 
discretion. The United States, in its sole discretion, may agree to 
one or more extensions of this time period not to exceed 60 calendar 
days in total and will notify the Court of any extensions.
    B. Defendants are ordered and directed, within 180 calendar days 
after the Court's entry of the Asset Preservation and Hold Separate 
Stipulation and Order in this matter, to achieve New Brewery 
Completion in a manner consistent with this Final Judgment to PV 
Brewing or to another Acquirer acceptable to the United States, in 
its sole discretion.
    C. Defendants must use their best efforts to divest the 
Divestiture Assets as expeditiously as possible and may not take any 
action to impede the permitting, operation, or divestiture of the 
Divestiture Assets. To incentivize Defendants to achieve New Brewery 
Completion within 180 calendar days after the Court's entry of the 
Asset Preservation and Hold Separate Stipulation and Order in this 
matter, beginning on calendar day 181 Defendants are ordered to pay 
to the United States $25,000 per day until they achieve New Brewery 
Completion. If Defendants demonstrate to the United States that 
unanticipated material difficulties have resulted in unavoidable 
additional delays to New Brewery Completion, the United States may, 
in its sole discretion, agree to forgo some or all of the payments.
    D. Unless the United States otherwise consents in writing, 
divestiture pursuant to this Final Judgment must include the entire 
Divestiture Assets and must be accomplished in such a way as to 
satisfy the United States,

[[Page 68923]]

in its sole discretion, that the Divestiture Assets can and will be 
used by Acquirer as part of a viable, ongoing business of the 
brewing, developing, packaging, importing, distributing, marketing, 
promoting, and selling of Beer in the State of Hawaii, and that the 
divestiture to Acquirer will remedy the competitive harm alleged in 
the Complaint.
    E. The divestiture must be made to an Acquirer that, in the 
United States' sole judgment, has the intent and capability 
(including the necessary managerial, operational, technical, and 
financial capability) to compete effectively in the brewing, 
developing, packaging, importing, distributing, marketing, 
promoting, and selling of Beer in the State of Hawaii.
    F. The divestiture must be accomplished so as to satisfy the 
United States, in its sole discretion, that none of the terms of any 
agreement between Acquirer and Defendants gives Defendants the 
ability unreasonably to raise Acquirer's costs, to lower Acquirer's 
efficiency, or otherwise to interfere in the ability of Acquirer to 
compete effectively.
    G. In the event Defendants are attempting to divest the 
Divestiture Assets to an Acquirer other than PV Brewing, Defendants 
promptly must make known, by usual and customary means, the 
availability of the Divestiture Assets. Defendants must inform any 
person making an inquiry regarding a possible purchase of the 
Divestiture Assets that the Divestiture Assets are being divested in 
accordance with this Final Judgment and must provide that person 
with a copy of this Final Judgment. Defendants must offer to furnish 
to all prospective Acquirers, subject to customary confidentiality 
assurances, all information and documents relating to the 
Divestiture Assets that are customarily provided in a due-diligence 
process; provided, however, that Defendants need not provide 
information or documents subject to the attorney-client privilege or 
work-product doctrine. Defendants must make all information and 
documents available to the United States at the same time that the 
information and documents are made available to any other person.
    H. Defendants must provide prospective Acquirers with (1) access 
to make inspections of the Divestiture Assets; (2) access to all 
environmental, zoning, and other permitting documents and 
information; and (3) access to all financial, operational, or other 
documents and information customarily provided as part of a due 
diligence process. Defendants also must disclose all encumbrances on 
any part of the Divestiture Assets, including on intangible 
property.
    I. Defendants must cooperate with and assist Acquirer to 
identify and hire all Relevant Personnel.
    1. Within 10 business days following the filing of the Complaint 
in this matter, Defendants must identify all Relevant Personnel to 
Acquirer and the United States, including by providing organization 
charts covering all Relevant Personnel.
    2. Within 10 business days following receipt of a request by 
Acquirer or the United States, Defendants must provide to Acquirer 
and the United States the following additional information related 
to Relevant Personnel: name; job title; current salary and benefits 
including most recent bonus paid, aggregate annual compensation, 
current target or guaranteed bonus, if any, and any other payments 
due to or promises made to the employee; descriptions of reporting 
relationships, past experience, responsibilities, and training and 
educational histories; lists of all certifications; and all job 
performance evaluations. If Defendants are barred by any applicable 
law from providing any of this information, Defendants must provide, 
within 10 business days following receipt of the request, the 
requested information to the full extent permitted by law and also 
must provide a written explanation of Defendants' inability to 
provide the remaining information.
    3. At the request of Acquirer, Defendants must promptly make 
Relevant Personnel available for private interviews with Acquirer 
during normal business hours at a mutually agreeable location.
    4. Defendants must not interfere with any effort by Acquirer to 
employ any Relevant Personnel. Interference includes, but is not 
limited to, offering to increase the salary or improve the benefits 
of Relevant Personnel unless the offer is part of a company-wide 
increase in salary or benefits that was announced prior to November 
11, 2019, or has been approved by the United States, in its sole 
discretion. Defendants' obligations under this Paragraph IV.I.4. 
will expire six months after the divestiture of the Divestiture 
Assets pursuant to this Final Judgment.
    5. For Relevant Personnel who elect employment with Acquirer 
within six months of the date on which the Divestiture Assets are 
divested to Acquirer, Defendants must waive all non-compete and non-
disclosure agreements, vest all unvested pension and other equity 
rights, and provide all benefits that those Relevant Personnel 
otherwise would have been provided had the Relevant Personnel 
continued employment with Defendants, including, but not limited to, 
any retention bonuses or payments. Defendants may maintain 
reasonable restrictions on disclosure by Relevant Personnel of 
Defendants' proprietary non-public information that is unrelated to 
the Divestiture Assets and not otherwise required to be disclosed by 
this Final Judgment.
    6. For a period of 12 months from the date on which the 
Divestiture Assets are divested to Acquirer, Defendants may not 
solicit to rehire Relevant Personnel who were hired by Acquirer 
within six months of the date on which the Divestiture Assets are 
divested to Acquirer unless (a) an individual is terminated or laid 
off by Acquirer or (b) Acquirer agrees in writing that Defendants 
may solicit to rehire that individual. Nothing in this Paragraph 
IV.I.6. prohibits Defendants from advertising employment openings 
using general solicitations or advertisements and rehiring Relevant 
Personnel who apply for an employment opening through a general 
solicitation or advertisement.
    J. Defendants must warrant to Acquirer that the New Kona Brewery 
will be operational and without material defect upon the date of New 
Brewery Completion.
    K. Defendants must warrant to Acquirer that (1) except as 
provided in Paragraph IV.J. above, the Divestiture Assets will be 
operational and without material defect on the date of their 
transfer to Acquirer; (2) there are no material defects in the 
environmental, zoning, or other permits pertaining to the operation 
of the Divestiture Assets; and (3) Defendants have disclosed all 
encumbrances on any part of the Divestiture Assets, including on 
intangible property. Following the sale of the Divestiture Assets, 
Defendants must not undertake, directly or indirectly, challenges to 
the environmental, zoning, or other permits pertaining to the 
operation of the Divestiture Assets.
    L. Defendants must assign, subcontract, or otherwise transfer 
all contracts, agreements, and customer relationships (or portions 
of such contracts, agreements, and customer relationships) included 
in the Divestiture Assets, including all supply and sales contracts, 
to Acquirer; provided, however, that for any contract or agreement 
that requires the consent of another party to assign, subcontract, 
or otherwise transfer, Defendants must use best efforts to 
accomplish the assignment, subcontracting, or transfer. Defendants 
must not interfere with any negotiations between Acquirer and a 
contracting party.
    M. Defendants must make best efforts to assist Acquirer to 
obtain all necessary licenses, registrations, and permits to operate 
Kona Hawaii, including, but not limited to, the New Kona Brewery. 
Until Acquirer obtains the necessary licenses, registrations, and 
permits, Defendants must provide Acquirer with the benefit of 
Defendants' licenses, registrations, and permits to the full extent 
permissible by law.
    N. At the option of Acquirer, and subject to approval by the 
United States in its sole discretion, on or before the date on which 
the Divestiture Assets are divested to Acquirer, Defendants must 
enter into a non-exclusive supply contract or contracts for the 
production, packaging, and delivery of Beer sufficient to meet 
Acquirer's needs, as determined by Acquirer, for a period of up to 
three years, on terms and conditions reasonably related to market 
conditions for the production, packaging, and delivery of Beer. All 
amendments to or modifications of any provision of any such supply 
contract are subject to approval by the United States, in its sole 
discretion. If the Acquirer is PV Brewing, the Acquirer, in its sole 
discretion, may renew any such supply contract for two one-year 
periods. For any Acquirer that is not PV Brewing, the United States, 
in its sole discretion, may approve one or more extensions of any 
such supply contract, for a total of up to an additional two years. 
If Acquirer seeks an extension of the term of any supply contract, 
Defendants must notify the United States in writing at least two 
months prior to the date the supply contract expires.
    O. At the option of Acquirer, and subject to approval by the 
United States in its sole discretion, on or before the date on which 
the Divestiture Assets are divested to Acquirer, the Hawaii WOD must 
enter into a distribution agreement for distribution of Beer in the 
State of Hawaii sufficient to meet Acquirer's needs, as determined 
by Acquirer, for a term determined by Acquirer, on terms

[[Page 68924]]

and conditions reasonably related to market conditions for the 
distribution of Beer in the State of Hawaii. Beginning one year 
after the effective date of such distribution agreement, Acquirer 
shall have the right, upon 60 days' written notice to the Hawaii 
WOD, to terminate without cause that distribution agreement. All 
amendments to or modifications of any provision of such distribution 
agreement are subject to approval by the United States, in its sole 
discretion.
    P. At the option of Acquirer, and subject to approval by the 
United States in its sole discretion, on or before the date on which 
the Divestiture Assets are divested to Acquirer, Defendants must 
enter into a contract to provide transition services for finance and 
accounting services, human resources services, supply and 
procurement services, brewpub consulting, on-island merchandising, 
brewing engineering, and information technology services and 
support, for a period of up to 18 months on terms and conditions 
reasonably related to market conditions for the provision of the 
transition services. Any amendments to or modifications of any 
provision of a contract to provide transition services are subject 
to approval by the United States, in its sole discretion. Acquirer 
may terminate a transition services agreement, or any portion of a 
transition services agreement, without cost or penalty at any time 
upon commercially reasonable notice. The employee(s) of Defendants 
tasked with providing transition services must not share any 
competitively sensitive information of Acquirer with any other 
employee of Defendants.
    Q. If any term of an agreement between Defendants and Acquirer, 
including, but not limited to, an agreement to effectuate the 
divestiture required by this Final Judgment, varies from a term of 
this Final Judgment, to the extent that Defendants cannot fully 
comply with both, this Final Judgment determines Defendants' 
obligations.

V. APPOINTMENT OF DIVESTITURE TRUSTEE

    A. If Defendants have not divested the Divestiture Assets within 
the period specified in Paragraph IV.A., Defendants must immediately 
notify the United States of that fact in writing. Upon application 
of the United States, which Defendants may not oppose, the Court 
will appoint a divestiture trustee selected by the United States and 
approved by the Court to effect the divestiture of the Divestiture 
Assets.
    B. After the appointment of a divestiture trustee by the Court, 
only the divestiture trustee will have the right to sell the 
Divestiture Assets. The divestiture trustee will have the power and 
authority to accomplish the divestiture to an Acquirer acceptable to 
the United States, in its sole discretion, at a price and on terms 
as are then obtainable upon reasonable effort by the divestiture 
trustee, subject to the provisions of Sections IV, V, and VI of this 
Final Judgment, and will have other powers as the Court deems 
appropriate. The divestiture trustee must sell the Divestiture 
Assets as quickly as possible.
    C. Defendants may not object to a sale by the divestiture 
trustee on any ground other than malfeasance by the divestiture 
trustee. Objections by Defendants must be conveyed in writing to the 
United States and the divestiture trustee within 10 calendar days 
after the divestiture trustee has provided the notice of proposed 
divestiture required under Section VI.
    D. The divestiture trustee will serve at the cost and expense of 
Defendants pursuant to a written agreement, on terms and conditions, 
including confidentiality requirements and conflict of interest 
certifications, that are approved by the United States.
    E. The divestiture trustee may hire at the cost and expense of 
Defendants any agents or consultants, including, but not limited to, 
investment bankers, attorneys, and accountants, that are reasonably 
necessary in the divestiture trustee's judgment to assist with the 
divestiture trustee's duties. These agents or consultants will be 
accountable solely to the divestiture trustee and will serve on 
terms and conditions, including terms and conditions governing 
confidentiality requirements and conflict-of-interest 
certifications, that are approved by the United States in its sole 
discretion.
    F. The compensation of the divestiture trustee and agents or 
consultants hired by the divestiture trustee must be reasonable in 
light of the value of the Divestiture Assets and based on a fee 
arrangement that provides the divestiture trustee with incentives 
based on the price and terms of the divestiture and the speed with 
which it is accomplished. If the divestiture trustee and Defendants 
are unable to reach agreement on the divestiture trustee's 
compensation or other terms and conditions of engagement within 14 
calendar days of the appointment of the divestiture trustee by the 
Court, the United States may, in its sole discretion, take 
appropriate action, including by making a recommendation to the 
Court. Within three business days of hiring an agent or consultant, 
the divestiture trustee must provide written notice of the hiring 
and rate of compensation to Defendants and the United States.
    G. The divestiture trustee must account for all monies derived 
from the sale of the Divestiture Assets sold by the divestiture 
trustee and all costs and expenses incurred. Within 30 calendar days 
of the date of the sale of the Divestiture Assets, the divestiture 
trustee must submit that accounting to the Court for approval. After 
approval by the Court of the divestiture trustee's accounting, 
including fees for unpaid services and those of agents or 
consultants hired by the divestiture trustee, all remaining money 
must be paid to Defendants and the trust will then be terminated.
    H. Defendants must use their best efforts to assist the 
divestiture trustee to accomplish the required divestiture. Subject 
to reasonable protection for trade secrets, other confidential 
research, development, or commercial information, or any applicable 
privileges, Defendants must provide the divestiture trustee and 
agents or consultants retained by the divestiture trustee with full 
and complete access to all personnel, books, records, and facilities 
of the Divestiture Assets. Defendants also must provide or develop 
financial and other information relevant to the Divestiture Assets 
that the divestiture trustee may reasonably request. Defendants may 
not take any action to interfere with or to impede the divestiture 
trustee's accomplishment of the divestiture.
    I. The divestiture trustee must maintain complete records of all 
efforts made to sell the Divestiture Assets, including by filing 
monthly reports with the United States setting forth the divestiture 
trustee's efforts to accomplish the divestiture ordered by this 
Final Judgment. The reports must include the name, address, and 
telephone number of each person who, during the preceding month, 
made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring any interest in the Divestiture Assets and 
must describe in detail each contact with any such person.
    J. If the divestiture trustee has not accomplished the 
divestiture ordered by this Final Judgment within six months of 
appointment, the divestiture trustee must promptly provide the 
United States with a report setting forth: (1) the divestiture 
trustee's efforts to accomplish the required divestiture; (2) the 
reasons, in the divestiture trustee's judgment, why the required 
divestiture has not been accomplished; and (3) the divestiture 
trustee's recommendations for completing the divestiture. Following 
receipt of that report, the United States may make additional 
recommendations consistent with the purpose of the trust to the 
Court. The Court thereafter may enter such orders as it deems 
appropriate to carry out the purpose of this Final Judgment, which 
may include extending the trust and the term of the divestiture 
trustee's appointment by a period requested by the United States.
    K. The divestiture trustee will serve until divestiture of all 
Divestiture Assets is completed or for a term otherwise ordered by 
the Court.
    L. If the United States determines that the divestiture trustee 
is not acting diligently or in a reasonably cost-effective manner, 
the United States may recommend that the Court appoint a substitute 
divestiture trustee.

VI. NOTICE OF PROPOSED DIVESTITURE

    A. Within two business days following execution of a definitive 
divestiture agreement, Defendants or the divestiture trustee, 
whichever is then responsible for effecting the divestiture, must 
notify the United States of a proposed divestiture required by this 
Final Judgment. If the divestiture trustee is responsible for 
completing the divestiture, the divestiture trustee also must notify 
Defendants. The notice must set forth the details of the proposed 
divestiture and list the name, address, and telephone number of each 
person not previously identified who offered or expressed an 
interest in or desire to acquire any ownership interest in the 
Divestiture Assets.
    B. Within 15 calendar days of receipt by the United States of 
this notice, the United States may request from Defendants, the 
proposed Acquirer, other third parties, or the divestiture trustee 
additional information

[[Page 68925]]

concerning the proposed divestiture, the proposed Acquirer, and 
other prospective Acquirers. Defendants and the divestiture trustee 
must furnish the additional information requested within 15 calendar 
days of the receipt of the request unless the United States provides 
written agreement to a different period.
    C. Within 45 calendar days after receipt of the notice required 
by Paragraph VI.A. or within 20 calendar days after the United 
States has been provided the additional information requested 
pursuant to Paragraph VI.B., whichever is later, the United States 
will provide written notice to Defendants and any divestiture 
trustee that states whether or not the United States, in its sole 
discretion, objects to Acquirer or any other aspect of the proposed 
divestiture. Without written notice that the United States does not 
object, a divestiture may not be consummated. If the United States 
provides written notice that it does not object, the divestiture may 
be consummated, subject only to Defendants' limited right to object 
to the sale under Paragraph V.C. of this Final Judgment. Upon 
objection by Defendants pursuant to Paragraph V.C., a divestiture by 
the divestiture trustee may not be consummated unless approved by 
the Court.
    D. No information or documents obtained pursuant to this Section 
VI may be divulged by the United States to any person other than an 
authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the 
United States is a party, including grand-jury proceedings, for the 
purpose of evaluating a proposed Acquirer or securing compliance 
with this Final Judgment, or as otherwise required by law.
    E. In the event of a request by a third party for disclosure of 
information under the Freedom of Information Act, 5 U.S.C. Sec.  
552, the Antitrust Division will act in accordance with that 
statute, and the Department of Justice regulations at 28 C.F.R. part 
16, including the provision on confidential commercial information, 
at 28 C.F.R. Sec.  16.7. Persons submitting information to the 
Antitrust Division should designate the confidential commercial 
information portions of all applicable documents and information 
under 28 C.F.R. Sec.  16.7. Designations of confidentiality expire 
ten years after submission, ``unless the submitter requests and 
provides justification for a longer designation period.'' See 28 
C.F.R. Sec.  16.7(b).
    F. If at the time that a person furnishes information or 
documents to the United States pursuant to this Section VI, that 
person represents and identifies in writing information or documents 
for which a claim of protection may be asserted under Rule 
26(c)(1)(G) of the Federal Rules of Civil Procedure, and marks each 
pertinent page of such material, ``Subject to claim of protection 
under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,'' 
the United States must give that person ten calendar days' notice 
before divulging the material in any legal proceeding (other than a 
grand-jury proceeding).

VII. FINANCING

    Defendants may not finance all or any part of Acquirer's 
purchase of all or part of the Divestiture Assets made pursuant to 
this Final Judgment.

VIII. ASSET PRESERVATION AND HOLD SEPARATE OBLIGATIONS

    Until the divestiture required by this Final Judgment has been 
accomplished, Defendants must take all steps necessary to comply 
with the Asset Preservation and Hold Separate Stipulation and Order 
entered by the Court. Defendants must take no action that would 
jeopardize the divestiture ordered by the Court.

IX. AFFIDAVITS

    A. Within 20 calendar days of the filing of the Complaint in 
this matter, and every 30 calendar days thereafter until the 
divestiture required by this Final Judgment has been completed, 
Defendants each must deliver to the United States an affidavit, 
signed by AB Companies' and CBA's Chief Financial Officer and 
General Counsel, respectively, describing the fact and manner of 
Defendants' compliance with this Final Judgment. The United States, 
in its sole discretion, may approve different signatories for the 
affidavits.
    B. Each affidavit must include: (1) the name, address, and 
telephone number of each person who, during the preceding 30 
calendar days, made an offer to acquire, expressed an interest in 
acquiring, entered into negotiations to acquire, or was contacted or 
made an inquiry about acquiring, an interest in the Divestiture 
Assets and describe in detail each contact with such persons during 
that period; (2) a description of the efforts Defendants have taken 
to solicit buyers for and complete the sale of the Divestiture 
Assets and to provide required information to prospective Acquirers; 
and (3) a description of any limitations placed by Defendants on 
information provided to prospective Acquirers. Objection by the 
United States to information provided by Defendants to prospective 
Acquirers must be made within 14 calendar days of receipt of the 
affidavit, except that the United States may object at any time if 
the information set forth in the affidavit is not true or complete.
    C. Defendants must keep all records of any efforts made to 
divest the Divestiture Assets until one year after the divestiture 
has been completed.
    D. Within 20 calendar days of the filing of the Complaint in 
this matter, Defendants also must each deliver to the United States 
an affidavit signed by AB Companies' and CBA's Chief Financial 
Officer and General Counsel, respectively, that describes in 
reasonable detail all actions Defendants have taken and all steps 
Defendants have implemented on an ongoing basis to comply with 
Section VIII of this Final Judgment. The United States, in its sole 
discretion, may approve different signatories for the affidavits.
    E. If Defendants make any changes to the efforts and actions 
outlined in any earlier affidavits provided pursuant to Paragraph 
IX.D., Defendants must, within 15 calendar days after any change is 
implemented, deliver to the United States an affidavit describing 
those changes.
    F. Defendants must keep all records of any efforts made to 
preserve the Divestiture Assets until one year after the divestiture 
has been completed.
    G. Within 15 calendar days after New Brewery Completion, 
Defendants also must each deliver to the United States an affidavit, 
signed by AB Companies' Chief Financial Officer and General Counsel 
and CBA's Chief Operating Officer and General Counsel, respectively, 
describing the fact and manner of Defendants' compliance with (1) 
New Brewery Completion, and (2) satisfaction of the warranty to 
Acquirer under Paragraph IV.J., including that the New Kona Brewery 
is operational and without material defect on the date of New 
Brewery Completion. The United States, in its sole discretion, may 
approve different signatories for this affidavit.

X. COMPLIANCE INSPECTION

    A. For the purposes of determining or securing compliance with 
this Final Judgment or of related orders such as the Asset 
Preservation and Hold Separate Stipulation and Order or of 
determining whether this Final Judgment should be modified or 
vacated, upon written request of an authorized representative of the 
Assistant Attorney General for the Antitrust Division, and 
reasonable notice to Defendants, Defendants must permit, from time 
to time and subject to legally recognized privileges, authorized 
representatives, including agents retained by the United States:

(1) to have access during Defendants' office hours to inspect and 
copy, or at the option of the United States, to require Defendants 
to provide electronic copies of all books, ledgers, accounts, 
records, data, and documents in the possession, custody, or control 
of Defendants relating to any matters contained in this Final 
Judgment; and
(2) to interview, either informally or on the record, Defendants' 
officers, employees, or agents, who may have their individual 
counsel present, regarding such matters. The interviews must be 
subject to the reasonable convenience of the interviewee and without 
restraint or interference by Defendants.
    B. Upon the written request of an authorized representative of 
the Assistant Attorney General for the Antitrust Division, 
Defendants must submit written reports or respond to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment.
    C. No information or documents obtained pursuant to this Section 
X may be divulged by the United States to any person other than an 
authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the 
United States is a party, including grand jury proceedings, for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. In the event of a request by a third party for disclosure of 
information under the Freedom of Information Act, 5 U.S.C. Sec.  
552, the Antitrust Division will act in accordance with that 
statute, and the Department of Justice regulations at 28 C.F.R. part 
16,

[[Page 68926]]

including the provision on confidential commercial information, at 
28 C.F.R. Sec.  16.7. Defendants submitting information to the 
Antitrust Division should designate the confidential commercial 
information portions of all applicable documents and information 
under 28 C.F.R. Sec.  16.7. Designations of confidentiality expire 
ten years after submission, ``unless the submitter requests and 
provides justification for a longer designation period.'' See 28 
C.F.R. Sec.  16.7(b).
    E. If at the time that Defendants furnish information or 
documents to the United States pursuant to this Section X, 
Defendants represent and identify in writing information or 
documents for which a claim of protection may be asserted under Rule 
26(c)(1)(G) of the Federal Rules of Civil Procedure, and Defendants 
mark each pertinent page of such material, ``Subject to claim of 
protection under Rule 26(c)(1)(G) of the Federal Rules of Civil 
Procedure,'' the United States must give Defendants ten (10) 
calendar days' notice before divulging the material in any legal 
proceeding (other than a grand jury proceeding).

XI. NOTIFICATION

    A. Unless a transaction is otherwise subject to the reporting 
and waiting period requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, 15 U.S.C. Sec.  18a (the ``HSR 
Act''), Defendants may not, without first providing at least thirty 
(30) calendar days advance notification to the United States, 
directly or indirectly acquire or license a Covered Interest in or 
from a Covered Entity.
    B. Defendants must provide the notification required by this 
Section XI in the same format as, and in accordance with the 
instructions relating to, the Notification and Report Form set forth 
in the Appendix to Part 803 of Title 16 of the Code of Federal 
Regulations, as amended, except that the information requested in 
Items 5 through 8 of the instructions must be provided only about 
the brewing, developing, packaging, importing, distributing, 
marketing, promoting, or selling of Beer in the State of Hawaii.
    C. Notification must be provided at least 30 calendar days 
before acquiring any assets or interest, and must include, beyond 
the information required by the instructions, the names of the 
principal representatives who negotiated the transaction on behalf 
of each party, and all management or strategic plans discussing the 
proposed transaction. If, within the 30 calendar days following 
notification, representatives of the United States make a written 
request for additional information, Defendants may not consummate 
the proposed transaction until 30 calendar days after submitting all 
requested information.
    D. Early termination of the waiting periods set forth in this 
Section XI may be requested and, where appropriate, granted in the 
same manner as is applicable under the requirements and provisions 
of the HSR Act and rules promulgated thereunder. This Section XI 
must be broadly construed, and any ambiguity or uncertainty 
regarding whether to file a notice under this Section XI should be 
resolved in favor of filing notice.

XII. NO REACQUISITION

    Defendants may not reacquire any part of or any interest in the 
Divestiture Assets during the term of this Final Judgment.

XIII. RETENTION OF JURISDICTION

    The Court retains jurisdiction to enable any party to this Final 
Judgment to apply to the Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or 
construe this Final Judgment, to modify any of its provisions, to 
enforce compliance, and to punish violations of its provisions.

XIV. ENFORCEMENT OF FINAL JUDGMENT

    A. The United States retains and reserves all rights to enforce 
the provisions of this Final Judgment, including the right to seek 
an order of contempt from the Court. Defendants agree that in a 
civil contempt action, a motion to show cause, or a similar action 
brought by the United States regarding an alleged violation of this 
Final Judgment, the United States may establish a violation of this 
Final Judgment and the appropriateness of a remedy therefor by a 
preponderance of the evidence, and Defendants waive any argument 
that a different standard of proof should apply.
    B. This Final Judgment should be interpreted to give full effect 
to the procompetitive purposes of the antitrust laws and to restore 
the competition the United States alleged was harmed by the 
challenged conduct. Defendants agree that they may be held in 
contempt of, and that the Court may enforce, any provision of this 
Final Judgment that, as interpreted by the Court in light of these 
procompetitive principles and applying ordinary tools of 
interpretation, is stated specifically and in reasonable detail, 
whether or not it is clear and unambiguous on its face. In any such 
interpretation, the terms of this Final Judgment should not be 
construed against either party as the drafter.
    C. In an enforcement proceeding in which the Court finds that 
Defendants have violated this Final Judgment, the United States may 
apply to the Court for a one-time extension of this Final Judgment, 
together with other relief that may be appropriate. In connection 
with a successful effort by the United States to enforce this Final 
Judgment against a Defendant, whether litigated or resolved before 
litigation, that Defendant agrees to reimburse the United States for 
the fees and expenses of its attorneys, as well as all other costs 
including experts' fees, incurred in connection with that 
enforcement effort, including in the investigation of the potential 
violation.
    D. For a period of four years following the expiration of this 
Final Judgment, if the United States has evidence that a Defendant 
violated this Final Judgment before it expired, the United States 
may file an action against that Defendant in this Court requesting 
that the Court order: (1) Defendant to comply with the terms of this 
Final Judgment for an additional term of at least four years 
following the filing of the enforcement action; (2) all appropriate 
contempt remedies; (3) additional relief needed to ensure the 
Defendant complies with the terms of this Final Judgment; and (4) 
fees or expenses as called for by this Section XIV.

XV. EXPIRATION OF FINAL JUDGMENT

    Unless the Court grants an extension, this Final Judgment will 
expire 10 years from the date of its entry , except that after five 
years from the date of its entry, this Final Judgment may be 
terminated upon notice by the United States to the Court and 
Defendants that the divestiture has been completed and the 
continuation of this Final Judgment is no longer necessary or in the 
public interest.

XVI. PUBLIC INTEREST DETERMINATION

    Entry of this Final Judgment is in the public interest. The 
parties have complied with the requirements of the Antitrust 
Procedures and Penalties Act, 15 U.S.C. Sec.  16, including by 
making available to the public copies of this Final Judgment and the 
Competitive Impact Statement, public comments thereon, and the 
United States' response to comments. Based upon the record before 
the Court, which includes the Competitive Impact Statement and any 
comments and response to comments filed with the Court, entry of 
this Final Judgment is in the public interest.

Date:------------------------------------------------------------------

[Court Approval Subject to Procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16]

-----------------------------------------------------------------------

United States District Judge

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI 
EASTERN DIVISION

    United States of America, Plaintiff, v. Anheuser-Busch INBEV SA/
NV, Anheuser-Busch Companies, LLC, and Craft Brew Alliance, Inc., 
Defendants.

Civil Action No.: 4:20-cv-01282-SRC
Judge Stephen R. Clark

COMPETITIVE IMPACT STATEMENT

    The United States of America, under Section 2(b) of the 
Antitrust Procedures and Penalties Act, 15 U.S.C. Sec.  16(b)-(h) 
(the ``APPA'' or ``Tunney Act''), files this Competitive Impact 
Statement relating to the proposed Final Judgment submitted for 
entry in this civil antitrust proceeding.

I. NATURE AND PURPOSE OF THE PROCEEDING

    On November 11, 2019, Defendant Anheuser-Busch Companies, LLC 
(``AB Companies''), a minority shareholder in Defendant Craft Brew 
Alliance, Inc. (``CBA''), agreed to acquire all of CBA's remaining 
shares in a transaction valued at approximately $220 million. AB 
Companies is a wholly-owned subsidiary of Defendant Anheuser-Busch 
InBev SA/NV (``ABI'').
    The United States filed a civil antitrust Complaint on September 
18, 2020, seeking to enjoin the proposed acquisition. See Dkt. No. 
1. The Complaint alleges that the proposed acquisition would likely 
eliminate important head-to-head competition in the state of Hawaii 
between ABI's beer brands and CBA's beer brands, particularly CBA's 
Kona brand.

[[Page 68927]]

The Complaint alleges that the acquisition would also likely 
facilitate price coordination. This likely reduction in competition 
would result in increased prices and reduced innovation for beer 
consumers in Hawaii. The Complaint thus alleges that the likely 
effect of this acquisition would be to substantially lessen 
competition for beer in the state of Hawaii in violation of Section 
7 of the Clayton Act, 15 U.S.C. Sec.  18.
    At the same time the Complaint was filed, the United States 
filed an Asset Preservation and Hold Separate Stipulation and Order 
(``Stipulation and Order'') and proposed Final Judgment, which are 
designed to address the anticompetitive effects alleged in the 
Complaint. See Dkt. No. 2. On September 25, 2020, the Court entered 
the Stipulation and Order. See Dkt. No. 14.
    Under the proposed Final Judgment, which is explained more fully 
below, Defendants are required to divest Kona Brewery, LLC (``Kona 
Hawaii''), which houses CBA's entire Kona brand business in the 
state of Hawaii, as well as other related tangible and intangible 
assets. Kona Hawaii competes in the brewing, developing, packaging, 
importing, distributing, marketing, promoting, and selling of Beer 
\1\ in the state of Hawaii. Its assets include a restaurant, brewery 
and brewpub, and a new brewery that is currently under construction 
and scheduled to become operational in the next few months. As part 
of the divestiture, Defendants are required to provide an exclusive 
and perpetual license to all intellectual property used or held for 
use in connection with the brewing, developing, packaging, 
importing, distributing, marketing, promoting, or selling of Kona 
products in Hawaii, including the ``Kona'' brand name. Because the 
competitive harm alleged in the Complaint is centered in the state 
of Hawaii, the proposed remedy is also centered in the state of 
Hawaii. The United States has approved PV Brewing Partners, LLC 
(``PV Brewing''), as the acquirer.
---------------------------------------------------------------------------

    \1\ In this Competitive Impact Statement, the term ``Beer,'' 
when capitalized within a sentence, has the same definition as set 
forth in the proposed Final Judgment at Paragraph II.J. Section III, 
infra, at pgs. 11-12, explains the difference between the terms beer 
and ``Beer.''
---------------------------------------------------------------------------

    Under the terms of the Stipulation and Order, until the 
divestiture required by the proposed Final Judgment was 
accomplished, Defendants were required to take certain steps to 
ensure that Kona Hawaii was operated as a competitively independent, 
economically viable, and ongoing business concern, that remained 
independent and uninfluenced by Defendants, and that competition was 
maintained during the pendency of the required divestiture. The 
required divestiture to PV Brewing occurred on October 6, 2020, as 
permitted under the terms of the Stipulation and Order, which was 
entered by the Court on September 25, 2020 (see Dkt. No. 14).
    The United States and Defendants have stipulated that the 
proposed Final Judgment may be entered after compliance with the 
APPA. Entry of the proposed Final Judgment will terminate this 
action, except that the Court will retain jurisdiction to construe, 
modify, or enforce the provisions of the proposed Final Judgment and 
to punish violations thereof.

II. DESCRIPTION OF EVENTS GIVING RISE TO THE ALLEGED VIOLATION

A. The Defendants and the Proposed Transaction

    ABI is a corporation organized and existing under the laws of 
Belgium, with its headquarters in Leuven, Belgium. ABI owns numerous 
major beer brands sold in the United States, including in Hawaii. 
These brands include Bud Light, Budweiser, Busch Light, Natural 
Light, Michelob Ultra, Stella Artois, and Golden Road. AB Companies 
is a wholly-owned subsidiary of ABI and a Delaware limited liability 
company with its headquarters in St. Louis, Missouri.
    CBA is a corporation organized and existing under the laws of 
Washington, with its headquarters in Portland, Oregon. CBA owns 
several beer brands sold in the United States, including Widmer 
Brothers, Omission, Redhook, and Kona, a brand that originated in 
Hawaii and is especially popular in that state.
    ABI, through its wholly-owned subsidiary AB Companies, currently 
holds approximately 31% of CBA's outstanding shares, delivers CBA 
beer brands to wholesalers throughout the United States, and has a 
contract with CBA to brew some CBA beer brands at ABI breweries. ABI 
also has the right to appoint two of the eight seats on CBA's Board 
of Directors.
    On November 11, 2019, AB Companies agreed to acquire all of 
CBA's outstanding shares in a transaction valued at approximately 
$220 million.

B. Beer Segments and Pricing

    Beer brands sold in Hawaii, like those sold in the United States 
in general, are often segmented based on price and quality. ABI 
currently groups beer into five segments: value, core, core-plus, 
premium, and super-premium (listed in order of increasing price and 
quality). ABI owns beer brands in each beer segment in Hawaii: value 
(where its brands include Busch Light and Natural Light), core 
(where its brands include Bud Light and Budweiser), core-plus (where 
its brands include Michelob Ultra and Bud Light Lime), premium 
(where its brands include Michelob Ultra Pure Gold), and super-
premium (where its brands include Stella Artois and Golden Road). 
CBA's Kona brand is generally considered a premium beer.
    As the Complaint alleges, beer consumers may ``trade up'' or 
``trade down'' between segments in response to changes in price. For 
example, as the prices of core-plus brands approach the prices of 
premium brands, consumers are increasingly willing to ``trade up'' 
from core-plus brands to premium brands. Therefore, the Complaint 
alleges that the competition provided by CBA's Kona in the premium 
segment serves as an important constraint on the ability of ABI to 
raise its beer prices not only in the premium segment, but also in 
core-plus and other beer segments.

C. The Competitive Effects of the Transaction on the Market for Beer in 
the State of Hawaii

    ABI is a global brewing company with the largest beer sales 
worldwide and in the United States, including in the state of 
Hawaii. CBA is a national brewing company with the fifth-largest 
beer sales in Hawaii. As measured by 2019 revenue, ABI accounts for 
approximately 28% of all beer sales in Hawaii, and CBA accounts for 
approximately 13% of all beer sales in Hawaii, of which its Kona 
brand constitutes the vast majority.\2\
---------------------------------------------------------------------------

    \2\ Market share calculations are based on distributor sales in 
Hawaii.
---------------------------------------------------------------------------

    ABI's proposed acquisition of CBA would give ABI 100% ownership 
of CBA, resulting in ABI's total control over all aspects of CBA's 
competitive decision-making, including pricing, marketing, and 
promotions. As a result, the Complaint alleges that the transaction 
would likely eliminate important head-to-head competition between 
ABI and CBA in Hawaii, and would likely facilitate price 
coordination following the transaction. The Complaint alleges that 
this likely reduction in competition would result in increased 
prices and reduced innovation for beer consumers in Hawaii.

1. The Relevant Market

    The Complaint alleges that the relevant product market for 
analyzing the effects of the proposed acquisition is beer. Beer is 
usually made from a malted cereal grain, flavored with hops, and 
brewed via a fermentation process. It is packaged in cans, bottles, 
and kegs (draft beer). Beer's taste, alcohol content, image (e.g., 
marketing and consumer perception), price, and other factors make it 
substantially different from other alcoholic beverages.
    The Complaint alleges that other alcoholic beverages, such as 
wine and distilled spirits, are not reasonable substitutes for beer 
that would discipline a small but significant and non-transitory 
increase in the price of beer (e.g., five percent), and relatively 
few consumers would substantially reduce their beer purchases or 
turn to alternatives in the event of such a price increase. 
Therefore, the Complaint alleges that a hypothetical monopolist 
producer of beer likely would increase its prices by at least a 
small but significant and non-transitory amount. See U.S. Dep't of 
Justice & Fed. Trade Comm'n, Horizontal Merger Guidelines Sec.  
4.1.1 (revised Aug. 19, 2010) (``Merger Guidelines''), https://www.justice.gov/atr/horizontal-merger-guidelines-08192010.
    The Complaint alleges that the relevant geographic market for 
analyzing the effects of the proposed acquisition is no larger than 
the state of Hawaii. The relevant geographic market is best defined 
by the locations of the customers who purchase beer, rather than by 
the locations of breweries that produce beer. Brewers develop 
pricing and promotional strategies based on an assessment of local 
demand for their beer, local competitive conditions, and the local 
strength of different beer brands. Consumers buy beer near their 
homes and typically do not travel great distances to buy beer even 
when prices rise. Consumers in Hawaii are particularly unlikely to 
travel outside the state to buy beer.
    For these reasons, the Complaint alleges that a hypothetical 
monopolist producer of

[[Page 68928]]

beer sold in Hawaii likely would find it profitable to increase its 
prices in that market by at least a small but significant and non-
transitory amount because customers could not economically purchase 
their beer in more distant locations. Therefore, Hawaii is a 
relevant geographic market and ``section of the country'' within the 
meaning of Section 7 of the Clayton Act. Thus, the relevant market 
is beer in the state of Hawaii.

2. The Transaction Would Increase Market Concentration Significantly

    The proposed acquisition would increase market concentration 
significantly for beer in the state of Hawaii. The Complaint alleges 
that ABI and CBA would have a combined share of approximately 41% in 
the relevant market following the transaction. Market concentration 
is often one useful indicator of the level of competitive vigor in a 
market and the likely competitive effects of a merger. The more 
concentrated a market, and the more a transaction would increase 
concentration in a market, the more likely it is that the 
transaction would result in harm to consumers by meaningfully 
reducing competition.
    Concentration in relevant markets is typically measured by the 
Herfindahl-Hirschman Index (``HHI''). Markets in which the HHI is 
between 1,500 and 2,500 are considered moderately concentrated. 
Mergers that increase the HHI by more than 100 points and result in 
a moderately concentrated market potentially raise significant 
competitive concerns. See Merger Guidelines Sec.  5.3.
    ABI's proposed acquisition of CBA would result in a moderately 
concentrated market with a post-acquisition HHI of nearly 2,500 
points, just below the threshold denoting a highly concentrated 
market. Moreover, the HHI would increase as a result of the 
transaction by more than 700 points. These HHI measures potentially 
raise significant competitive concerns. See Merger Guidelines Sec.  
5.3.
    As the Complaint alleges, these concentration measures likely 
understate the extent to which the transaction would result in 
anticompetitive effects such as higher prices and less innovation in 
the relevant market. As explained in Section II.C.4. below, the 
Complaint alleges that the market for beer in Hawaii shows signs of 
vulnerability to coordinated conduct, and the transaction is likely 
to enhance that vulnerability. Those conditions make the transaction 
more likely to raise significant competitive concerns than the 
measures of concentration alone would indicate. See Merger 
Guidelines Sec.  7.1.

3. ABI's Acquisition of CBA Would Eliminate Head-to-Head Competition 
Between ABI and CBA

    The Complaint alleges that ABI and CBA compete directly against 
each other in Hawaii. In that state, CBA's Kona brand competes 
closely with ABI's Stella Artois and Michelob Ultra brands, and also 
competes with ABI's Bud Light and Budweiser brands. Recent 
developments and product innovations have further enhanced the 
degree of competition between ABI and CBA. For example, CBA recently 
introduced Kona Light, a lower calorie brand similar to ABI's low-
calorie offerings like Michelob Ultra and Bud Light. CBA's share of 
the beer market in Hawaii has been among the fastest growing in the 
state over the past seven years. The Complaint thus alleges that 
ABI's proposed acquisition of CBA likely would substantially lessen 
this current head-to-head competition between ABI and CBA in Hawaii, 
in violation of Section 7 of the Clayton Act.
    Moreover, competition between ABI and CBA in Hawaii is poised to 
increase in the future. The Complaint alleges that CBA is investing 
in its business in Hawaii, and it has plans to grow its share of 
beer volume sold in Hawaii by about 25% by 2021. CBA is also 
constructing a new brewery in Hawaii that is scheduled to become 
operational in the next few months.
    As the Complaint alleges, ABI has plans to grow its share of 
beer in the premium segment. In recent years, consumer preferences 
have shifted toward the premium and super-premium segments. Because 
ABI's positions in the value, core, and core-plus segments are 
stronger than its positions in the premium and super-premium 
segments, this trend toward the premium and super-premium segments 
has threatened ABI's overall market share of beer and made ABI's 
plans to expand its share of beer in the premium segment more 
urgent. These plans include the introduction of new premium brands 
and other brand innovations. CBA's Kona brand is positioned as a 
premium beer in Hawaii. Therefore, ABI's increased focus on the 
premium segment would increase competition with CBA's Kona brand.
    For these reasons, the Complaint alleges that competition 
between ABI and CBA in Hawaii likely would grow significantly in the 
absence of the proposed acquisition. ABI's acquisition of CBA, 
therefore, is likely to substantially lessen this future potential 
competition between ABI and CBA, also in violation of Section 7 of 
the Clayton Act.

4. ABI's Acquisition of CBA Would Facilitate Price Coordination

    The Complaint alleges that ABI has historically employed a 
``price leadership'' strategy throughout the United States, 
including in Hawaii. According to this strategy, ABI, with the 
largest beer sales in the United States and Hawaii, seeks to 
generate industry-wide price increases by pre-announcing its own 
price increases and purposefully making those price increases 
transparent to the market so its primary competitors are more likely 
to follow its lead. These announced price increases, which can vary 
by geography because of different competitive conditions, typically 
cover a broad range of beer brands and packages (e.g., container and 
size). After announcing price increases, ABI tracks the degree to 
which its primary competitors follow its price increases. Depending 
on the competitive response, ABI will either maintain, adjust, or 
rescind an announced price increase.
    The Complaint alleges that, for many years, Molson Coors 
Beverage Company (``Molson Coors''), the brewer with the second-
largest beer sales in the United States and owner of many brands 
sold in Hawaii such as Miller Lite, Coors Light, and Blue Moon, has 
followed ABI's announced price increases in Hawaii to a significant 
degree. Molson Coors's willingness to follow ABI's announced price 
increases is constrained, however, by the diversion of sales to 
other competitors who are seeking to gain share, including CBA and 
its Kona brand.
    As alleged in the Complaint, by acquiring CBA, ABI would gain 
control over Kona's pricing and would likely increase Kona's price, 
thereby eliminating a significant constraint on Molson Coors's 
willingness to follow ABI's announced price increases in Hawaii. By 
reducing Kona's constraint on Molson Coors's willingness to increase 
prices, the acquisition likely increases the ability of ABI to 
facilitate price coordination, thereby resulting in higher prices 
for beer sold in Hawaii. For these reasons, the Complaint alleges 
that ABI's acquisition of CBA likely would substantially lessen 
competition in Hawaii in violation of Section 7 of the Clayton Act.

D. Difficulty of Entry or Expansion

    As alleged in the Complaint, new entry and expansion by 
competitors likely will neither be timely nor sufficient in scope to 
prevent the acquisition's likely anticompetitive effects. Barriers 
to entry and expansion within the state of Hawaii include: (i) the 
significant time and expense required to build a brand's reputation; 
(ii) the substantial sunk costs for promotional and advertising 
activity needed to secure the distribution and placement of a new 
entrant's beer in retail outlets; (iii) the considerable time and 
cost of building new breweries and other facilities; and (iv) the 
difficulty of developing an effective network of beer distributors 
with incentives to promote and expand a new entrant's sales.
    The Complaint also alleges that the anticompetitive effects of 
the proposed acquisition are not likely to be eliminated or 
mitigated by any efficiencies the proposed acquisition may achieve.

III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT

    The divestiture required by the proposed Final Judgment will 
remedy the loss of competition alleged in the Complaint by 
establishing an independent and economically viable competitor in 
the market for beer in the state of Hawaii. As described in more 
detail below, the proposed Final Judgment requires Defendants, 
within 10 calendar days after the entry of the Stipulation and Order 
by the Court (to which the United States granted an extension of 
seven calendar days, see Dkt. No. 15), to divest Kona Hawaii, and 
all tangible and intangible assets related to or used in connection 
with the brewing, developing, packaging, importing, distributing, 
marketing, promoting, and selling of Beer in the state of Hawaii. 
The Stipulation and Order was entered by the Court on September 25, 
2020 (see Dkt. No. 14), and the required divestiture to PV Brewing 
occurred on October 6, 2020. The divestiture assets also include an 
exclusive and perpetual license to Kona intellectual property, 
including the ``Kona'' brand name. The divestiture will

[[Page 68929]]

transfer to PV Brewing the brewing capacity, assets, and rights 
necessary to compete with ABI brands in Hawaii.
    In the proposed Final Judgment, ``Beer'' is defined to include 
not only brewed products made from malted cereal grain as beer is 
described in the Complaint, but also ``fermented beverages, brewed 
or produced from malt, wholly or in part, or from rice, grain of any 
kind, bran, glucose, sugar, and molasses when such items are used as 
a substitute for malt, or from honey, fruit, fruit juice, fruit 
concentrate, herbs, spices, or other food materials'' (excluding 
distilled alcoholic beverages and wine). This definition in the 
proposed Final Judgment is necessary because Kona Hawaii currently 
produces hard seltzer. To the extent PV Brewing produces hard 
seltzer or innovates other products that fall within the proposed 
Final Judgment's definition of ``Beer,'' this broader definition 
will ensure that Defendants' obligations under the proposed Final 
Judgment extend to those products (e.g., such products would be 
subject to a distribution agreement per Paragraph IV.O. of the 
proposed Final Judgment), thus further establishing PV Brewing as an 
independent and economically viable competitor in the state of 
Hawaii.

A. Divestiture Assets

    Paragraph IV.A. of the proposed Final Judgment requires 
Defendants to divest to PV Brewing the Divestiture Assets as defined 
in Paragraphs II.I.1-8 of the proposed Final Judgment. The 
Divestiture Assets will provide PV Brewing with the facilities, 
equipment, materials, and legal rights it needs to compete against 
Defendants and other brewers in Hawaii.

1. Kona Hawaii and the New Brewery

    The Divestiture Assets include Kona Hawaii (including its 
restaurant located in Honolulu, Hawaii, a brewery (with brewing 
capacity of 10,000 barrels) and brewpub located in Kailua-Kona, 
Hawaii, and a new brewery also located in Kailua-Kona, Hawaii, that 
is currently under construction), and all tangible and intangible 
assets, as described in Paragraphs II.I.1-8 of the proposed Final 
Judgment, related to or used in connection with Kona Hawaii. Kona 
Hawaii comprises CBA's entire Kona brand business in the state of 
Hawaii.
    Kona Hawaii's new brewery encompasses 30,000 square feet and is 
expected to have a brewing capacity of 100,000 barrels, along with 
canning operations. Once the new brewery is operational, PV Brewing 
will be able to brew beer and package beer in both kegs and cans for 
sale in Hawaii. Although ownership of the new brewery transferred to 
PV Brewing at the time of the divestiture, the new brewery is not 
yet fully constructed or capable of producing saleable beer. When 
fully operational, it is expected that the new brewery will produce 
enough beer to meet present demand for Kona beer packaged in cans 
and kegs for sale in Hawaii.
    Since the new brewery is not yet operational, the proposed Final 
Judgment requires Defendants to continue construction of the new 
brewery and to achieve a specific production milestone within 180 
calendar days after the Court's entry of the Stipulation and Order. 
Specifically, under Paragraph IV.B. of the proposed Final Judgment, 
Defendants must achieve an average production capacity of 1,500 
barrels of saleable Beer each calendar week for three consecutive 
calendar weeks at the new brewery within 180 calendar days after the 
Court's entry of the Stipulation and Order. In addition, upon 
achieving this production milestone, under Paragraph IV.J. of the 
proposed Final Judgment, Defendants must warrant to PV Brewing that 
the new brewery is operational and without material defect.
    If Defendants fail to achieve this production milestone within 
the 180-day period, beginning on calendar day 181, Defendants shall 
pay to the United States $25,000 per day until they achieve the 
proposed Final Judgment's production milestone. The payments 
beginning on day 181 are designed to incentivize Defendants to 
promptly satisfy this metric so that PV Brewing can start using the 
new brewery to brew Kona products for sale in Hawaii.
    Requiring Defendants to make incentive payments if they do not 
meet the proposed Final Judgment's production milestone is 
appropriate under the specific set of facts presented here because, 
in order for PV Brewing to successfully replace CBA as a competitor 
independent of ABI, the new brewery must be operational soon after 
the divestiture so that PV Brewing can brew Kona products for sale 
in Hawaii. At PV Brewing's option, the proposed Final Judgment 
requires Defendants to brew Kona-branded products for PV Brewing 
while the new brewery is under construction.

2. Kona IP and Brand License

    The Divestiture Assets, as defined in Paragraphs II.I.1-8 of the 
proposed Final Judgment, also include an exclusive, irrevocable, 
fully paid-up, royalty-free, perpetual license to all intellectual 
property used or held for use in connection with the brewing, 
developing, packaging, importing, distributing, marketing, 
promoting, or selling of Kona products in Hawaii. This Kona license 
includes intellectual property connected to the ``Kona'' brand name 
(and all associated trademarks, service marks, and services names). 
The license applies to all products produced by Defendants using the 
``Kona'' brand name at any time after November 11, 2019, and all 
products produced by PV Brewing using the ``Kona'' brand name at any 
time in the future. The proposed Final Judgment requires Defendants 
to license--rather than divest--the Kona intellectual property and 
brand name because Defendants retain the right to brew, market, and 
sell Kona-branded products outside of the state of Hawaii.
    With this license, PV Brewing will have the exclusive rights to 
brew, market, and sell Kona products in Hawaii, while Defendants 
will have those rights outside of Hawaii. For example, with this 
license, PV Brewing may innovate and develop new beer brand 
extensions or packages using the Kona brand name and sell them in 
Hawaii. In addition, at its option, PV Brewing may adopt and sell in 
Hawaii Kona-branded products that Defendants produce and sell 
outside of Hawaii. Under the proposed Final Judgment, the license 
extends beyond Beer. If, for example, PV Brewing wants to sell Kona-
branded T-shirts (as CBA does now) to help market and promote its 
new brewery (or sell Kona-branded salad dressing at its brewpub), it 
could do so using the license required by the proposed Final 
Judgment.
    The license thus allows PV Brewing to innovate and to adapt to 
changing market conditions in Hawaii to compete effectively against 
Defendants in the state of Hawaii.

B. Supply, Distribution, and Transition Services Agreements

    As explained below, the proposed Final Judgment also 
contemplates PV Brewing, at its option, entering into a supply 
agreement, distribution agreement, and transition services agreement 
with Defendants to enable it to become an independent and 
economically viable competitor in the market for beer in the state 
of Hawaii.

1. Supply Agreement

    Until the new brewery in Hawaii is operational, PV Brewing will 
need to arrange for another brewer to brew its canned and keg beer 
in order to compete in Hawaii. In addition, CBA does not have the 
facilities in Hawaii to brew bottled beer; CBA currently brews, or 
ABI contract brews for CBA, bottled beer outside of Hawaii and ships 
it to Hawaii. Similarly, post-divestiture, PV Brewing will not have 
the facilities in Hawaii to brew bottled beer and will need to 
source bottled beer from outside of Hawaii, to the extent it 
continues selling bottled beer in Hawaii. Very little beer brewed in 
Hawaii is bottled in Hawaii because there are no glass beer bottles 
produced on the islands and importing empty glass bottles is 
prohibitively expensive.
    As a result, at PV Brewing's option, Paragraph IV.N. of the 
proposed Final Judgment requires Defendants to enter into a non-
exclusive supply contract for the production, packaging, and 
delivery of Beer sufficient to meet PV Brewing's needs, as PV 
Brewing determines. The supply agreement may be for a period of up 
to three years and PV Brewing, in its sole discretion, may renew any 
such supply contract for two one-year periods.
    As described in the Complaint, ABI currently contract brews some 
CBA beer brands, including Kona beer (kegs, cans, and bottles) for 
CBA to sell in Hawaii. Defendants are thus already familiar with the 
recipes and brewing processes for Kona brands. Defendants can 
provide brewing capacity for canned and keg beer until the new 
brewery in Hawaii is able to produce saleable Beer, and can provide 
brewing capacity for bottled beer while PV Brewing considers other 
options.
    PV Brewing may contract with other brewers to brew its Beer for 
sale in Hawaii--in addition to or in lieu of a supply agreement with 
Defendants. PV Brewing need not purchase minimum or maximum volumes 
under the supply agreement with Defendants, meaning it can have 
Defendants brew as little or as much Beer as PV Brewing requires. 
These provisions give PV Brewing flexibility to source its Kona-
branded

[[Page 68930]]

products from Defendants or from one of several other mainland 
brewers that offer contract brewing services.
    This supply agreement is also time-limited to ensure that PV 
Brewing will become a fully independent competitor to Defendants. 
Lastly, to the extent PV Brewing or Defendants seek to amend or 
modify any supply agreement, the United States must approve any 
changes.

2. Distribution Agreement

    Beer distributors play an important role in marketing and 
promoting beer with retailers to help grow beer sales. Thus, 
effective distribution is important for a brewer to be competitive 
in the beer industry. As described in the Complaint, ABI currently 
delivers CBA beer brands to distributors throughout the United 
States. Anheuser-Busch Sales of Hawaii, Inc., which is AB Companies' 
wholly-owned distributor in the state of Hawaii (``Hawaii WOD''), 
currently distributes Kona products, in addition to other CBA 
products, throughout the state of Hawaii. The Hawaii WOD is the 
second-largest beer distributor in Hawaii.
    At PV Brewing's option, Paragraph IV.O. of the proposed Final 
Judgment requires the Hawaii WOD to enter into a distribution 
agreement for distribution of PV Brewing's Beer in the state of 
Hawaii sufficient to meet PV Brewing's needs, as PV Brewing 
determines, and for a period of time as determined by PV Brewing. 
The proposed Final Judgment further requires that under such a 
distribution agreement, beginning one year after the agreement's 
effective date, PV Brewing shall have the right, upon 60 days' 
written notice to the Hawaii WOD, to terminate without cause the 
distribution agreement.
    The proposed Final Judgment thus enables PV Brewing, at its 
option, to remain with the Hawaii WOD, which has been distributing 
Kona products throughout the state of Hawaii for some time. It also 
provides a mechanism by which PV Brewing can terminate the 
distribution agreement without cause and move to another distributor 
in Hawaii. With the no-cause-termination provision, the Hawaii WOD 
will have the incentive to promote and sell Kona products in order 
to retain the profitable and popular Kona brands in its portfolio. 
If it fails to perform to PV Brewing's satisfaction, PV Brewing can 
move its popular Kona products to another distributor in Hawaii.
    Lastly, as with the supply agreement, to the extent PV Brewing 
or Defendants seek to amend or modify any distribution agreement, 
the United States must approve any changes.

3. Transition Services Agreement

    At PV Brewing's option, Paragraph IV.P. of the proposed Final 
Judgment requires Defendants to enter into a transition services 
agreement. Under such an agreement, Defendants will provide to PV 
Brewing transition services for finance and accounting services, 
human resources services, supply and procurement services, brewpub 
consulting, on-island merchandising, brewing engineering, and 
information technology services and support. Transition services as 
to brewing engineering are particularly important to PV Brewing to 
ensure that it can run the new brewery and produce saleable Beer--
which is critical to PV Brewing competing effectively in Hawaii. Any 
transition services agreement may last for a period of up to 18 
months. PV Brewing may terminate such a transition services 
agreement (or any portion), without cost or penalty, at any time 
upon notice to Defendants. This paragraph further provides that 
employees of Defendants tasked with supporting any transition 
services agreement must not share any competitively sensitive 
information of PV Brewing with any other employees of Defendants. 
Any transition services agreement must be time-limited to 
incentivize PV Brewing to become a fully independent competitor of 
Defendants.
    Lastly, as with the supply and distribution agreements, to the 
extent PV Brewing or Defendants seek to amend or modify any 
transition services agreement, the United States must approve any 
changes.

C. Other Provisions

    In order to preserve competition and facilitate the success of 
PV Brewing, the proposed Final Judgment contains additional 
obligations for Defendants.
    With the divestiture, PV Brewing will become the owner of Kona 
Hawaii, which employs personnel that currently operate Kona Hawaii's 
restaurant and brewery and brewpub, and will also operate the new 
brewery that is currently under construction. Paragraph IV.I. of the 
proposed Final Judgment requires Defendants to cooperate with and 
assist PV Brewing to identify and hire all full-time, part-time, or 
contract employees of Kona Hawaii, wherever located, whose job 
responsibilities relate in any way to the brewing, developing, 
packaging, importing, distributing, marketing, promoting, or selling 
of Kona products in the state of Hawaii.
    In particular, the proposed Final Judgment requires that 
Defendants provide PV Brewing and the United States with 
organization charts and information relating to the employees and 
make employees available for interviews. It also provides that 
Defendants must not interfere with PV Brewing's retention of those 
employees. For employees who elect to continue employment with Kona 
Hawaii, Defendants must waive all non-compete and non-disclosure 
agreements, vest all unvested pension and other equity rights, and 
provide all benefits that the employees would generally have been 
provided if the employees had continued employment with Defendants. 
In addition, Paragraph IV.I.6. further provides that the Defendants 
may not solicit to rehire any employee of Kona Hawaii who was hired 
by PV Brewing within six months of the divestiture, unless that 
individual is terminated or laid off by PV Brewing or PV Brewing 
agrees in writing that the Defendants may solicit to rehire that 
individual. The non-solicitation period runs for 12 months from the 
date of the divestiture. These provisions will help ensure that PV 
Brewing will be able to retain qualified employees for Kona Hawaii.
    Section XI of the proposed Final Judgment requires Defendants to 
notify the United States in advance of executing certain 
transactions that would not otherwise be reportable under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 
U.S.C. Sec.  18a (``HSR Act''). The transactions covered by these 
provisions include the acquisition or license of any interest in 
non-ABI Beer brewing or distribution assets or brands, excluding 
acquisitions of: (1) a Beer brewery or brand located outside of the 
state of Hawaii that does not generate at least $3.75 million in 
annual gross revenue from Beer sold for resale in the state of 
Hawaii; (2) distribution licenses for non-ABI Beer brands that do 
not generate at least $1 million in annual gross revenue in the 
state of Hawaii; and (3) Beer distributors that do not generate at 
least $1 million in annual gross revenue in the state of Hawaii. 
This provision significantly broadens Defendants' pre-merger 
reporting requirements because the $1 million and $3.75 million 
threshold amounts are significantly lower than the HSR Act's ``size 
of the transaction'' reporting threshold. Section XI will provide 
the United States with advance notice of, and an opportunity to 
evaluate, Defendants' acquisition of both Beer distributors and Beer 
brewers in the state of Hawaii.
    Notification of distributor acquisitions in Hawaii allows the 
United States to evaluate changes to the Hawaii beer market, 
including potential implications for PV Brewing's distribution 
agreement with Defendants. Similarly, notification of brewer 
acquisitions in Hawaii allows the United States to evaluate any 
acquisition by ABI of, among other things, craft breweries. ABI has 
acquired multiple craft breweries over the past several years; some 
of these acquisitions were not reportable under the HSR Act. 
Acquisitions of this nature, individually or collectively, have the 
potential to substantially lessen competition, and the proposed 
Final Judgment gives the United States an opportunity to evaluate 
such transactions in advance of their closing even if the purchase 
price is below the HSR Act's thresholds.\3\
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    \3\ The Division notes that similar notification obligations 
apply to ABI by virtue of the Modified Final Judgment in United 
States v. Anheuser-Busch InBev SA/NV, No. 1:16-cv-01483-EGS (D.D.C. 
2016), which involved ABI's prior transaction with brewer SABMiller. 
Under the ABI-SABMiller consent decree, ABI must provide notice of 
certain distributor and brewer transactions in the United States. 
The monetary thresholds are higher in the ABI-SABMiller consent 
decree than in the instant proposed Final Judgment, and the ABI-
SABMiller consent decree is set to expire in 2026.
---------------------------------------------------------------------------

    Paragraph XI.B. of the proposed Final Judgment requires 
Defendants to provide such notification to the Antitrust Division of 
the United States Department of Justice (``Antitrust Division'') in 
the same format as, and in accordance with the instructions relating 
to, the Notification and Report Form set forth in the Appendix to 
Part 803 of Title 16 of the Code of Federal Regulations, as amended. 
Pursuant to Paragraph XI.C. of the proposed Final Judgment, 
Defendants must provide such notification at least 30 calendar days 
prior to acquiring any such interest. If, within the 30-day period 
after notification,

[[Page 68931]]

the Antitrust Division makes a written request for additional 
information, Defendants shall be precluded from consummating the 
proposed transaction or agreement until 30 calendar days after 
submitting all requested additional information. Early termination 
of these waiting periods may be requested and, where appropriate, 
granted in the same manner as is applicable under the requirements 
and provisions of the HSR Act and rules promulgated thereunder.
    Section XII of the proposed Final Judgment prevents Defendants 
from reacquiring any part of or interest in the Divestiture Assets 
during the term of the Final Judgment. Thus, ABI may not seek to 
reacquire the Kona brand in the state of Hawaii.
    Additionally, the proposed Final Judgment also contains 
provisions designed to promote compliance and make enforcement of 
the Final Judgment as effective as possible. Paragraph XIV.A. 
provides that the United States retains and reserves all rights to 
enforce the Final Judgment, including the right to seek an order of 
contempt from the Court. Under the terms of this paragraph, 
Defendants have agreed that in any civil contempt action, any motion 
to show cause, or any similar action brought by the United States 
regarding an alleged violation of the Final Judgment, the United 
States may establish the violation and the appropriateness of any 
remedy by a preponderance of the evidence and that Defendants have 
waived any argument that a different standard of proof should apply. 
This provision aligns the standard for compliance with the Final 
Judgment with the standard of proof that applies to the underlying 
offense that the Final Judgment addresses.
    Paragraph XIV.B. provides additional clarification regarding the 
interpretation of the provisions of the proposed Final Judgment. The 
proposed Final Judgment was drafted to restore competition the 
United States alleged would otherwise be harmed by the transaction. 
Defendants agree that they will abide by the proposed Final 
Judgment, and that they may be held in contempt of this Court for 
failing to comply with any provision of the proposed Final Judgment 
that is stated specifically and in reasonable detail, as interpreted 
in light of this procompetitive purpose.
    Paragraph XIV.C. of the proposed Final Judgment provides that if 
the Court finds in an enforcement proceeding that Defendants have 
violated the Final Judgment, the United States may apply to the 
Court for a one-time extension of the Final Judgment, together with 
such other relief as may be appropriate. In addition, to compensate 
American taxpayers for any costs associated with investigating and 
enforcing violations of the Final Judgment, Paragraph XIV.C. 
provides that in any successful effort by the United States to 
enforce the Final Judgment against a Defendant, whether litigated or 
resolved before litigation, that Defendants will reimburse the 
United States for attorneys' fees, experts' fees, and other costs 
incurred in connection with any effort to enforce the Final 
Judgment, including the investigation of the potential violation.
    Paragraph XIV.D. states that the United States may file an 
action against a Defendant for violating the Final Judgment for up 
to four years after the Final Judgment has expired or been 
terminated. This provision is meant to address circumstances such as 
when evidence that a violation of the Final Judgment occurred during 
the term of the Final Judgment is not discovered until after the 
Final Judgment has expired or been terminated or when there is not 
sufficient time for the United States to complete an investigation 
of an alleged violation until after the Final Judgment has expired 
or been terminated. This provision, therefore, makes clear that, for 
four years after the Final Judgment has expired or been terminated, 
the United States may still challenge a violation that occurred 
during the term of the Final Judgment.
    Finally, Section XV of the proposed Final Judgment provides that 
the Final Judgment will expire ten years from the date of its entry, 
except that after five years from the date of its entry, the Final 
Judgment may be terminated upon notice by the United States to the 
Court and Defendants that the divestiture has been completed and 
that the continuation of the Final Judgment is no longer necessary 
or in the public interest.

IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS

    Section 4 of the Clayton Act, 15 U.S.C. Sec.  15, provides that 
any person who has been injured as a result of conduct prohibited by 
the antitrust laws may bring suit in federal court to recover three 
times the damages the person has suffered, as well as costs and 
reasonable attorneys' fees. Entry of the proposed Final Judgment 
neither impairs nor assists the bringing of any private antitrust 
damage action. Under the provisions of Section 5(a) of the Clayton 
Act, 15 U.S.C. Sec.  16(a), the proposed Final Judgment has no prima 
facie effect in any subsequent private lawsuit that may be brought 
against Defendants.

V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT

    The United States and Defendants have stipulated that the 
proposed Final Judgment may be entered by the Court after compliance 
with the provisions of the APPA, provided that the United States has 
not withdrawn its consent. The APPA conditions entry upon the 
Court's determination that the proposed Final Judgment is in the 
public interest.
    The APPA provides a period of at least 60 days preceding the 
effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding 
the proposed Final Judgment. Any person who wishes to comment should 
do so within 60 days of the date of publication of this Competitive 
Impact Statement in the Federal Register, or the last date of 
publication in a newspaper of the summary of this Competitive Impact 
Statement, whichever is later. All comments received during this 
period will be considered by the U.S. Department of Justice, which 
remains free to withdraw its consent to the proposed Final Judgment 
at any time before the Court's entry of the Final Judgment. The 
comments and the response of the United States will be filed with 
the Court. In addition, comments will be posted on the U.S. 
Department of Justice, Antitrust Division's internet website and, 
under certain circumstances, published in the Federal Register.
    Written comments should be submitted to:

Robert A. Lepore, Chief, Transportation, Energy, and Agriculture 
Section, Antitrust Division, U.S. Department of Justice, 450 Fifth 
Street, NW, Suite 8000, Washington, DC 20530

    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the 
Court for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT

    As an alternative to the proposed Final Judgment, the United 
States considered a full trial on the merits against Defendants. The 
United States could have continued the litigation and sought 
preliminary and permanent injunctions against AB Companies' 
acquisition of all of CBA's remaining shares. The United States is 
satisfied, however, that the divestiture of assets described in the 
proposed Final Judgment will remedy the anticompetitive effects 
alleged in the Complaint, preserving competition for beer in the 
state of Hawaii. Thus, the proposed Final Judgment achieves all or 
substantially all of the relief the United States would have 
obtained through litigation, but avoids the time, expense, and 
uncertainty of a full trial on the merits of the Complaint.

VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a 60-day 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, in accordance with the statute as amended 
in 2004, 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.


[[Page 68932]]


15 U.S.C. Sec.  16(e)(1)(A) & (B). In considering these statutory 
factors, the Court's inquiry is necessarily a limited one as the 
government is entitled to ``broad discretion to settle with the 
defendant within the reaches of the public interest.'' United States 
v. Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); United 
States v. Associated Milk Producers, Inc., 534 F.2d 113, 117 (8th 
Cir. 1976) (``It is axiomatic that the Attorney General must retain 
considerable discretion in controlling government litigation and in 
determining what is in the public interest.''); United States v. 
U.S. Airways Grp., Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) 
(explaining that the ``court's inquiry is limited'' in Tunney Act 
settlements); United States v. InBev N.V./S.A., No. 08-1965 (JR), 
2009 U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting 
that a 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 mechanism to enforce the 
final judgment are clear and manageable'').
    Under the APPA, a court considers, among other things, the 
relationship between the remedy secured and the specific allegations 
in the government's complaint, whether the proposed Final Judgment 
is sufficiently clear, whether its enforcement mechanisms are 
sufficient, and whether it may positively harm third parties. See 
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the 
relief secured by the proposed Final Judgment, a court may not `` 
`make de novo determination of facts and issues.' '' United States 
v. W. Elec. Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993) (quoting 
United States v. Mid-Am. Dairymen, Inc., No. 73 CV 681-W-1, 1977 WL 
4352, at *9 (W.D. Mo. May 17, 1977)); see also Microsoft, 56 F.3d at 
1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 
(D.D.C. 2001); United States v. Enova Corp., 107 F. Supp. 2d 10, 16 
(D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Instead, 
``[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.'' W. 
Elec. Co., 993 F.2d at 1577 (quotation marks omitted).
    ``The court should bear in mind the flexibility of the public 
interest inquiry: the court's function is not to determine whether 
the resulting array of rights and liabilities is one that will best 
serve society, but only to confirm that the resulting settlement is 
within the reaches of the public interest.'' Microsoft, 56 F.3d at 
1460 (quotation marks omitted); see also United States v. Deutsche 
Telekom AG, No. 19-2232 (TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 
14, 2020). More demanding requirements would ``have enormous 
practical consequences for the government's ability to negotiate 
future settlements,'' contrary to congressional intent. Id. at 1456. 
``The Tunney Act was not intended to create a disincentive to the 
use of the consent decree.'' Id.; see also United States v. Mid-Am. 
Dairymen, Inc., No. 73 CV 681-W-1, 1977 WL 4352, at *9 (W.D. Mo. May 
17, 1977) (``It was the intention of Congress in enacting [the] APPA 
to preserve consent decrees as a viable enforcement option in 
antitrust cases.'').
    The United States' predictions about the efficacy of the remedy 
are to be afforded deference by the Court. See, e.g., Microsoft, 56 
F.3d at 1461 (recognizing courts should give ``due respect to the 
Justice Department's . . . view of the nature of its case''); United 
States v. Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 
2016) (``In evaluating objections to settlement agreements under the 
Tunney Act, a court must be mindful that [t]he government need not 
prove that the settlements will perfectly remedy the alleged 
antitrust harms[;] it need only provide a factual basis for 
concluding that the settlements are reasonably adequate remedies for 
the alleged harms.'') (internal citations omitted); United States v. 
Republic Servs., Inc., 723 F. Supp. 2d 157, 160 (D.D.C. 2010) 
(noting ``the deferential review to which the government's proposed 
remedy is accorded''); United States v. Archer-Daniels-Midland Co., 
272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A district court must accord 
due respect to the government's prediction as to the effect of 
proposed remedies, its perception of the market structure, and its 
view of the nature of the case''); see also Mid-Am. Dairymen, 1977 
WL 4352, at *9 (``The APPA codifies the case law which established 
that the Department of Justice has a range of discretion in deciding 
the terms upon which an antitrust case will be settled''). The 
ultimate question is whether ``the remedies [obtained by the Final 
Judgment are] so inconsonant with the allegations charged as to fall 
outside of the `reaches of the public interest.' '' Microsoft, 56 
F.3d at 1461 (quoting W. Elec. Co., 900 F.2d at 309).
    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, and does not authorize 
the Court to ``construct [its] own hypothetical case and then 
evaluate the decree against that case.'' Microsoft, 56 F.3d at 1459; 
see also U.S. Airways, 38 F. Supp. 3d at 75 (noting that the court 
must simply determine whether there is a factual foundation for the 
government's decisions such that its conclusions regarding the 
proposed settlements are reasonable); InBev, 2009 U.S. Dist. LEXIS 
84787, at *20 (``[T]he `public interest' is not to be measured by 
comparing the violations alleged in the complaint against those the 
court believes could have, or even should have, been alleged''). 
Because the ``court's authority to review the decree depends 
entirely on the government's exercising its prosecutorial discretion 
by bringing a case in the first place,'' it follows that ``the court 
is only authorized to review the decree itself,'' and not to 
``effectively redraft the complaint'' to inquire into other matters 
that the United States did not pursue. Microsoft, 56 F.3d at 1459-
60.
    In its 2004 amendments to the APPA, Congress made clear its 
intent to preserve the practical benefits of using consent judgments 
proposed by the United States in antitrust enforcement, Pub. L. 108-
237 Sec.  221, and added 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); see also U.S. 
Airways, 38 F. Supp. 3d at 76 (indicating that a court is not 
required to hold an evidentiary hearing or to permit intervenors as 
part of its review under the Tunney Act). This language explicitly 
wrote into the statute what Congress intended when it first enacted 
the Tunney Act in 1974. As Senator Tunney explained: ``[t]he court 
is nowhere compelled to go to trial or to engage in extended 
proceedings which might have the effect of vitiating the benefits of 
prompt and less costly settlement through the consent decree 
process.'' 119 Cong. Rec. 24,598 (1973) (statement of Sen. Tunney). 
``A court can make its public interest determination based on the 
competitive impact statement and response to public comments 
alone.'' U.S. Airways, 38 F. Supp. 3d at 76 (citing Enova Corp., 107 
F. Supp. 2d at 17).

VIII. DETERMINATIVE DOCUMENTS

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Dated: October 26, 2020

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA
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JILL C. MAGUIRE (DC979595)

U.S. Department of Justice, Antitrust Division, Assistant Chief, 
Healthcare & Consumer Products Section, 450 Fifth Street, NW, Suite 
4100, Washington, DC 20530, Tel: (202) 598-8805, Fax: (202) 307-
5802, Email: [email protected]

[FR Doc. 2020-24056 Filed 10-29-20; 8:45 am]
BILLING CODE 4410-11-P