United States v. Anheuser-Busch InBev SA/NV, et al.; Response to Public Comments, 15700-15711 [2021-05988]

Download as PDF khammond on DSKJM1Z7X2PROD with NOTICES 15700 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices investigation are claims 1 and 12 of the ’582 patent; claim 1 of the ’649 patent; and claims 1, 12, and 17 of the ’735 patent. On August 27, 2020, M–I filed a motion for summary determination that the Defaulting Respondents violated section 337 and that M–I satisfies the domestic industry requirement of section 337. The motion sought issuance of a general exclusion order (‘‘GEO’’) and imposition of a one hundred percent (100%) bond on accused products imported during the Presidential review period. On September 16, 2020, OUII filed a response supporting M–I’s motion, including the remedial relief requested therein. On November 19, 2020, the ALJ issued the subject ID granting M–I’s motion and recommending issuance of a GEO and imposition of a bond in the amount of 100 percent of the entered value of infringing products. Specifically, the ID found that (1) the Commission has jurisdiction over the products, the parties, and the investigation; (2) the importation requirement is satisfied; (3) M–I has standing to bring this investigation; (4) all of the remaining asserted claims are infringed by one or more of the Defaulting Respondents’ products; and (5) M–I has satisfied the domestic industry requirement of section 337. Additionally, the ALJ recommended that the Commission issue a GEO and impose a bond in the amount of one hundred percent (100%) of the entered value of infringing articles imported during the period of Presidential review. On January 4, 2021, the Commission determined to review the ID’s finding that M–I’s investments in plant and equipment and M–I’s employment of labor and capital are significant under section 337(a)(3)(A) and (B). Notice (Jan. 4, 2021). The Commission also sought briefing on remedy, bonding, and the public interest. M–I filed a submission in response on January 19, 2021 and filed a corrected version of that response on January 22, 2021. OUII filed a submission in response on January 19, 2021 and filed a reply submission on January 26, 2021. No submissions were received from the public. Having reviewed the written submissions and the evidentiary record, the Commission has determined to affirm the ID’s finding that M–I satisfied the economic prong of the domestic industry requirement on the basis that M–I made significant investments in plant and equipment and significant employment of labor under section 337(a)(3)(A) & (B), 19 U.S.C. VerDate Sep<11>2014 16:30 Mar 23, 2021 Jkt 253001 1337(a)(3)(A) & (B), but to vacate the ID’s value-added analysis (ID at 65–66). The Commission has determined that the appropriate remedy in this investigation is a GEO prohibiting the unlicensed importation of certain shaker screens for drilling fluids and components thereof that infringe claims 1 and 12 of the ’582 patent; claim 1 of the ’649 patent; and claims 1, 12, and 17 of the ’735 patent. The Commission has further determined that the public interest factors enumerated in section 337(d), 19 U.S.C. 1337(d), do not preclude issuance of the GEO. Finally, the Commission has determined that a bond in the amount of one hundred (100) percent of the entered value of the imported articles that are subject to the GEO is required to permit temporary importation of the articles in question during the period of Presidential review, 19 U.S.C. 1337(j). The investigation is hereby terminated in its entirety. The Commission’s order and opinion were delivered to the President and to the United States Trade Representative on the day of their issuance. The Commission has also notified the Secretary of the Treasury and Customs and Border Protection of the order. The Commission vote for these determinations took place on March 18, 2021. The authority for the Commission’s determination is contained in section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and in Part 210 of the Commission’s Rules of Practice and Procedure (19 CFR part 210). While temporary remote operating procedures are in place in response to COVID–19, the Office of the Secretary is not able to serve parties that have not retained counsel or otherwise provided a point of contact for electronic service. Accordingly, pursuant to Commission Rules 201.16(a) and 210.7(a)(1) (19 CFR 201.16(a), 210.7(a)(1)), the Commission orders that the Complainant(s) complete service for any party/parties without a method of electronic service noted on the attached Certificate of Service and shall file proof of service on the Electronic Document Information System (EDIS). By order of the Commission. Issued: March 18, 2021. Lisa Barton, Secretary to the Commission. [FR Doc. 2021–06016 Filed 3–23–21; 8:45 am] BILLING CODE 7020–02–P PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 DEPARTMENT OF JUSTICE Antitrust Division United States v. Anheuser-Busch InBev SA/NV, et al.; Response to Public Comments Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)–(h), the United States hereby publishes below the Response to Public Comments on the Proposed Final Judgment in United States v. Anheuser-Busch InBev SA/NV, et al., Civil Action No. 4:20–cv– 01282–SRC, which was filed in the United States District Court for the Eastern District of Missouri on March 17, 2021, together with a copy of the two comments received by the United States. A copy of the comments and the United States’ response to the comments is available at https://www.justice.gov/ atr/case/us-v-anheuser-busch-inbevsanv-et-al. Copies of the comments and the United States’ response are available for inspection at the Office of the Clerk of the United States District Court for the Eastern District of Missouri. Copies of these materials may also be obtained from the Antitrust Division upon request and payment of the copying fee set by Department of Justice regulations. 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, AnheuserBusch Companies, LLC, and Craft Brew Alliance, Inc., Defendants. Civil Action No.: 4:20–cv–01282–SRC Response of Plaintiff United States to Public Comments on the Proposed Final Judgment Pursuant to the requirements of the Antitrust Procedures and Penalties Act (the ‘‘APPA’’ or ‘‘Tunney Act’’), 15 U.S.C. 16(b)–(h), the United States hereby responds to the two public comments received regarding the proposed Final Judgment in this case. After careful consideration of the submitted comments, the United States continues to believe that the divestiture required by the proposed Final Judgment provides an effective and appropriate remedy for the antitrust violation alleged in the Complaint and is therefore in the public interest. The United States will move the Court for entry of the proposed Final Judgment after the public comments and this E:\FR\FM\24MRN1.SGM 24MRN1 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES response have been published as required by 15 U.S.C. 16(d). I. Procedural History 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 AnheuserBusch InBev SA/NV (‘‘ABI’’). After a thorough and comprehensive investigation, the United States filed a civil antitrust Complaint on September 18, 2020, seeking to enjoin the proposed transaction because it would substantially lessen competition for beer sold in the state of Hawaii, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. See Dkt. No. 1. At the same time the Complaint was filed, the United States filed a proposed Final Judgment and an Asset Preservation and Hold Separate Stipulation and Order (‘‘Stipulation and Order’’) in which the United States and Defendants consented to entry of the proposed Final Judgment after compliance with the requirements of the Tunney Act. See Dkt. No. 2–1. On September 25, 2020, the Court entered the Stipulation and Order. See Dkt. No. 14. On October 6, 2020, the divestiture contemplated by the proposed Final Judgment was effectuated to PV Brewing Partners, LLC (‘‘PV Brewing’’). On October 26, 2020, the United States filed a Competitive Impact Statement, describing the transaction and the proposed Final Judgment. See Dkt. No. 17. On October 30, 2020, the United States published the proposed Final Judgment and the Competitive Impact Statement in the Federal Register, see 85 FR 68918 (October 30, 2020), and caused notice regarding the same, together with directions for the submission of written comments relating to the proposed Final Judgment, to be published in the Washington Post from October 30, 2020, through November 5, 2020; the St. Louis PostDispatch from October 30, 2020, through November 7, 2020; and the Honolulu Star-Advertiser from October 30, 2020, through November 9, 2020. The 60-day public comment period ended on January 8, 2021. The United States received two public comments. See Tunney Act Comment of the Attorney General of Hawaii on the Proposed Final Judgment, attached as Exhibit A; Tunney Act Comment of Maui Brewing Co., attached as Exhibit B. VerDate Sep<11>2014 16:30 Mar 23, 2021 Jkt 253001 II. The Complaint and the Proposed Final Judgment The Complaint alleges that ABI’s proposed acquisition of CBA would likely eliminate important existing head-to-head competition in the state of Hawaii between ABI’s beer brands and CBA’s beer brands, particularly CBA’s Kona brand. Specifically, 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. The Complaint also alleges that, but for the merger, the competition between ABI and CBA in Hawaii likely would have grown significantly because CBA was investing in its business in Hawaii, had plans to significantly grow its share of beer volume sold in Hawaii, and planned to open a new brewery in 2021. The Complaint also alleges that the transaction would likely facilitate price coordination between ABI and Molson Coors Beverage Company in Hawaii. This likely reduction in existing and future competition would result in higher prices and reduced innovation for consumers in Hawaii, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. The proposed Final Judgment remedies the harm to competition alleged in the Complaint by requiring a divestiture that will establish an independent, economically viable competitor in the state. It requires Defendants to divest Kona Brewery, LLC (‘‘Kona Hawaii’’), which includes CBA’s entire Kona brand business in the state of Hawaii, as well as other related tangible and intangible assets, to an acquirer approved by the United States. ABI proposed PV Brewing as the acquirer. After a rigorous and independent evaluation, the United States approved PV Brewing as the acquirer. PV Brewing is a well-financed company, backed by private equity, that is incentivized to compete aggressively in the Hawaii beer market. In addition, the operational leadership of PV Brewing has extensive experience in the brewing, developing, packaging, importing, distributing, marketing, promoting, and selling of beer. The proposed Final Judgment also allows the acquirer, at its option, to enter into a supply contract, distribution agreement, and transition services agreement with ABI. These divestiture assets and optional supply, distribution, and transition services agreements— which are similar to agreements that CBA had with ABI prior to the transaction—will enable the acquirer to compete effectively from day one in the market for beer in the state of Hawaii, PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 15701 thereby restoring the competition that would otherwise likely be lost as a result of the transaction. PV Brewing has elected to exercise its options and entered into supply, distribution, and transition services agreements with ABI, as permitted by the proposed Final Judgment. III. Standard of Judicial Review 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. 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 E:\FR\FM\24MRN1.SGM 24MRN1 khammond on DSKJM1Z7X2PROD with NOTICES 15702 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices the mechanisms 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 VerDate Sep<11>2014 16:30 Mar 23, 2021 Jkt 253001 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. ArcherDaniels-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 PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 United States in antitrust enforcement, Public Law 108–237 § 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. 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). IV. Summary of Comments and the United States’ Response The United States received two public comments in response to the proposed Final Judgment. One comment is from the State of Hawaii through its Office of the Attorney General (‘‘Hawaii AG’’). The other comment is from Maui Brewing Co. (‘‘Maui Brewing’’), which describes itself as Hawaii’s ‘‘largest craft brewer.’’ Exhibit B at 1. Maui Brewing sought to purchase the divestiture assets by submitting an ‘‘Indication of Interest’’ to ABI, but was not selected by ABI as the proposed acquirer. Id. at 2. The overarching concern raised by both the Hawaii AG and Maui Brewing is that the acquirer, PV Brewing, will continue to significantly rely on ABI such that it will not compete independently with, nor constrain, ABI. More specifically, the concerns raised by the Hawaii AG and Maui Brewing can be grouped into five categories: (1) ABI will retain the rights to the Kona brand outside of Hawaii; (2) the acquirer may enter into a distribution agreement with ABI’s wholly-owned distributor, as CBA did prior to the transaction; (3) the acquirer may enter into a supply contract with ABI to brew and package at least some of its beer, as CBA did prior to the transaction; (4) the acquirer may enter into a temporary transition services agreement with ABI; and (5) the E:\FR\FM\24MRN1.SGM 24MRN1 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices Consistent with this principle, when a license for a product ‘‘covers the right to compete in multiple product or geographic markets, yet the merger adversely affects competition in only a subset of these markets, the [Antitrust] Division will insist only on the sale or license of rights necessary to maintain competition in the affected markets.’’ DOJ Merger Remedies Manual at 7 n.25; see also United States v. Iron Mountain, Inc., 217 F. Supp. 3d 146, 152–53 (D.D.C. 2016) (rejecting complaining competitor’s request that the Final A. The Remedy Creates an Independent, Judgment be broadened to allow all Robust Competitor in Hawaii Where the customers—regardless of their Competitive Harm was Likely to Occur location—to terminate their contracts with the parties without incurring fees The Hawaii AG and Maui Brewing because that would far exceed what is express concern that ABI retains the rights to sell Kona-branded beer outside necessary to remedy the harm alleged in of Hawaii following the divestiture. See the complaint limited to 15 geographic markets). Exhibit A at 2–3; Exhibit B at 2. In their The divestiture assets encompass view, ABI’s ability to sell Kona-branded beer outside of Hawaii could impede the Kona Hawaii, CBA’s entire Kona brand business unit in the state, including a acquirer’s ability to compete effectively restaurant, a brewery, a brewpub, a new in the market for beer in Hawaii. There brewery that is currently under is no basis for this concern; the construction, and an exclusive, proposed Final Judgment grants the irrevocable, perpetual, and fully paid-up acquirer the assets, rights, and license to Kona-branded products in personnel it needs to be a robust Hawaii, which gives the acquirer the competitor in Hawaii, the only state in sole right to sell Kona-branded products which the transaction would have in Hawaii. See Dkt. No. 2–1, Exhibit A otherwise harmed competition. (Proposed Final Judgment, Para. II.I., In this case, the Complaint alleges M.–O.). The license grants the acquirer harm to competition in a geographic the sole right to innovate and develop market ‘‘no larger than the state of new products using the Kona brand Hawaii.’’ See Dkt. No. 1 (Complaint name and sell them in Hawaii. This ¶ 19). The overarching purpose of a right is important as beer brewers merger remedy is to restore the increasingly compete with one another competition lost by the transaction. See by developing innovative products that Ford Motor Co. v. United States, 405 are marketed using established beer U.S. 562, 573 (1972) (‘‘The relief in an brand names. Similarly, the license antitrust case must be ‘effective to grants the acquirer the sole right to redress the violations’ and ‘to restore develop Hawaii-specific marketing competition.’’’) (quoting United States promotions or Hawaii-specific v. E. I. Du Pont De Nemours & Co., 366 U.S. 316, 326 (1961)); see also U.S. Dep’t packaging for the beer brewed at the new brewery, once it is operational. of Justice, Merger Remedies Manual Paragraph IV.I. of the proposed Final (2020) (‘‘DOJ Merger Remedies Judgment establishes mechanisms by Manual’’) at 3, available at https:// which the acquirer can hire personnel www.justice.gov/atr/page/file/1312416/ formerly employed by Kona Hawaii. download.2 Therefore, it is appropriate Indeed, the United States understands for the merger remedy here to focus on that the Kona Hawaii leadership team restoring competition in the state of has already joined PV Brewing. Those Hawaii. personnel will further enhance PV Brewing’s ability to compete effectively 1 The Hawaii AG also raises an issue regarding the in Hawaii. And the divestiture will labels that it believes should be affixed to beer enhance Kona Hawaii’s independence products brewed outside of the state of Hawaii. See from ABI. Before the transaction, ABI Exhibit A at 10 n.23. To the extent the State of Hawaii wishes to require brewers to disclose the held an approximate 31% stake in CBA source of beer sold in the state of Hawaii, that is and, by extension, in Kona Hawaii. See a matter unrelated to the antitrust violation alleged Complaint ¶ 13. Following the in the Complaint and, as such, is outside the divestiture, ABI will no longer own any purview of the Court’s review under the Tunney Act. See Microsoft, 56 F.3d at 1459–60. stake in Kona Hawaii. 2 ‘‘The purpose of this manual is to provide Regardless of ABI’s rights to the Kona [Antitrust] Division attorneys and economists with brand in other geographies more than a framework for structuring and implementing 2,000 miles away, the acquirer will be appropriate relief short of a full-stop injunction in merger cases.’’ Id. at 2. the sole owner of the rights to sell Kona- khammond on DSKJM1Z7X2PROD with NOTICES process by which ABI selected the proposed acquirer was unfair.1 For these reasons, the Hawaii AG asserts that the proposed Final Judgment fails to protect competition, although the Hawaii AG chose not to exercise its own independent authority to challenge the transaction under the antitrust laws. For its part, Maui Brewing contends that, due to the concerns above, it should be the acquirer of the divestiture assets instead of PV Brewing. VerDate Sep<11>2014 16:30 Mar 23, 2021 Jkt 253001 PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 15703 branded products in Hawaii—the state where the competitive harm is alleged to occur. As such, the acquirer will be fully empowered and incentivized to compete and grow its sales in Hawaii, thereby preserving the competition that would otherwise be lost as a result of the transaction. B. The Distribution Relationship With ABI Is Optional and Terminable The Hawaii AG and Maui Brewing express concern that the proposed Final Judgment permits the acquirer to enter into a distribution agreement with ABI’s wholly-owned distributor. See Exhibit A at 3–7; Exhibit B at 2. More specifically, the Hawaii AG asserts that the distribution agreement gives ABI ‘‘control and authority’’ over the price of the acquirer’s Kona-branded beer, Exhibit A at 3, ‘‘pav[ing] the way for Molson Coors to follow any price increases announced by [ABI] in Hawaii,’’ id. at 4, and giving ABI the ‘‘ability to prevent PV [Brewing] from competing against other beers sold by ABI,’’ id. at 5. These assertions are incorrect. Brewers must have access to distribution channels to compete effectively in the beer industry. To give the acquirer access to distribution channels from day one, the proposed Final Judgment provides for a distribution agreement with ABI’s wholly-owned subsidiary in the state. The distribution arrangement set forth in the proposed Final Judgment merely affords the acquirer the option to continue a distribution relationship that existed between CBA and ABI prior to the transaction. See Exhibit A at 3 (acknowledging that ABI distributed CBA’s beer in Hawaii prior to the transaction). As the Complaint alleges, during the time when ABI and CBA had a distribution relationship, CBA competed head to head with ABI and constrained ABI’s ability to coordinate higher prices in Hawaii. For example, the Complaint states that ‘‘ABI and CBA compete directly against each other in Hawaii,’’ Complaint ¶ 25; that ‘‘Molson Coors’s willingness to follow ABI’s announced price increases is constrained’’ by ‘‘CBA and its Kona brand,’’ Complaint ¶ 30; and 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,’’ Complaint ¶ 16.3 After the divestiture, the acquirer 3 The Complaint is taken as true for purposes of evaluating whether a remedy is adequate in a Tunney Act Proceeding. See United States v. Microsoft Corp., 56 F.3d 1448, 1459 (D.C. Cir. 1995). Commenters are not permitted to construct their E:\FR\FM\24MRN1.SGM Continued 24MRN1 15704 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES will have the ability and incentive to continue to offer at least this same level of competition, even if it chooses to contract with ABI for distribution services, just as CBA did before the transaction. Here, the proposed Final Judgment requires that the distribution agreement be sufficient to meet the acquirer’s needs, as the acquirer determines, and last for a period of time as determined by the acquirer. See Dkt. No. 2–1, Exhibit A (Proposed Final Judgment, Para. IV.O.). The distribution agreement with ABI’s wholly-owned distributor is optional, which provides the acquirer with the ability to choose its own preferred method of distribution, whether that is ABI’s wholly-owned distributor or another distributor in the state of Hawaii. In making this decision, the acquirer’s incentive will be to employ the distributor that most effectively sells its beer in competition with ABI and other rivals. The approved acquirer, PV Brewing, has the expertise necessary to make this choice for itself. PV Brewing’s operational leadership has extensive experience in the beer industry, including negotiating distribution agreements. Even after entering into a distribution agreement with ABI’s wholly-owned distributor, the acquirer will be able to terminate the agreement without cause, beginning one year after the agreement’s effective date. See id. Thus, if ABI’s wholly-owned distributor prices the Kona-branded products too high or too low to retailers or otherwise fails to market the Kona-branded products effectively, the acquirer will be able to shift its Kona-branded products to another distributor. The threat of termination without cause will incentivize ABI’s wholly-owned distributor to promote and sell the Kona-branded products to the acquirer’s satisfaction in order to retain the popular Kona brand in its portfolio.4 ‘‘own hypothetical case and then evaluate the decree against that case.’’ Id. 4 The Hawaii AG asserts, based on an excerpt from CBA’s 2018 10–K filing, see Exhibit A at 6, that it would be costly and ‘‘daunting’’ for PV Brewing to terminate its distribution contract with ABI’s wholly-owned distributor and switch the Kona-branded products to a new distributor. But the quoted language relates to CBA’s former contract with ABI covering distribution throughout the United States, not the contract between PV Brewing and ABI’s wholly-owned distributor covering distribution of Kona-branded products in Hawaii. As discussed above, in the distribution agreement permitted by the proposed Final Judgment, the acquirer holds the threat of termination without cause, which will incentivize ABI’s wholly-owned distributor to promote and sell the Kona-branded products to the acquirer’s satisfaction. In addition, in the beer industry, rival distributors typically pay the costs of switching a brand to their portfolios. VerDate Sep<11>2014 16:30 Mar 23, 2021 Jkt 253001 Further, as noted above, the proposed Final Judgment establishes mechanisms by which PV Brewing can hire personnel formerly employed by Kona Hawaii. See id. at Para. IV.I. The Kona Hawaii leadership team’s experience in the Hawaii beer industry further enhances PV Brewing’s ability to select the distribution channels that allow it to compete most effectively in the state. C. The Contract Brewing Relationship With ABI Is Optional, Non-Exclusive, and Temporary The Hawaii AG and Maui Brewing express concern about allowing the acquirer, at its option, to engage ABI to brew and package Kona beer for the acquirer to sell in Hawaii. See Exhibit A at 8–10; Exhibit B at 2. The Hawaii AG contends that PV Brewing ‘‘will remain reliant on ABI for the production, packaging, and delivery of beer’’ sufficient to meet PV Brewing’s needs until the new brewery is operational, and so long as PV Brewing sells bottled beer in Hawaii. Exhibit A at 9–10. The United States agrees that until the new brewery in Hawaii is operational, the acquirer will need to arrange for another brewer to brew its canned and kegged beer in order to compete in Hawaii. Similarly, so long as the acquirer wishes to sell bottled beer in Hawaii, the acquirer will need to arrange for another brewer to brew and ship the acquirer’s bottled beer to Hawaii.5 To ensure the uninterrupted supply of Kona-branded beer to sell in Hawaii, the proposed Final Judgment requires ABI to enter into a nonexclusive supply contract for the production, packaging, and delivery of beer sufficient to meet the acquirer’s needs, as the acquirer determines and at the acquirer’s option. As set forth in Paragraph IV.N. of the proposed Final Judgment, the contract brewing relationship with ABI does not impose any constraints on the acquirer. The contract has no minimum or maximum volume requirements, and it is non-exclusive. The acquirer is free to engage companies other than ABI to brew its beer for sale in Hawaii, either to supplement ABI’s production or to replace ABI. This optional supply contract is limited to five years maximum to ensure that the acquirer will become a fully independent competitor to ABI. The supply contract cannot be extended, amended, or 5 As noted in the Competitive Impact Statement (Dkt. No. 17 at pg. 15), very little beer brewed in Hawaii is bottled in Hawaii because there is no large-scale production of glass beer bottles on the islands and importing empty glass bottles is prohibitively expensive for most brewers. PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 otherwise modified without the approval of the United States. The proposed Final Judgment provides the acquirer with the flexibility to choose its own preferred supplier, whether that is ABI or another brewer on the mainland. In making this decision, the acquirer’s incentive will be to employ the contract brewer that most effectively brews and ships its beer. The approved acquirer, PV Brewing, has the expertise necessary to make this choice for itself. The Hawaii AG lists various factors that it contends could make it less than ‘‘viable’’ for PV Brewing to switch to a new contract brewer. Exhibit A at 10. The Hawaii AG, however, does not offer any reason to conclude that non-ABI contract brewers are incapable of managing ‘‘the intricacies of switching,’’ maintaining ‘‘quality control and consistency,’’ or ensuring ‘‘sufficient production quantities’’ for PV Brewing’s needs. Id. The Hawaii AG also expresses concern that ABI does not have adequate motivation to complete construction of the new brewery and that a delay in completing the brewery may lengthen the time the acquirer needs a supply contract. See Exhibit A at 8–9. The proposed Final Judgment establishes strong incentives for ABI to complete the new brewery promptly. It requires ABI to continue construction of the new brewery and to 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 days of the Court’s entry of the Stipulation and Order (that is, by March 24, 2021). See Dkt. No. 2–1, Exhibit A (Proposed Final Judgment, Para. IV.B.). If ABI fails to reach that production metric by the deadline, it is required to pay the United States $25,000 per day until it achieves the metric. See id. at Para. IV.C. Once the new brewery is operational, the acquirer will be able to brew and package canned and kegged beer for sale in Hawaii. The Hawaii AG and Maui Brewing express doubt that the new brewery will be capable of supplying all of PV Brewing’s beer, even once it is built. See Exhibit A at 9; Exhibit B at 2–3. When fully operational, however, the new brewery is expected to produce enough beer to meet present demand for canned and kegged Kona beer in Hawaii. And there are contract brewers, other than ABI, on the mainland with available brewing capacity to whom PV Brewing can turn to supply beer—bottled beer or otherwise—as needed. Lastly, CBA had a brewing contract with ABI prior to the transaction. See E:\FR\FM\24MRN1.SGM 24MRN1 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices Complaint ¶ 13 (‘‘ABI . . . has a contract with CBA to brew some CBA brands of beer at ABI breweries’’). The contract brewing provision in the proposed Final Judgment preserves for the acquirer the option to continue a brewing relationship that allowed CBA to compete effectively in the relevant market, including against ABI. khammond on DSKJM1Z7X2PROD with NOTICES D. The Transition Services Agreement With ABI Is Optional, Limited, Temporary, and Terminable The Hawaii AG expresses concern that the proposed Final Judgment makes available to PV Brewing a transition services agreement with ABI, thereby giving ABI ‘‘influence’’ over PV Brewing’s operations. Exhibit A at 7–8. The Hawaii AG is incorrect. The provision of transition services will not give ABI the ability to influence PV Brewing’s operations because the services are narrow in scope and temporary. The provision of transition services helps ensure that the acquirer seamlessly steps into the helm of Kona Hawaii to compete with ABI. Transition services provisions, such as the one included in the proposed Final Judgment, are commonplace in connection with divestitures and serve an important role in ensuring the success of a divestiture. See, e.g., Final Judgment at 12–13, United States v. United Technologies Corp., No. 1:18-cv02279 (D.D.C. 2018) (requiring Defendants to supply transition services such as facility management and upkeep, government compliance, and accounting and finance, at the purchaser’s option); see also Competitive Impact Statement at 17, United States v. Bayer AG, No. 1:18–cv– 01241 (D.D.C. 2018) (noting that transition services agreements are ‘‘aimed at ensuring that the [divestiture] assets are handed off in a seamless and efficient manner . . . [and that divestiture buyer] can continue to serve customers immediately upon completion of the divestitures.’’). Transition services agreements, such as the one contemplated by the proposed Final Judgment, are purposefully limited in scope. For example, the transition services provision here requires ABI to provide the acquirer with 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—only if the acquirer chooses. See Dkt. No. 2– 1, Exhibit A (Proposed Final Judgment, Para. IV.P.). VerDate Sep<11>2014 16:30 Mar 23, 2021 Jkt 253001 The transition services agreement permitted by the proposed Final Judgment is also temporary, lasting up to a maximum of 18 months. The acquirer has the right under the proposed Final Judgment to terminate any transition services agreement (or any portion of one), without cost or penalty, at any time upon notice to ABI. To the extent either the acquirer or ABI seeks to extend, or otherwise amend or modify a transition services agreement, those extensions, amendments, and modifications must be approved by the United States. The Hawaii AG asserts that PV Brewing may need to rely on ABI for transition services for more than 18 months, on the basis that it may take PV Brewing time to acquire knowledgeable local employees, see Exhibit A at 8. As noted above, however, the proposed Final Judgment puts in place mechanisms by which PV Brewing can hire personnel formerly employed by Kona Hawaii, and the local leadership team of Kona Hawaii has already joined PV Brewing. E. The United States Rigorously and Independently Assessed the Approved Acquirer Finally, Maui Brewing contends that the process by which ABI selected PV Brewing as the proposed acquirer was ‘‘unfairly administered,’’ see Exhibit B at 1, and believes it instead should be approved as the acquirer of the divestiture assets. In support of that contention, Maui Brewing states that PV Brewing offered a price ‘‘below fair market value’’; Maui Brewing is more qualified than PV Brewing to be the acquirer; and ABI selected PV Brewing as the proposed acquirer due to its ‘‘clear ties to ABI.’’ Exhibit B at 1–3 (internal citations omitted). The goal of a divestiture is to ‘‘ensure that the purchaser possesses both the means and the incentive to maintain the level of premerger competition in the market of concern.’’ DOJ Merger Remedies Manual at 6. The United States is not ‘‘to pick winners and losers’’ or to ‘‘protect or favor particular competitors.’’ Id. at 4–5. In vetting a potential acquirer, the United States’ ‘‘appropriate remedial goal is to ensure that the selected purchaser will effectively preserve competition according to the requirements in the consent decree, not that [the acquirer] will necessarily be the best possible competitor.’’ Id. at 24. The United States has done so here. In accordance with Paragraph IV.A. of the proposed Final Judgment, the United States has found PV Brewing to be an appropriate acquirer. Paragraph PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 15705 IV.E. of the proposed Final Judgment requires divestiture to an acquirer that ‘‘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.’’ Regardless of the process by which ABI selected PV Brewing as the proposed acquirer, the United States rigorously and independently evaluated PV Brewing as the proposed acquirer, including the qualifications, experience, incentives, business plans, finances, and professional and financial ties of PV Brewing and its operational team. Based on that evaluation, the United States concluded that PV Brewing is capable, willing, and incentivized to compete effectively and will preserve competition in the state of Hawaii, and approved PV Brewing as the purchaser. Further, the price offered by PV Brewing for the divestiture assets, which Maui Brewing characterizes as ‘‘quite low,’’ Exhibit B at 2, does not cast doubt on PV Brewing’s ability or intentions to compete. It is common for divestiture assets to be sold at belowmarket prices, because the ‘‘divesting firm is being forced to dispose of assets within a limited period. Potential purchasers know this.’’ DOJ Merger Remedies Manual at 25. Moreover, considerations other than price, such as the ability to close quickly and the likelihood of receiving approval from the United States, may result in the selection of a proposed acquirer who offers less than the highest price. In some cases, a low purchase price may raise concerns as to whether a proposed purchaser will be a successful competitor. See, e.g., United States v. Aetna, Inc., 240 F. Supp. 3d 1, 72 (D.D.C. 2017) (citing an ‘‘extremely low purchase price’’ as evidence that the divestiture buyer was not likely to be able to replace the competition lost by the merger). The key inquiry is whether ‘‘the purchase price and other evidence indicate that the purchaser is unable or unwilling to compete in the relevant market.’’ See DOJ Merger Remedies Manual at 25. In its investigation here, the United States did not find evidence that PV Brewing was unwilling or unable to compete in the relevant market, nor has Maui Brewing pointed to any such evidence. Lastly, Maui Brewing’s concern about PV Brewing’s ‘‘clear ties to ABI’’ ignores the fact that the divestiture will not only preserve the competition likely to be lost by the transaction, but will enhance E:\FR\FM\24MRN1.SGM 24MRN1 15706 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices Kona Hawaii’s independence from ABI. As noted previously, before this transaction, ABI held an approximate 31% stake in CBA and, by extension, in Kona Hawaii. ABI also had the right to appoint two of the eight seats on CBA’s Board of Directors. See Complaint ¶ 13. Following the divestiture, ABI will no longer own any stake in Kona Hawaii. V. Conclusion khammond on DSKJM1Z7X2PROD with NOTICES After careful consideration of the public comments, the United States continues to believe that the proposed Final Judgment provides an effective and appropriate remedy for the antitrust violation alleged in the Complaint, and is therefore in the public interest. The United States will move this Court to enter the Final Judgment after the comments and this response are published as required by 15 U.S.C. 16(d). [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.1 The CIS provides additional insight on the intent of the divestiture remedy as follows: 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 [S]tate of Hawaii.2 (Emphasis added.) Respectfully, we are concerned that the PFJ does not meet the ‘‘public interest’’ standard. While the PFJ contemplates PV, a newly-formed entity, owning the divestiture assets, ongoing entanglements between ABI Dated: March 17, 2021 and PV raise concerns that: (i) The Respectfully Submitted, divestiture remedy will not establish PV FOR PLAINTIFF UNITED STATES OF to be truly independent of ABI; nor (ii) AMERICA establish PV to be able to effectively /s/ lllllllllllllllllll compete with ABI in Hawaii. We summarize our concerns as Jill C. Maguire (DC#979595) follows: U.S. Department of Justice, Antitrust • PV and ABI will be intertwined as Division, Assistant Chief, Healthcare & they both will be selling the same Consumer Products Section, 450 Fifth Street branded product in their respective NW, Suite 4100, Washington, DC 20530, Tel: sales territories. (202) 598–8805, Fax: (202) 307–5802, Email: • PV’s entanglement with and jill.maguire@usdoj.gov. reliance on ABI’s wholly-owned Exhibit A distributor (‘‘WOD’’) may well mean Tunney Act Comment of the Attorney that ABI will have pricing control and General of Hawaii on the Proposed Final authority over the price-to-retailer (PTR) Judgment Filed in United States of America of PV Kona Brew which could foster: v. Anheuser-Busch InBev SA/NV, Et Al. Æ ABI’s price leadership and Molson Civil Action No. 4:20–cv–01282 Coors’s willingness to follow ABI’s announced price increases in Hawaii; Definitions and The following terms are used in this Æ Anticompetitive pricing of the PTR comment: of PV Kona Brew in comparison to other • PV—means PV Brewing Partners, beers sold by ABI in Hawaii.3 LLC, the acquirer of the divestiture • PV’s entanglement with and assets, and includes Kona Brewing LLC. reliance on ABI for the performance of • PV Kona Brew—means Kona Brew critical business functions through the products believed to be sold by PV in Transition Services Agreement will give Hawaii. ABI influence and if not a measure of • ABI Kona Brew—means Kona Brew control over these business functions. • By reason of the non-exclusive products made by ABI and sold outside supply contract, PV will be entangled of Hawaii. • ABI—means Defendants Anheuser- with ABI for production, packaging and delivery of PV Kona Brew to meet PV’s Busch InBev SA/NV), Anheuser-Busch needs: Companies, LLC, and Craft Brew Æ We expect PV to be close to 100% Alliance, Inc. (‘‘CBA’’), unless otherwise reliant on ABI as its contract brewer specifically noted. • CIS—means the Competitive Impact until the new brewery is fully operational; Statement. • PFJ—means the proposed Final 1 PFJ at ¶ III.D. at p. 8. Judgment. 2 Introduction The PFJ provides that the intent of the divestiture remedy is: VerDate Sep<11>2014 CIS at p. 11. PTR is the price at which the beer is sold by the distributor to retailers who set the retail price for customers. In this matter, the distributor is ABI’s wholly-owned distributor. 3 The 19:37 Mar 23, 2021 Jkt 253001 PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 Æ We expect PV to be reliant on ABI as long as PV chooses to sell bottled beer; Æ We expect PV to be reliant on ABI if the new brewery is not able to produce PV’s entire requirements of PV Kona Brew cans and draught beer of sufficient quality and quantity after 5 years. Discussion Entanglement No. 1: The Common Product Post divestiture, PV and ABI will each be parts of a whole and intricately intertwined with the other. The ‘‘whole’’ is the universe of Kona Brew products where ideally, ABI and PV will be selling the same product—Kona Brew beer—as follows: (i) Kona Brew products are to be brewed and packaged in different locations: a. PV Kona Brew being brewed and packaged in Hawaii; and b. ABI Kona Brew being brewed and packaged on the U.S. mainland; and (ii) Kona Brew products are to be sold in different locations: a. PV Kona Brew will be sold in Hawaii; and b. ABI Kona Brew will be sold outside of Hawaii throughout the rest of the world.4 ABI Kona Brew and PV Kona Brew are both tied to a common ‘‘story’’ of the beer’s origins in Hawaii and the advertising and lifestyle niche reflected in the marketing of the beer, e.g., the marketing of the products as ‘‘Liquid Aloha’’ and other Hawaii-themed campaigns. It would not make sense for ABI to disavow the Hawaii-connection nor for PV to now claim a non-Hawaii origin. Since Defendants and PV are selling the same products in concept as well as in taste and marketing, each will be intricately intertwined with the other which may call for each to be moving with the other in a highly coordinated manner. Entanglement No. 2: The Role of ABI’s Wholly Owned Distributor Per the PFJ, at the option of PV, ABI’s WOD in Hawaii is required to enter into a distribution agreement with PV.5 Thus, PV will logistically continue with the pre-transaction arrangement that CBA had where the WOD distributed all of CBA’s Kona Brew products in Hawaii.6 This WOD has distributed 4 This ideal world is not what will occur because initially, portions of PV Kona Brew will be produced and packaged on the U.S. mainland and delivered to Hawaii for distribution by ABI’s WOD to Hawaii retailers. 5 See, PFJ at ¶ IV(O) on p. 13. 6 CIS at p. 16. E:\FR\FM\24MRN1.SGM 24MRN1 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices other ABI beers in Hawaii in the past.7 We expect the WOD to continue to distribute other ABI beers postdivestiture. Since the WOD is wholly-owned by ABI, we are concerned that ABI will have the control and authority over the PTR of PV Kona Brew. Such control by ABI over the PTR is strongly suggested by ¶ 29 of the Complaint which alleges that ABI has a ‘‘price leadership’’ strategy, that ABI seeks to generate ‘‘industry-wide price increases,’’ that ABI implements this strategy by preannouncing its own price increases and purposefully making those price increases, and that ABI tracks its primary competitors: 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. khammond on DSKJM1Z7X2PROD with NOTICES The allegations do not mention the authority of the WOD to set the PTR or the WOD’s discretion on implementation of the price leadership strategy. In fact, the allegations read as if the WOD does not have any role or involvement with ABI’s industry-wide price increases, and in particular, as to price increases applicable to Hawaii. We are therefore concerned that the entanglement of PV with ABI’s WOD will pose at least two (2) anticompetitive pricing problems: Problem No. 1: Facilitating ABI’s Price Leadership viz. Molson Coors The CIS at p. 10 describes a concern that through the proposed transaction, ‘‘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.’’ The Complaint describes the dynamics as follows: 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. (Emphasis added.) The divestiture remedy does not remove nor lessen the prospect of a violation of Section 7 of the Clayton Act. Due to ABI’s control and authority over the PTR, ABI will still possess the ability to remove any pricing constraint associated with the PTR of PV Kona Brew and thereby pave the way for Molson Coors to follow any price increases announced by ABI in Hawaii. Problem No. 2: Anticompetitive Pricing of PV Kona Brew Versus Other Beers Sold by ABI in Hawaii The entanglement between PV and ABI’s WOD may negatively impact price competition between PV Kona Brew and other ABI beers sold in Hawaii. ABI groups beers into five segments and sells beers in each segment in Hawaii: 1. Value (Busch Light and Natural Light); 2. Core (Bud Light and Budweiser); 3. Core-plus (Michelob Ultra and Bud Light Lime); 4. Premium (Michelob Ultra Pure Gold); and 5. Super-premium (Stella Artois and Golden Road).8 Importantly, as noted earlier, the WOD has distributed other ABI beers in Hawaii, and we expect it will continue to do so post-divestiture. We are not aware of any prohibition that would prevent PV from seeking to have PV Kona Brew priced sufficiently low by a distributor independent of ABI to effectively compete with ABI’s beers in other segments, such as: (i) The Value segment; (ii) the Core segment; or (iii) the Core-plus segment.9 8 CIS 7 See, e.g., https://www.yellowpages.com/aiea-hi/ mip/anheuser-busch-sales-of-hawaii-inc-11728049. VerDate Sep<11>2014 19:37 Mar 23, 2021 Jkt 253001 at p.4. Complaint at ¶ 16 acknowledges the importance of changes in price in prompting 9 The PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 15707 But with the divestiture remedy, through its control and authority over the WOD and the PTR of PV Kona Brew, ABI will have the ability to prevent PV Kona Brew from competing against other beers sold by ABI and substantially lessen competition between PV and ABI to benefit the sales of ABI’s other beers. Consider the following: • ABI has positioned one of its beers in the premium segment—Michelob Ultra Pure Gold. ABI has the motivation to suppress competition from PV Kona Brew to protect its own premium beer in Hawaii and could cause the PTR of PV Kona Brew to be above the PTR of Michelob Ultra Pure Gold. • ABI, through its control and authority, could increase the PTR of PV Kona Brew to remove a constraint on ABI’s ability to raise prices in other segments. The Complaint contains an implicit acknowledgement that the level of PV Kona Brew’s price could constrain ABI’s ability to raise its beer prices not only in the premium segment but also in core-plus and other beer segments: . . . [T]he competition provided by CBA’s Kona in the premium segment [has served] 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.10 (Emphasis added.) In addition, ABI would likely prevent PV Kona Brew from being priced lower to compete against ABI’s value, core, or core-plus beers to avoid eroding sales in Hawaii of ABI’s beers in these segments. ABI and PV may assert that a premium beer such as PV Kona Brew would not be priced to compete with other beers sold by ABI in Hawaii because the other ABI beers appeal to different tastes and customers. That said, the pricing is under the control of ABI. Also, consumers are not strictly prohibited from buying other than their favorite beer, especially if another beer is a premium beer sold at a competitive price. As noted earlier, the Complaint acknowledges that price can cause consumers switch beers or ‘‘trade up’’ or ‘‘trade down’’ in response to changes in price. * * * * * While PV has the option to arrange for a new distributor, pursuit of this option will likely be a daunting task that could consumers to switch beers or ‘‘trade up’’ or ‘‘trade down’’ between segments: 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 coreplus brands to premium brands. 10 Complaint at ¶ 16. E:\FR\FM\24MRN1.SGM 24MRN1 15708 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices impair distribution of PV Kona Brew. As CBA has noted in the past, changing the distribution network is a challenging task: We have a continuing relationship with Anheuser-Busch, LLC and the current distribution network that would be difficult to replace. Most of our products are sold and distributed through A–B’s distribution network. If the A–B Distributor Agreement were terminated, we would be faced with a number of operational tasks, including establishing and maintaining direct contracts with the existing wholesaler network or negotiating agreements with replacement wholesalers on an individual basis, and enhancing our credit evaluation, billing and accounts receivable processes. Such an undertaking would require significant effort and substantial time to complete, during which the distribution of our products could be impaired. We are dependent on our wholesalers for the sale of our products.11 (Emphasis added.) Furthermore, the challenge could be far greater because we are not aware of any publicly available information showing that the principals of PV have: (i) Experience in running a Hawaiibased hands-on beer brewing operation; (ii) experience with doing business in Hawaii; or (iii) experience with servicing all the retail connections that purchased Kona Brew beer from the WOD. Thus, we remain concerned that the entanglement of PV with ABI’s WOD poses anticompetitive pricing problems. khammond on DSKJM1Z7X2PROD with NOTICES Entanglement No. 3: ABI’s Provisioning of Transition Services. Per the PFJ, at the option of PV, Defendants are required to enter into a contract to provide transition services to PV.12 PV will be entangled with and reliant upon ABI for the performance of critical business functions through the Transition Services Agreement which will give ABI influence if not a measure of control over these functions. These functions are: • Finance and accounting services; • Human resources services; • Supply and procurement services; • Brewpub consulting; • On-island merchandising; • Brewing engineering; and • Information technology services and support.13 The CIS describes the brewing engineering function as ‘‘particularly important to PV Brewing to ensure that it can run the new brewery and produce saleable Beer—which is critical to PV 11 See, Risk Factors’’ section of CBA’s 2018 10– K at pp. 16–17. 12 See, PFJ at ¶ IV(P) on pp. 13–14. 13 CIS at p. 17. VerDate Sep<11>2014 19:37 Mar 23, 2021 Jkt 253001 Brewing competing effectively in Hawaii.’’ 14 Per the CIS: • ‘‘Any transition Services agreement may last for a period of up to 18 months;’’ • The transition services agreement contemplates ‘‘employees of Defendants’’ being ‘‘tasked with supporting the transition services agreement;’’ and • ‘‘Any transition services agreement must be time-limited to incentivize [PV] to become a fully independent competitor of [ABI].’’ 15 But consider that a complete termination of services via the Transition Services Agreement will likely occur only if PV has acquired employees sufficient and capable of substantially performing the myriad functions without the assistance of Defendants. While there is an intent to limit the term of the agreement to 18 months, we are not aware of an absolute prohibition on an amendment to extend the term beyond 18 months to address any employment shortcomings experienced by PV. We also note that the CIS contemplates changes and provides on p. 18 that ‘‘to the extent PV Brewing or Defendants seek to amend or modify any transition services agreement, the United States must approve any changes.’’ Thus, we remain concerned that PV will remain entangled with ABI for critical services beyond 18 months. Entanglement No. 4: Contract Brewing of PV Kona Brew by ABI Per the PFJ, at the option of PV, Defendants are required to enter into a non-exclusive supply contract for the production, packaging, and delivery of beer.16 We understand the logic of the contract brewing arrangement given: (i) The history of ABI brewing Kona Brew beer for years due to the absence of a fully operational brewery in Hawaii capable of handling CBA’s production requirements; and (ii) the fact that ABI and PV will both selling a common product such that the quality of PV Kona Brew must be commensurate with ABI Kona Brew. PV will be acquiring a new brewery that has been under construction since 14 CIS at p. 17. at pp. 17 & 18. Interestingly, the CIS does not express the sentiment that PV be incentivized to become a ‘‘fully independent competitor’’ with respect to the distributor agreement with the WOD nor the non-exclusive supply contract with Defendants discussed later. 16 See, PFJ at ¶ IV(N) on pp. 12–13. The movement of PV Kona Brew from the mainland brewery to the WOD appears to be a continuous flow with title to the beer remaining with ABI. 15 CIS PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 as far back as 2018 if not earlier.17 The exact timing of when the brewery will be certified as being fully operational is unknown. But we do know that Defendants will be deemed to have complied with their PFJ obligation on the new brewery if: (i) The new brewery achieves an average production capacity of 1,500 barrels of saleable Beer each calendar week for three consecutive calendar weeks within 180 calendar days after the Court’s entry of the Stipulation and Order; 18 and (ii) If Defendants warrant to PV that the new brewery is operational and without material defect.19 If these metrics are not met, then Defendants will be required to pay $25,000 per day until they achieve compliance per the PFJ.20 At the moment, until the brewery is fully operational, there is uncertainty as to the true capability of the new brewery to produce the entire product spectrum and quantity of PV Kona Brew cans and draught beer. We therefore expect PV will remain reliant on ABI for the production, packaging, and delivery of beer sufficient to meet PV’s immediate needs via the non-exclusive supply contract with ABI. This entanglement of PV with ABI through the non-exclusive supply contract should provide the products needed by PV and promote consistency between PV Kona Brew and ABI Kona Brew until the new brewery is fully operational. The supply agreement may be for a period of five (5) years as contemplated by the PFJ—an initial three year period plus two one-year periods. We remain concerned, however, that PV’s entanglement with ABI via the non-exclusive supply contract will continue beyond five (5) years for three reasons. First, it is unclear whether and to what extent the new brewery will be able to brew all the canned beer and draught beer needed by PV. Second, we are not aware of an absolute prohibition on an amendment to extend the term of the non-exclusive supply contract beyond five (5) years months to address production 17 The CBA 2017 10–K report at p. 23 stated that ‘‘In 2016, we held a groundbreaking ceremony for a new brewery near our existing brewery and pub in Kona. The new brewery, which is being built with sustainability in mind, is scheduled to go online in the first quarter of 2019.’’ The CBA 2018 10–K report at p. 7 stated that that the brewery was scheduled to go online in the latter half of 2019. 18 It is not clear what ‘‘1,500 barrels of saleable beer’’ represents in terms of PV’s production requirements nor clear as to the extent 1,500 barrels will free PV from ABI’s contract brewing role. 19 CIS at p. 13 referring to PFJ at ¶ IV.B and J. 20 CIS at p. 13. E:\FR\FM\24MRN1.SGM 24MRN1 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices shortcomings experienced by PV. Here, we note that the CIS contemplates changes and provides on p. 16 that ‘‘to the extent PV Brewing or Defendants seek to amend or modify any supply agreement, the United States must approve any changes.’’ Third, PV does not have the facilities in Hawaii to brew bottled beer.21 PV will therefore be reliant on the nonexclusive supply contract with ABI as long as PV decides to sell PV Kona Brew in bottles. Admittedly, PV will have the option to contract with other brewers to brew its PV Kona Brew in bottles as well as in cans and draught. But the fact that PV may pursue a non-ABI brewing option does not mean the option is viable due to: (i) The intricacies of switching to a new brewery; (ii) the need to ensure quality control and consistency between the multiple PV Kona Brew products and ABI Kona Brew products; and (iii) the need to ensure sufficient production quantities. That ‘‘Defendants are already familiar with the recipes and brewing processes for Kona brands’’ and have the brewing capacity provides much comfort if not inertia against pursuing a non-ABI brewing option.22 We are concerned that this entanglement between PV and ABI via the nonexclusive supply contract with ABI will continue beyond 5 years as long as PV chooses to sell bottled beer and/or if the new brewery is not able to produce PV’s entire requirements of PV Kona Brew cans and draught beer of sufficient quality and quantity after 5 years.23 Summary Based on the above, we are concerned that the PFJ does not meet the ‘‘public interest’’ standard. Ongoing entanglements between ABI and PV raise concerns that the divestiture remedy will not establish PV to be: (i) Truly independent of ABI; and (ii) able to effectively compete with ABI in Hawaii: • PV and ABI will be intertwined as they both will be selling the same branded product in their respective sales territories. • PV’s entanglement with and reliance on ABI’s wholly-owned distributor may well mean that ABI will have pricing control and authority over the price-to-retailer of PV Kona Brew which could foster: 15709 Æ ABI’s price leadership and Molson Coors’s willingness to follow ABI’s announced price increases in Hawaii; and Æ Anticompetitive pricing of the PTR of PV Kona Brew in comparison to other beers sold by ABI in Hawaii. • PV’s entanglement with and reliance on ABI for the performance of critical business functions through the Transition Services Agreement will give ABI influence and if not a measure of control over these business functions. • By reason of the non-exclusive supply contract, PV will be entangled with ABI for production, packaging and delivery of PV Kona Brew: Æ We expect PV to be close to 100% reliant on ABI as its contract brewer until the new brewery is fully operational; Æ We expect PV to be reliant on ABI as long as PV chooses to sell bottled beer; and Æ We expect PV to be reliant on ABI if the new brewery is not able to produce PV’s entire requirements of PV Kona Brew cans and draught beer of sufficient quality and quantity after 5 years. EXHIBITB A. i .. •~~ ~AJ ► o~ MAUI KUPU khammond on DSKJM1Z7X2PROD with NOTICES 7 December 2020 Robert A. Lepore, Chief, Transportation, Energy, and Agriculture Section Antitrust Division, Department of Justice, 450 5th Street NW, Suite 8000, Washington, DC 20530 21 CIS at p. 15. at p. 15. 23 We also remain concerned over the potential customer confusion that could be caused by: (i) ‘‘locally-made’’ PV Kona Brew cans being 22 CIS VerDate Sep<11>2014 16:30 Mar 23, 2021 Jkt 253001 MAUI HARD SELiZER - Re: Testimony; United States of America, Plaintiff, v. Anheuser-Busch INBEV SA/NV, Anheuser-Busch Companies, LLC, and Craft Brew Alliance, Inc. Aloha Mr. Lepore, I would like to provide comment on the proposed sale of the Craft Brewers Alliance (CBA) assets in Hawaii to PV Brewing of Kansas as we feel that the divestiture process was unfairly administered, and a buyer was selected for their clear ties to Anheuser Busch InBev (ABI) and at a price substantially below ‘‘fair market value’’. In the currently proposed structure, there is comingled with cans and bottles produced and packaged for PV by ABI on the U.S. mainland under contract; and/or (ii) mainland-brewed beer being poured in bars and restaurants in Hawaii without any signage. One solution is packaging and notice to clearly and conspicuously inform consumers of where the particular PV Kona Brew was brewed. The notice provided by ABI on packaging used to date has not been as clear and conspicuous to inform consumers of where the beer was brewed. PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 E:\FR\FM\24MRN1.SGM 24MRN1 EN24MR21.000</GPH> -SPIRITS BREWINGC! khammond on DSKJM1Z7X2PROD with NOTICES 15710 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices simply no separation in the short or long term from ABI. For a bit of background our company is 100% locally owned in Hawai1i and is a small closely held family business. We began brewing in 2005 with the simple idea that or State needed an authentic craft beer that was truly made in Hawai1i. At the time there were very few brewing operations and Kona was the only widely sold offering, and even then was not made in Hawai1i. Even back then, all the packaged product (cans did not exist at the time) and much of the draft was being brewed on the mainland, shipped to Hawai1i and sold as supposedly ‘‘local’’ and being from Hawaii. We saw an opportunity to bring authenticity and a sense of place to craft beer in Hawai1i and from that simple idea Maui Brewing Co. (MBC) was born. Maui Brewing Co. is Hawai1i’s largest craft brewer, and brewery for that matter. No one brews as much beer in the State as we do. We have a 16-year history of brewing in the islands with volumes that far surpass those of our competitors by at least 4-fold. We also operate 4 restaurant locations; two on Maui and two on Oahu. Our craft beer is synonymous with authenticity, quality, innovation and sense of place. We are local and every drop of beer brewed to date has been brewed in Hawai1i. When we learned of the proposed divestiture of the Kona brands in State, along with the sale of the new brewery and retail locations we were intrigued at the opportunity to combine the two brands into a truly authentic Hawai1i organization leveraging the strengths of both. Most importantly I saw a vision of two brands coming together for the betterment of Hawai1i and to finally bring legitimacy to the Kona brands across the State, meaning that this would then be truly brewed in Hawai1i. In my eyes this was something to be celebrated and bringing the Kona brand back to Hawai1i would be my honor. We followed this transaction closely and were part of one offer through another group. This offer was not accepted and was likely ignored. The reason I say ‘ignored’ is that when we learned to whom the sale was awarded, we were all shocked at the extremely low price and only I was not surprised by the fact that a former ABI executive was going to be purchasing the assets of Kona. I truly did not believe that the Department of Justice (DOJ) would approve this structure as a buyer as it does not in any way fully disconnect ABI from Kona. I look at the published information on the new brewing facility in Kona. A VerDate Sep<11>2014 16:30 Mar 23, 2021 Jkt 253001 30,000 square foot facility is simply not capable of producing 100,000 barrels a year. There are many ways to evaluate this. By comparison we operate an 82,000 facility approximately 65,000 of which is dedicated to brewing and have a true 100,000-barrel capacity facility. The shipping and logistics challenges in Hawai1i alone do not allow for this to be achieved. I have done a comprehensive analysis on all the publicly available data for the new brewery in Kona and suffice to say it is not nearly capable of brewing all of Kona’s beer for Hawai1i. Their own marketing materials when looking to sell the Hawai1i assets state that the ‘‘new brewery will allow for the majority of its Hawaiian consumed products to be locally brewed’’. This by definition means that any ‘‘transitional brewing agreement’’ is not meant to be temporary and in fact be a long-term reliance and as soon as no one is watching it is unlikely to believe PV will attempt to brew 100% of the beer in Hawai1i. Therefore, by allowing PV Brewing (backed by a private equity firm) to purchase Kona’s assets with a former ABI executive with a full-time position as President/Chief Operating Officer of a larger grocer managing from afar, a brand that is owned in the rest of the world by ABI, selling beer brewed by ABI, to an ABI Wholly Owned Distributor (WOD). Where exactly is the disconnect from ABI? I subsequently placed a direct and unsolicited Indication of Interest for a significant premium over the PV Brewing offer for our company to acquire the Kona assets in Hawai1i. I was clear that this Indication of Interest (IOI) could be swiftly converted to Letter of Intent (LOI) and provide the basis for a Sale Agreement and close quickly to meet to needs of all parties. Prior to this direct offer, I was a consultant on an offer that was nearly a 3X premium above what was ultimately paid. I would think that the shareholders of CBA would have wanted their company to accept a qualified buyer and the highest bid. From an enterprise value viewpoint, the purchase price awarded to PV Brewing seems quite low. What was advertised as a 24MM+ new brewery, with 2 successful restaurants grossing north of 15MM, on top of over a million case equivalents of beer sold in State, could certainly not be sold for 16MM as a legitimate enterprise value. To me, and many others, it seems this process was not conducted fairly and there clearly were motives at play to keep Kona as much under ABI influence as possible. A reasonable person can see this for what it is. It is unlikely to believe that a former ABI executive, PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 with a separate successful career decides to start a brewery in Hawai1i with no plans to move here to operate it, begins his career as a brewer with a brand like Kona. Furthermore, that the assets are sold at a price that could only be described as a ‘‘sweetheart deal’’ awarded to former ABI company men to ensure long-term influence over the Kona brand in Hawai1i and across the world. I then begin to look at the term ‘‘qualified buyer’’. It would seem to me that a company such as ours, with a dedicated, local, top-tier team operating 4 restaurants and the largest brewing operation in the State offering more money should at least be considered. From an experience standpoint, no one in Hawai1i and no one outside of Hawai1i has more experience brewing in the islands than we do. To say that it’s a challenge to brew in Hawai1i is an understatement and we have proven our capabilities of brewing nearly 60,000 barrels of beer each year. I am also a founding member of the Hawaiian Craft Brewers Guild, Vice-Chair of the Brewers Association, and have been led more than a dozen legislative actions in Hawai1i making a profound impact on the brewing community and access to beer. Additionally, our restaurant operations group has the capability to handle additional locations. I believe our company is not only a qualified buyer, but the most qualified buyer due to our experience and capabilities. It would seem that if the sale was meant to be a legitimate divestiture of the Kona Brewing assets in Hawai1i, the sale would have been awarded to a buyer exhibiting a history of brewing in Hawai1i at the annual volumes needed to meet demand, willing to pay a higher price, maximize shareholder value, has existing restaurant operations in Hawai1i capable of operating the two Kona pubs, and has a brewery with additional capacity to handle it’s volume and augment the shortfall of the new Kona facility to meet demand without long term reliance on ABI for brewing. Again, it is inconceivable that PV Brewing can meet the Hawai1i demand for the various beers and packaging configurations without long-term reliance on ABI. Without true capabilities to brew 100% of the KBC demand in Hawai1i, ABI WOD in Hawai1i will simply be ordering and receiving direct containers of KBC brand beer from ABI facilities on the mainland, these containers would never even touch the loading dock at ‘‘PV Brewing’’ on the Big Island. With an integration of Maui Brewing Co. and Kona Brewing Co. operating as two separate ‘‘partner’’ brands we would be 100% self-sufficient after a short E:\FR\FM\24MRN1.SGM 24MRN1 15711 Federal Register / Vol. 86, No. 55 / Wednesday, March 24, 2021 / Notices transition brewing agreement. Between the two facilities MBC and KBC, we would have capacity, redundancy and true economies of scale to execute this plan completely free from ABI influence. I have prepared a spreadsheet with data from my analysis of the publicly available information from the new brewery construction along with valuation metrics for the company. I can share this at the appropriate time in our discussion. In closing we feel that the divestiture process was unfairly administered, and a buyer was selected for their clear ties to ABI and the desire to maintain influence. We are still an interested party and would like the opportunity to be considered as a buyer for the Kona Brewing assets within Hawai1i. Sincerely, /s/ Garrett W. Marrero CEO, Founder, Maui Brewing Co. [FR Doc. 2021–05988 Filed 3–23–21; 8:45 am] BILLING CODE 4410–11–P DEPARTMENT OF JUSTICE Drug Enforcement Administration [Docket No. DEA–813] Importer of Controlled Substances Application: Shertech Laboratories, LLC Drug code Controlled substance I Cocaine ........................ 9041 Schedule III The company plans to import synthetic derivatives of the listed controlled substance in bulk form to conduct clinical trials. No other activity for this drug code is authorized for this registration. Approval of permit applications will occur only when the registrant’s business activity is consistent with what is authorized under 21 U.S.C. 952(a)(2). Authorization will not extend to the import of Food and Drug Administration-approved or nonapproved finished dosage forms for commercial sale. William T. McDermott, Assistant Administrator. Drug Enforcement Administration, Justice. ACTION: Notice of application. [FR Doc. 2021–06031 Filed 3–23–21; 8:45 am] Shertech Laboratories, LLC has applied to be registered as an importer of basic class(es) of controlled substance(s). Refer to Supplemental Information listed below for further drug information. DATES: Registered bulk manufacturers of the affected basic class(es), and applicants therefore, may file written comments on or objections to the issuance of the proposed registration on or before April 23, 2021. Such persons may also file a written request for a hearing on the application on or before April 23, 2021. ADDRESSES: Written comments should be sent to: Drug Enforcement Administration, Attention: DEA Federal Register Representative/DPW, 8701 Morrissette Drive, Springfield, Virginia 22152. All requests for a hearing must be sent to: Drug Enforcement Administration, Attn: Administrator, 8701 Morrissette Drive, Springfield, Virginia 22152. All requests for a hearing should also be sent to: (1) Drug DEPARTMENT OF JUSTICE AGENCY: SUMMARY: khammond on DSKJM1Z7X2PROD with NOTICES Enforcement Administration, Attn: Hearing Clerk/OALJ, 8701 Morrissette Drive, Springfield, Virginia 22152; and (2) Drug Enforcement Administration, Attn: DEA Federal Register Representative/DPW, 8701 Morrissette Drive, Springfield, Virginia 22152. SUPPLEMENTARY INFORMATION: In accordance with 21 CFR 1301.34(a), this is notice that on March 1, 2021, Shertech Laboratories, LLC, 1185 Woods Chapel Road, Duncan, South Carolina 29334, applied to be registered as an importer of the following basic class(es) of controlled substance(s): VerDate Sep<11>2014 16:30 Mar 23, 2021 Jkt 253001 BILLING CODE 4410–09–P Drug Enforcement Administration [Docket No. DEA–812] Importer of Controlled Substances Application: Medi-Physics Inc dba GE Healthcare hearing on the application on or before April 23, 2021. ADDRESSES: Written comments should be sent to: Drug Enforcement Administration, Attention: DEA Federal Register Representative/DPW, 8701 Morrissette Drive, Springfield, Virginia 22152. All requests for a hearing must be sent to: Drug Enforcement Administration, Attn: Administrator, 8701 Morrissette Drive, Springfield, Virginia 22152. All requests for a hearing should also be sent to: (1) Drug Enforcement Administration, Attn: Hearing Clerk/OALJ, 8701 Morrissette Drive, Springfield, Virginia 22152; and (2) Drug Enforcement Administration, Attn: DEA Federal Register Representative/DPW, 8701 Morrissette Drive, Springfield, Virginia 22152. SUPPLEMENTARY INFORMATION: In accordance with 21 CFR 1301.34(a), this is notice that on February 26, 2021, Medi-Physics Inc dba GE Healthcare, 3350 North Ridge Avenue, Arlington Heights, Illinois 60004–1412, applied to be registered as an importer of the following basic class(es) of controlled substance(s): Controlled substance Ecgonine ....................... Drug code 9180 Schedule II The company plans to import derivatives of the controlled substance to be used for the manufacture a diagnostic product and reference standards. No other activity for this drug code is authorized for this registration. Approval of permit applications will occur only when the registrant’s business activity is consistent with what is authorized under 21 U.S.C. 952(a)(2). Authorization will not extend to the import of Food and Drug Administration-approved or nonapproved finished dosage forms for commercial sale. William T. McDermott, Assistant Administrator. Drug Enforcement Administration, Justice. ACTION: Notice of application. AGENCY: [FR Doc. 2021–06030 Filed 3–23–21; 8:45 am] BILLING CODE 4410–09–P Medi-Physics Inc dba GE Healthcare has applied to be registered as an importer of basic class(es) of controlled substance(s). Refer to Supplemental Information listed below for further drug information. DATES: Registered bulk manufacturers of the affected basic class(es), and applicants therefore, may file written comments on or objections to the issuance of the proposed registration on or before April 23, 2021. Such persons may also file a written request for a SUMMARY: PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 DEPARTMENT OF JUSTICE Drug Enforcement Administration [Docket No. DEA–811] Importer of Controlled Substances Application: Perkinelmer, Inc. Drug Enforcement Administration, Justice. ACTION: Notice of application. AGENCY: E:\FR\FM\24MRN1.SGM 24MRN1

Agencies

[Federal Register Volume 86, Number 55 (Wednesday, March 24, 2021)]
[Notices]
[Pages 15700-15711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05988]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Anheuser-Busch InBev SA/NV, et al.; Response to 
Public Comments

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the Response to 
Public Comments on the Proposed Final Judgment in United States v. 
Anheuser-Busch InBev SA/NV, et al., Civil Action No. 4:20-cv-01282-SRC, 
which was filed in the United States District Court for the Eastern 
District of Missouri on March 17, 2021, together with a copy of the two 
comments received by the United States.
    A copy of the comments and the United States' response to the 
comments is available at https://www.justice.gov/atr/case/us-v-anheuser-busch-inbev-sanv-et-al. Copies of the comments and the United 
States' response are available for inspection at the Office of the 
Clerk of the United States District Court for the Eastern District of 
Missouri. Copies of these materials may also be obtained from the 
Antitrust Division upon request and payment of the copying fee set by 
Department of Justice regulations.

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

Response of Plaintiff United States to Public Comments on the Proposed 
Final Judgment

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act (the ``APPA'' or ``Tunney Act''), 15 U.S.C. 16(b)-(h), 
the United States hereby responds to the two public comments received 
regarding the proposed Final Judgment in this case. After careful 
consideration of the submitted comments, the United States continues to 
believe that the divestiture required by the proposed Final Judgment 
provides an effective and appropriate remedy for the antitrust 
violation alleged in the Complaint and is therefore in the public 
interest. The United States will move the Court for entry of the 
proposed Final Judgment after the public comments and this

[[Page 15701]]

response have been published as required by 15 U.S.C. 16(d).

I. Procedural History

    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''). After a thorough and comprehensive investigation, the United 
States filed a civil antitrust Complaint on September 18, 2020, seeking 
to enjoin the proposed transaction because it would substantially 
lessen competition for beer sold in the state of Hawaii, in violation 
of Section 7 of the Clayton Act, 15 U.S.C. 18. See Dkt. No. 1.
    At the same time the Complaint was filed, the United States filed a 
proposed Final Judgment and an Asset Preservation and Hold Separate 
Stipulation and Order (``Stipulation and Order'') in which the United 
States and Defendants consented to entry of the proposed Final Judgment 
after compliance with the requirements of the Tunney Act. See Dkt. No. 
2-1. On September 25, 2020, the Court entered the Stipulation and 
Order. See Dkt. No. 14. On October 6, 2020, the divestiture 
contemplated by the proposed Final Judgment was effectuated to PV 
Brewing Partners, LLC (``PV Brewing''). On October 26, 2020, the United 
States filed a Competitive Impact Statement, describing the transaction 
and the proposed Final Judgment. See Dkt. No. 17.
    On October 30, 2020, the United States published the proposed Final 
Judgment and the Competitive Impact Statement in the Federal Register, 
see 85 FR 68918 (October 30, 2020), and caused notice regarding the 
same, together with directions for the submission of written comments 
relating to the proposed Final Judgment, to be published in the 
Washington Post from October 30, 2020, through November 5, 2020; the 
St. Louis Post-Dispatch from October 30, 2020, through November 7, 
2020; and the Honolulu Star-Advertiser from October 30, 2020, through 
November 9, 2020. The 60-day public comment period ended on January 8, 
2021. The United States received two public comments. See Tunney Act 
Comment of the Attorney General of Hawaii on the Proposed Final 
Judgment, attached as Exhibit A; Tunney Act Comment of Maui Brewing 
Co., attached as Exhibit B.

II. The Complaint and the Proposed Final Judgment

    The Complaint alleges that ABI's proposed acquisition of CBA would 
likely eliminate important existing head-to-head competition in the 
state of Hawaii between ABI's beer brands and CBA's beer brands, 
particularly CBA's Kona brand. Specifically, 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. The Complaint also 
alleges that, but for the merger, the competition between ABI and CBA 
in Hawaii likely would have grown significantly because CBA was 
investing in its business in Hawaii, had plans to significantly grow 
its share of beer volume sold in Hawaii, and planned to open a new 
brewery in 2021. The Complaint also alleges that the transaction would 
likely facilitate price coordination between ABI and Molson Coors 
Beverage Company in Hawaii. This likely reduction in existing and 
future competition would result in higher prices and reduced innovation 
for consumers in Hawaii, in violation of Section 7 of the Clayton Act, 
15 U.S.C. 18.
    The proposed Final Judgment remedies the harm to competition 
alleged in the Complaint by requiring a divestiture that will establish 
an independent, economically viable competitor in the state. It 
requires Defendants to divest Kona Brewery, LLC (``Kona Hawaii''), 
which includes CBA's entire Kona brand business in the state of Hawaii, 
as well as other related tangible and intangible assets, to an acquirer 
approved by the United States. ABI proposed PV Brewing as the acquirer. 
After a rigorous and independent evaluation, the United States approved 
PV Brewing as the acquirer. PV Brewing is a well-financed company, 
backed by private equity, that is incentivized to compete aggressively 
in the Hawaii beer market. In addition, the operational leadership of 
PV Brewing has extensive experience in the brewing, developing, 
packaging, importing, distributing, marketing, promoting, and selling 
of beer.
    The proposed Final Judgment also allows the acquirer, at its 
option, to enter into a supply contract, distribution agreement, and 
transition services agreement with ABI. These divestiture assets and 
optional supply, distribution, and transition services agreements--
which are similar to agreements that CBA had with ABI prior to the 
transaction--will enable the acquirer to compete effectively from day 
one in the market for beer in the state of Hawaii, thereby restoring 
the competition that would otherwise likely be lost as a result of the 
transaction. PV Brewing has elected to exercise its options and entered 
into supply, distribution, and transition services agreements with ABI, 
as permitted by the proposed Final Judgment.

III. Standard of Judicial Review

    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.

    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

[[Page 15702]]

the mechanisms 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, Public Law 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. 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).

IV. Summary of Comments and the United States' Response

    The United States received two public comments in response to the 
proposed Final Judgment. One comment is from the State of Hawaii 
through its Office of the Attorney General (``Hawaii AG''). The other 
comment is from Maui Brewing Co. (``Maui Brewing''), which describes 
itself as Hawaii's ``largest craft brewer.'' Exhibit B at 1. Maui 
Brewing sought to purchase the divestiture assets by submitting an 
``Indication of Interest'' to ABI, but was not selected by ABI as the 
proposed acquirer. Id. at 2.
    The overarching concern raised by both the Hawaii AG and Maui 
Brewing is that the acquirer, PV Brewing, will continue to 
significantly rely on ABI such that it will not compete independently 
with, nor constrain, ABI. More specifically, the concerns raised by the 
Hawaii AG and Maui Brewing can be grouped into five categories: (1) ABI 
will retain the rights to the Kona brand outside of Hawaii; (2) the 
acquirer may enter into a distribution agreement with ABI's wholly-
owned distributor, as CBA did prior to the transaction; (3) the 
acquirer may enter into a supply contract with ABI to brew and package 
at least some of its beer, as CBA did prior to the transaction; (4) the 
acquirer may enter into a temporary transition services agreement with 
ABI; and (5) the

[[Page 15703]]

process by which ABI selected the proposed acquirer was unfair.\1\
---------------------------------------------------------------------------

    \1\ The Hawaii AG also raises an issue regarding the labels that 
it believes should be affixed to beer products brewed outside of the 
state of Hawaii. See Exhibit A at 10 n.23. To the extent the State 
of Hawaii wishes to require brewers to disclose the source of beer 
sold in the state of Hawaii, that is a matter unrelated to the 
antitrust violation alleged in the Complaint and, as such, is 
outside the purview of the Court's review under the Tunney Act. See 
Microsoft, 56 F.3d at 1459-60.
---------------------------------------------------------------------------

    For these reasons, the Hawaii AG asserts that the proposed Final 
Judgment fails to protect competition, although the Hawaii AG chose not 
to exercise its own independent authority to challenge the transaction 
under the antitrust laws. For its part, Maui Brewing contends that, due 
to the concerns above, it should be the acquirer of the divestiture 
assets instead of PV Brewing.

A. The Remedy Creates an Independent, Robust Competitor in Hawaii Where 
the Competitive Harm was Likely to Occur

    The Hawaii AG and Maui Brewing express concern that ABI retains the 
rights to sell Kona-branded beer outside of Hawaii following the 
divestiture. See Exhibit A at 2-3; Exhibit B at 2. In their view, ABI's 
ability to sell Kona-branded beer outside of Hawaii could impede the 
acquirer's ability to compete effectively in the market for beer in 
Hawaii. There is no basis for this concern; the proposed Final Judgment 
grants the acquirer the assets, rights, and personnel it needs to be a 
robust competitor in Hawaii, the only state in which the transaction 
would have otherwise harmed competition.
    In this case, the Complaint alleges harm to competition in a 
geographic market ``no larger than the state of Hawaii.'' See Dkt. No. 
1 (Complaint ] 19). The overarching purpose of a merger remedy is to 
restore the competition lost by the transaction. See Ford Motor Co. v. 
United States, 405 U.S. 562, 573 (1972) (``The relief in an antitrust 
case must be `effective to redress the violations' and `to restore 
competition.''') (quoting United States v. E. I. Du Pont De Nemours & 
Co., 366 U.S. 316, 326 (1961)); see also U.S. Dep't of Justice, Merger 
Remedies Manual (2020) (``DOJ Merger Remedies Manual'') at 3, available 
at https://www.justice.gov/atr/page/file/1312416/download.\2\ 
Therefore, it is appropriate for the merger remedy here to focus on 
restoring competition in the state of Hawaii.
---------------------------------------------------------------------------

    \2\ ``The purpose of this manual is to provide [Antitrust] 
Division attorneys and economists with a framework for structuring 
and implementing appropriate relief short of a full-stop injunction 
in merger cases.'' Id. at 2.
---------------------------------------------------------------------------

    Consistent with this principle, when a license for a product 
``covers the right to compete in multiple product or geographic 
markets, yet the merger adversely affects competition in only a subset 
of these markets, the [Antitrust] Division will insist only on the sale 
or license of rights necessary to maintain competition in the affected 
markets.'' DOJ Merger Remedies Manual at 7 n.25; see also United States 
v. Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) 
(rejecting complaining competitor's request that the Final Judgment be 
broadened to allow all customers--regardless of their location--to 
terminate their contracts with the parties without incurring fees 
because that would far exceed what is necessary to remedy the harm 
alleged in the complaint limited to 15 geographic markets).
    The divestiture assets encompass Kona Hawaii, CBA's entire Kona 
brand business unit in the state, including a restaurant, a brewery, a 
brewpub, a new brewery that is currently under construction, and an 
exclusive, irrevocable, perpetual, and fully paid-up license to Kona-
branded products in Hawaii, which gives the acquirer the sole right to 
sell Kona-branded products in Hawaii. See Dkt. No. 2-1, Exhibit A 
(Proposed Final Judgment, Para. II.I., M.-O.). The license grants the 
acquirer the sole right to innovate and develop new products using the 
Kona brand name and sell them in Hawaii. This right is important as 
beer brewers increasingly compete with one another by developing 
innovative products that are marketed using established beer brand 
names. Similarly, the license grants the acquirer the sole right to 
develop Hawaii-specific marketing promotions or Hawaii-specific 
packaging for the beer brewed at the new brewery, once it is 
operational.
    Paragraph IV.I. of the proposed Final Judgment establishes 
mechanisms by which the acquirer can hire personnel formerly employed 
by Kona Hawaii. Indeed, the United States understands that the Kona 
Hawaii leadership team has already joined PV Brewing. Those personnel 
will further enhance PV Brewing's ability to compete effectively in 
Hawaii. And the divestiture will enhance Kona Hawaii's independence 
from ABI. Before the transaction, ABI held an approximate 31% stake in 
CBA and, by extension, in Kona Hawaii. See Complaint ] 13. Following 
the divestiture, ABI will no longer own any stake in Kona Hawaii.
    Regardless of ABI's rights to the Kona brand in other geographies 
more than 2,000 miles away, the acquirer will be the sole owner of the 
rights to sell Kona-branded products in Hawaii--the state where the 
competitive harm is alleged to occur. As such, the acquirer will be 
fully empowered and incentivized to compete and grow its sales in 
Hawaii, thereby preserving the competition that would otherwise be lost 
as a result of the transaction.

B. The Distribution Relationship With ABI Is Optional and Terminable

    The Hawaii AG and Maui Brewing express concern that the proposed 
Final Judgment permits the acquirer to enter into a distribution 
agreement with ABI's wholly-owned distributor. See Exhibit A at 3-7; 
Exhibit B at 2. More specifically, the Hawaii AG asserts that the 
distribution agreement gives ABI ``control and authority'' over the 
price of the acquirer's Kona-branded beer, Exhibit A at 3, ``pav[ing] 
the way for Molson Coors to follow any price increases announced by 
[ABI] in Hawaii,'' id. at 4, and giving ABI the ``ability to prevent PV 
[Brewing] from competing against other beers sold by ABI,'' id. at 5. 
These assertions are incorrect.
    Brewers must have access to distribution channels to compete 
effectively in the beer industry. To give the acquirer access to 
distribution channels from day one, the proposed Final Judgment 
provides for a distribution agreement with ABI's wholly-owned 
subsidiary in the state. The distribution arrangement set forth in the 
proposed Final Judgment merely affords the acquirer the option to 
continue a distribution relationship that existed between CBA and ABI 
prior to the transaction. See Exhibit A at 3 (acknowledging that ABI 
distributed CBA's beer in Hawaii prior to the transaction). As the 
Complaint alleges, during the time when ABI and CBA had a distribution 
relationship, CBA competed head to head with ABI and constrained ABI's 
ability to coordinate higher prices in Hawaii. For example, the 
Complaint states that ``ABI and CBA compete directly against each other 
in Hawaii,'' Complaint ] 25; that ``Molson Coors's willingness to 
follow ABI's announced price increases is constrained'' by ``CBA and 
its Kona brand,'' Complaint ] 30; and 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,'' Complaint ] 16.\3\ 
After the divestiture, the acquirer

[[Page 15704]]

will have the ability and incentive to continue to offer at least this 
same level of competition, even if it chooses to contract with ABI for 
distribution services, just as CBA did before the transaction.
---------------------------------------------------------------------------

    \3\ The Complaint is taken as true for purposes of evaluating 
whether a remedy is adequate in a Tunney Act Proceeding. See United 
States v. Microsoft Corp., 56 F.3d 1448, 1459 (D.C. Cir. 1995). 
Commenters are not permitted to construct their ``own hypothetical 
case and then evaluate the decree against that case.'' Id.
---------------------------------------------------------------------------

    Here, the proposed Final Judgment requires that the distribution 
agreement be sufficient to meet the acquirer's needs, as the acquirer 
determines, and last for a period of time as determined by the 
acquirer. See Dkt. No. 2-1, Exhibit A (Proposed Final Judgment, Para. 
IV.O.). The distribution agreement with ABI's wholly-owned distributor 
is optional, which provides the acquirer with the ability to choose its 
own preferred method of distribution, whether that is ABI's wholly-
owned distributor or another distributor in the state of Hawaii. In 
making this decision, the acquirer's incentive will be to employ the 
distributor that most effectively sells its beer in competition with 
ABI and other rivals. The approved acquirer, PV Brewing, has the 
expertise necessary to make this choice for itself. PV Brewing's 
operational leadership has extensive experience in the beer industry, 
including negotiating distribution agreements.
    Even after entering into a distribution agreement with ABI's 
wholly-owned distributor, the acquirer will be able to terminate the 
agreement without cause, beginning one year after the agreement's 
effective date. See id. Thus, if ABI's wholly-owned distributor prices 
the Kona-branded products too high or too low to retailers or otherwise 
fails to market the Kona-branded products effectively, the acquirer 
will be able to shift its Kona-branded products to another distributor. 
The threat of termination without cause will incentivize ABI's wholly-
owned distributor to promote and sell the Kona-branded products to the 
acquirer's satisfaction in order to retain the popular Kona brand in 
its portfolio.\4\ Further, as noted above, the proposed Final Judgment 
establishes mechanisms by which PV Brewing can hire personnel formerly 
employed by Kona Hawaii. See id. at Para. IV.I. The Kona Hawaii 
leadership team's experience in the Hawaii beer industry further 
enhances PV Brewing's ability to select the distribution channels that 
allow it to compete most effectively in the state.
---------------------------------------------------------------------------

    \4\ The Hawaii AG asserts, based on an excerpt from CBA's 2018 
10-K filing, see Exhibit A at 6, that it would be costly and 
``daunting'' for PV Brewing to terminate its distribution contract 
with ABI's wholly-owned distributor and switch the Kona-branded 
products to a new distributor. But the quoted language relates to 
CBA's former contract with ABI covering distribution throughout the 
United States, not the contract between PV Brewing and ABI's wholly-
owned distributor covering distribution of Kona-branded products in 
Hawaii. As discussed above, in the distribution agreement permitted 
by the proposed Final Judgment, the acquirer holds the threat of 
termination without cause, which will incentivize ABI's wholly-owned 
distributor to promote and sell the Kona-branded products to the 
acquirer's satisfaction. In addition, in the beer industry, rival 
distributors typically pay the costs of switching a brand to their 
portfolios.
---------------------------------------------------------------------------

C. The Contract Brewing Relationship With ABI Is Optional, Non-
Exclusive, and Temporary

    The Hawaii AG and Maui Brewing express concern about allowing the 
acquirer, at its option, to engage ABI to brew and package Kona beer 
for the acquirer to sell in Hawaii. See Exhibit A at 8-10; Exhibit B at 
2. The Hawaii AG contends that PV Brewing ``will remain reliant on ABI 
for the production, packaging, and delivery of beer'' sufficient to 
meet PV Brewing's needs until the new brewery is operational, and so 
long as PV Brewing sells bottled beer in Hawaii. Exhibit A at 9-10.
    The United States agrees that until the new brewery in Hawaii is 
operational, the acquirer will need to arrange for another brewer to 
brew its canned and kegged beer in order to compete in Hawaii. 
Similarly, so long as the acquirer wishes to sell bottled beer in 
Hawaii, the acquirer will need to arrange for another brewer to brew 
and ship the acquirer's bottled beer to Hawaii.\5\ To ensure the 
uninterrupted supply of Kona-branded beer to sell in Hawaii, the 
proposed Final Judgment requires ABI to enter into a non-exclusive 
supply contract for the production, packaging, and delivery of beer 
sufficient to meet the acquirer's needs, as the acquirer determines and 
at the acquirer's option.
---------------------------------------------------------------------------

    \5\ As noted in the Competitive Impact Statement (Dkt. No. 17 at 
pg. 15), very little beer brewed in Hawaii is bottled in Hawaii 
because there is no large-scale production of glass beer bottles on 
the islands and importing empty glass bottles is prohibitively 
expensive for most brewers.
---------------------------------------------------------------------------

    As set forth in Paragraph IV.N. of the proposed Final Judgment, the 
contract brewing relationship with ABI does not impose any constraints 
on the acquirer. The contract has no minimum or maximum volume 
requirements, and it is non-exclusive. The acquirer is free to engage 
companies other than ABI to brew its beer for sale in Hawaii, either to 
supplement ABI's production or to replace ABI. This optional supply 
contract is limited to five years maximum to ensure that the acquirer 
will become a fully independent competitor to ABI. The supply contract 
cannot be extended, amended, or otherwise modified without the approval 
of the United States.
    The proposed Final Judgment provides the acquirer with the 
flexibility to choose its own preferred supplier, whether that is ABI 
or another brewer on the mainland. In making this decision, the 
acquirer's incentive will be to employ the contract brewer that most 
effectively brews and ships its beer. The approved acquirer, PV 
Brewing, has the expertise necessary to make this choice for itself.
    The Hawaii AG lists various factors that it contends could make it 
less than ``viable'' for PV Brewing to switch to a new contract brewer. 
Exhibit A at 10. The Hawaii AG, however, does not offer any reason to 
conclude that non-ABI contract brewers are incapable of managing ``the 
intricacies of switching,'' maintaining ``quality control and 
consistency,'' or ensuring ``sufficient production quantities'' for PV 
Brewing's needs. Id.
    The Hawaii AG also expresses concern that ABI does not have 
adequate motivation to complete construction of the new brewery and 
that a delay in completing the brewery may lengthen the time the 
acquirer needs a supply contract. See Exhibit A at 8-9. The proposed 
Final Judgment establishes strong incentives for ABI to complete the 
new brewery promptly. It requires ABI to continue construction of the 
new brewery and to 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 days of the Court's entry 
of the Stipulation and Order (that is, by March 24, 2021). See Dkt. No. 
2-1, Exhibit A (Proposed Final Judgment, Para. IV.B.). If ABI fails to 
reach that production metric by the deadline, it is required to pay the 
United States $25,000 per day until it achieves the metric. See id. at 
Para. IV.C. Once the new brewery is operational, the acquirer will be 
able to brew and package canned and kegged beer for sale in Hawaii.
    The Hawaii AG and Maui Brewing express doubt that the new brewery 
will be capable of supplying all of PV Brewing's beer, even once it is 
built. See Exhibit A at 9; Exhibit B at 2-3. When fully operational, 
however, the new brewery is expected to produce enough beer to meet 
present demand for canned and kegged Kona beer in Hawaii. And there are 
contract brewers, other than ABI, on the mainland with available 
brewing capacity to whom PV Brewing can turn to supply beer--bottled 
beer or otherwise--as needed.
    Lastly, CBA had a brewing contract with ABI prior to the 
transaction. See

[[Page 15705]]

Complaint ] 13 (``ABI . . . has a contract with CBA to brew some CBA 
brands of beer at ABI breweries''). The contract brewing provision in 
the proposed Final Judgment preserves for the acquirer the option to 
continue a brewing relationship that allowed CBA to compete effectively 
in the relevant market, including against ABI.

D. The Transition Services Agreement With ABI Is Optional, Limited, 
Temporary, and Terminable

    The Hawaii AG expresses concern that the proposed Final Judgment 
makes available to PV Brewing a transition services agreement with ABI, 
thereby giving ABI ``influence'' over PV Brewing's operations. Exhibit 
A at 7-8. The Hawaii AG is incorrect. The provision of transition 
services will not give ABI the ability to influence PV Brewing's 
operations because the services are narrow in scope and temporary. The 
provision of transition services helps ensure that the acquirer 
seamlessly steps into the helm of Kona Hawaii to compete with ABI.
    Transition services provisions, such as the one included in the 
proposed Final Judgment, are commonplace in connection with 
divestitures and serve an important role in ensuring the success of a 
divestiture. See, e.g., Final Judgment at 12-13, United States v. 
United Technologies Corp., No. 1:18-cv-02279 (D.D.C. 2018) (requiring 
Defendants to supply transition services such as facility management 
and upkeep, government compliance, and accounting and finance, at the 
purchaser's option); see also Competitive Impact Statement at 17, 
United States v. Bayer AG, No. 1:18-cv-01241 (D.D.C. 2018) (noting that 
transition services agreements are ``aimed at ensuring that the 
[divestiture] assets are handed off in a seamless and efficient manner 
. . . [and that divestiture buyer] can continue to serve customers 
immediately upon completion of the divestitures.'').
    Transition services agreements, such as the one contemplated by the 
proposed Final Judgment, are purposefully limited in scope. For 
example, the transition services provision here requires ABI to provide 
the acquirer with 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--only if the acquirer 
chooses. See Dkt. No. 2-1, Exhibit A (Proposed Final Judgment, Para. 
IV.P.).
    The transition services agreement permitted by the proposed Final 
Judgment is also temporary, lasting up to a maximum of 18 months. The 
acquirer has the right under the proposed Final Judgment to terminate 
any transition services agreement (or any portion of one), without cost 
or penalty, at any time upon notice to ABI. To the extent either the 
acquirer or ABI seeks to extend, or otherwise amend or modify a 
transition services agreement, those extensions, amendments, and 
modifications must be approved by the United States.
    The Hawaii AG asserts that PV Brewing may need to rely on ABI for 
transition services for more than 18 months, on the basis that it may 
take PV Brewing time to acquire knowledgeable local employees, see 
Exhibit A at 8. As noted above, however, the proposed Final Judgment 
puts in place mechanisms by which PV Brewing can hire personnel 
formerly employed by Kona Hawaii, and the local leadership team of Kona 
Hawaii has already joined PV Brewing.

E. The United States Rigorously and Independently Assessed the Approved 
Acquirer

    Finally, Maui Brewing contends that the process by which ABI 
selected PV Brewing as the proposed acquirer was ``unfairly 
administered,'' see Exhibit B at 1, and believes it instead should be 
approved as the acquirer of the divestiture assets. In support of that 
contention, Maui Brewing states that PV Brewing offered a price ``below 
fair market value''; Maui Brewing is more qualified than PV Brewing to 
be the acquirer; and ABI selected PV Brewing as the proposed acquirer 
due to its ``clear ties to ABI.'' Exhibit B at 1-3 (internal citations 
omitted).
    The goal of a divestiture is to ``ensure that the purchaser 
possesses both the means and the incentive to maintain the level of 
premerger competition in the market of concern.'' DOJ Merger Remedies 
Manual at 6. The United States is not ``to pick winners and losers'' or 
to ``protect or favor particular competitors.'' Id. at 4-5. In vetting 
a potential acquirer, the United States' ``appropriate remedial goal is 
to ensure that the selected purchaser will effectively preserve 
competition according to the requirements in the consent decree, not 
that [the acquirer] will necessarily be the best possible competitor.'' 
Id. at 24. The United States has done so here.
    In accordance with Paragraph IV.A. of the proposed Final Judgment, 
the United States has found PV Brewing to be an appropriate acquirer. 
Paragraph IV.E. of the proposed Final Judgment requires divestiture to 
an acquirer that ``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.'' Regardless of the process by which ABI selected 
PV Brewing as the proposed acquirer, the United States rigorously and 
independently evaluated PV Brewing as the proposed acquirer, including 
the qualifications, experience, incentives, business plans, finances, 
and professional and financial ties of PV Brewing and its operational 
team. Based on that evaluation, the United States concluded that PV 
Brewing is capable, willing, and incentivized to compete effectively 
and will preserve competition in the state of Hawaii, and approved PV 
Brewing as the purchaser.
    Further, the price offered by PV Brewing for the divestiture 
assets, which Maui Brewing characterizes as ``quite low,'' Exhibit B at 
2, does not cast doubt on PV Brewing's ability or intentions to 
compete. It is common for divestiture assets to be sold at below-market 
prices, because the ``divesting firm is being forced to dispose of 
assets within a limited period. Potential purchasers know this.'' DOJ 
Merger Remedies Manual at 25. Moreover, considerations other than 
price, such as the ability to close quickly and the likelihood of 
receiving approval from the United States, may result in the selection 
of a proposed acquirer who offers less than the highest price. In some 
cases, a low purchase price may raise concerns as to whether a proposed 
purchaser will be a successful competitor. See, e.g., United States v. 
Aetna, Inc., 240 F. Supp. 3d 1, 72 (D.D.C. 2017) (citing an ``extremely 
low purchase price'' as evidence that the divestiture buyer was not 
likely to be able to replace the competition lost by the merger).
    The key inquiry is whether ``the purchase price and other evidence 
indicate that the purchaser is unable or unwilling to compete in the 
relevant market.'' See DOJ Merger Remedies Manual at 25. In its 
investigation here, the United States did not find evidence that PV 
Brewing was unwilling or unable to compete in the relevant market, nor 
has Maui Brewing pointed to any such evidence.
    Lastly, Maui Brewing's concern about PV Brewing's ``clear ties to 
ABI'' ignores the fact that the divestiture will not only preserve the 
competition likely to be lost by the transaction, but will enhance

[[Page 15706]]

Kona Hawaii's independence from ABI. As noted previously, before this 
transaction, ABI held an approximate 31% stake in CBA and, by 
extension, in Kona Hawaii. ABI also had the right to appoint two of the 
eight seats on CBA's Board of Directors. See Complaint ] 13. Following 
the divestiture, ABI will no longer own any stake in Kona Hawaii.

V. Conclusion

    After careful consideration of the public comments, the United 
States continues to believe that the proposed Final Judgment provides 
an effective and appropriate remedy for the antitrust violation alleged 
in the Complaint, and is therefore in the public interest. The United 
States will move this Court to enter the Final Judgment after the 
comments and this response are published as required by 15 U.S.C. 
16(d).

Dated: March 17, 2021

Respectfully Submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA

/s/--------------------------------------------------------------------

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: [email protected].

Exhibit A

    Tunney Act Comment of the Attorney General of Hawaii on the 
Proposed Final Judgment Filed in United States of America v. 
Anheuser-Busch InBev SA/NV, Et Al.

Civil Action No. 4:20-cv-01282

Definitions

    The following terms are used in this comment:
     PV--means PV Brewing Partners, LLC, the acquirer of the 
divestiture assets, and includes Kona Brewing LLC.
     PV Kona Brew--means Kona Brew products believed to be sold 
by PV in Hawaii.
     ABI Kona Brew--means Kona Brew products made by ABI and 
sold outside of Hawaii.
     ABI--means Defendants Anheuser-Busch InBev SA/NV), 
Anheuser-Busch Companies, LLC, and Craft Brew Alliance, Inc. (``CBA''), 
unless otherwise specifically noted.
     CIS--means the Competitive Impact Statement.
     PFJ--means the proposed Final Judgment.

Introduction

    The PFJ provides that the intent of the divestiture remedy is:

    [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.\1\
---------------------------------------------------------------------------

    \1\ PFJ at ] III.D. at p. 8.

    The CIS provides additional insight on the intent of the 
---------------------------------------------------------------------------
divestiture remedy as follows:

    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 [S]tate of Hawaii.\2\ (Emphasis added.)
---------------------------------------------------------------------------

    \2\ CIS at p. 11.

    Respectfully, we are concerned that the PFJ does not meet the 
``public interest'' standard. While the PFJ contemplates PV, a newly-
formed entity, owning the divestiture assets, ongoing entanglements 
between ABI and PV raise concerns that: (i) The divestiture remedy will 
not establish PV to be truly independent of ABI; nor (ii) establish PV 
to be able to effectively compete with ABI in Hawaii.
    We summarize our concerns as follows:
     PV and ABI will be intertwined as they both will be 
selling the same branded product in their respective sales territories.
     PV's entanglement with and reliance on ABI's wholly-owned 
distributor (``WOD'') may well mean that ABI will have pricing control 
and authority over the price-to-retailer (PTR) of PV Kona Brew which 
could foster:
    [cir] ABI's price leadership and Molson Coors's willingness to 
follow ABI's announced price increases in Hawaii; and
    [cir] Anticompetitive pricing of the PTR of PV Kona Brew in 
comparison to other beers sold by ABI in Hawaii.\3\
---------------------------------------------------------------------------

    \3\ The PTR is the price at which the beer is sold by the 
distributor to retailers who set the retail price for customers. In 
this matter, the distributor is ABI's wholly-owned distributor.
---------------------------------------------------------------------------

     PV's entanglement with and reliance on ABI for the 
performance of critical business functions through the Transition 
Services Agreement will give ABI influence and if not a measure of 
control over these business functions.
     By reason of the non-exclusive supply contract, PV will be 
entangled with ABI for production, packaging and delivery of PV Kona 
Brew to meet PV's needs:
    [cir] We expect PV to be close to 100% reliant on ABI as its 
contract brewer until the new brewery is fully operational;
    [cir] We expect PV to be reliant on ABI as long as PV chooses to 
sell bottled beer;
    [cir] We expect PV to be reliant on ABI if the new brewery is not 
able to produce PV's entire requirements of PV Kona Brew cans and 
draught beer of sufficient quality and quantity after 5 years.

Discussion

Entanglement No. 1: The Common Product

    Post divestiture, PV and ABI will each be parts of a whole and 
intricately intertwined with the other. The ``whole'' is the universe 
of Kona Brew products where ideally, ABI and PV will be selling the 
same product--Kona Brew beer--as follows:

    (i) Kona Brew products are to be brewed and packaged in 
different locations:
    a. PV Kona Brew being brewed and packaged in Hawaii; and
    b. ABI Kona Brew being brewed and packaged on the U.S. mainland; 
and
    (ii) Kona Brew products are to be sold in different locations:
    a. PV Kona Brew will be sold in Hawaii; and
    b. ABI Kona Brew will be sold outside of Hawaii throughout the 
rest of the world.\4\
---------------------------------------------------------------------------

    \4\ This ideal world is not what will occur because initially, 
portions of PV Kona Brew will be produced and packaged on the U.S. 
mainland and delivered to Hawaii for distribution by ABI's WOD to 
Hawaii retailers.

    ABI Kona Brew and PV Kona Brew are both tied to a common ``story'' 
of the beer's origins in Hawaii and the advertising and lifestyle niche 
reflected in the marketing of the beer, e.g., the marketing of the 
products as ``Liquid Aloha'' and other Hawaii-themed campaigns. It 
would not make sense for ABI to disavow the Hawaii-connection nor for 
PV to now claim a non-Hawaii origin.
    Since Defendants and PV are selling the same products in concept as 
well as in taste and marketing, each will be intricately intertwined 
with the other which may call for each to be moving with the other in a 
highly coordinated manner.

Entanglement No. 2: The Role of ABI's Wholly Owned Distributor

    Per the PFJ, at the option of PV, ABI's WOD in Hawaii is required 
to enter into a distribution agreement with PV.\5\ Thus, PV will 
logistically continue with the pre-transaction arrangement that CBA had 
where the WOD distributed all of CBA's Kona Brew products in Hawaii.\6\ 
This WOD has distributed

[[Page 15707]]

other ABI beers in Hawaii in the past.\7\ We expect the WOD to continue 
to distribute other ABI beers post-divestiture.
---------------------------------------------------------------------------

    \5\ See, PFJ at ] IV(O) on p. 13.
    \6\ CIS at p. 16.
    \7\ See, e.g., https://www.yellowpages.com/aiea-hi/mip/anheuser-busch-sales-of-hawaii-inc-11728049.
---------------------------------------------------------------------------

    Since the WOD is wholly-owned by ABI, we are concerned that ABI 
will have the control and authority over the PTR of PV Kona Brew. Such 
control by ABI over the PTR is strongly suggested by ] 29 of the 
Complaint which alleges that ABI has a ``price leadership'' strategy, 
that ABI seeks to generate ``industry-wide price increases,'' that ABI 
implements this strategy by pre-announcing its own price increases and 
purposefully making those price increases, and that ABI tracks its 
primary competitors:

    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.

    The allegations do not mention the authority of the WOD to set the 
PTR or the WOD's discretion on implementation of the price leadership 
strategy. In fact, the allegations read as if the WOD does not have any 
role or involvement with ABI's industry-wide price increases, and in 
particular, as to price increases applicable to Hawaii.
    We are therefore concerned that the entanglement of PV with ABI's 
WOD will pose at least two (2) anticompetitive pricing problems:

Problem No. 1: Facilitating ABI's Price Leadership viz. Molson Coors

    The CIS at p. 10 describes a concern that through the proposed 
transaction, ``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.'' The Complaint describes the dynamics as 
follows:

    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. (Emphasis added.)

    The divestiture remedy does not remove nor lessen the prospect of a 
violation of Section 7 of the Clayton Act. Due to ABI's control and 
authority over the PTR, ABI will still possess the ability to remove 
any pricing constraint associated with the PTR of PV Kona Brew and 
thereby pave the way for Molson Coors to follow any price increases 
announced by ABI in Hawaii.

Problem No. 2: Anticompetitive Pricing of PV Kona Brew Versus Other 
Beers Sold by ABI in Hawaii

    The entanglement between PV and ABI's WOD may negatively impact 
price competition between PV Kona Brew and other ABI beers sold in 
Hawaii.
    ABI groups beers into five segments and sells beers in each segment 
in Hawaii:
    1. Value (Busch Light and Natural Light);
    2. Core (Bud Light and Budweiser);
    3. Core-plus (Michelob Ultra and Bud Light Lime);
    4. Premium (Michelob Ultra Pure Gold); and
    5. Super-premium (Stella Artois and Golden Road).\8\
---------------------------------------------------------------------------

    \8\ CIS at p.4.
---------------------------------------------------------------------------

    Importantly, as noted earlier, the WOD has distributed other ABI 
beers in Hawaii, and we expect it will continue to do so post-
divestiture.
    We are not aware of any prohibition that would prevent PV from 
seeking to have PV Kona Brew priced sufficiently low by a distributor 
independent of ABI to effectively compete with ABI's beers in other 
segments, such as: (i) The Value segment; (ii) the Core segment; or 
(iii) the Core-plus segment.\9\
---------------------------------------------------------------------------

    \9\ The Complaint at ] 16 acknowledges the importance of changes 
in price in prompting consumers to switch beers or ``trade up'' or 
``trade down'' between segments:
    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.
---------------------------------------------------------------------------

    But with the divestiture remedy, through its control and authority 
over the WOD and the PTR of PV Kona Brew, ABI will have the ability to 
prevent PV Kona Brew from competing against other beers sold by ABI and 
substantially lessen competition between PV and ABI to benefit the 
sales of ABI's other beers. Consider the following:
     ABI has positioned one of its beers in the premium 
segment--Michelob Ultra Pure Gold. ABI has the motivation to suppress 
competition from PV Kona Brew to protect its own premium beer in Hawaii 
and could cause the PTR of PV Kona Brew to be above the PTR of Michelob 
Ultra Pure Gold.
     ABI, through its control and authority, could increase the 
PTR of PV Kona Brew to remove a constraint on ABI's ability to raise 
prices in other segments. The Complaint contains an implicit 
acknowledgement that the level of PV Kona Brew's price could constrain 
ABI's ability to raise its beer prices not only in the premium segment 
but also in core-plus and other beer segments:

. . . [T]he competition provided by CBA's Kona in the premium 
segment [has served] 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.\10\ (Emphasis added.)
---------------------------------------------------------------------------

    \10\ Complaint at ] 16.

    In addition, ABI would likely prevent PV Kona Brew from being 
priced lower to compete against ABI's value, core, or core-plus beers 
to avoid eroding sales in Hawaii of ABI's beers in these segments.
    ABI and PV may assert that a premium beer such as PV Kona Brew 
would not be priced to compete with other beers sold by ABI in Hawaii 
because the other ABI beers appeal to different tastes and customers. 
That said, the pricing is under the control of ABI. Also, consumers are 
not strictly prohibited from buying other than their favorite beer, 
especially if another beer is a premium beer sold at a competitive 
price. As noted earlier, the Complaint acknowledges that price can 
cause consumers switch beers or ``trade up'' or ``trade down'' in 
response to changes in price.
* * * * *
    While PV has the option to arrange for a new distributor, pursuit 
of this option will likely be a daunting task that could

[[Page 15708]]

impair distribution of PV Kona Brew. As CBA has noted in the past, 
changing the distribution network is a challenging task:

    We have a continuing relationship with Anheuser-Busch, LLC and 
the current distribution network that would be difficult to replace. 
Most of our products are sold and distributed through A-B's 
distribution network. If the A-B Distributor Agreement were 
terminated, we would be faced with a number of operational tasks, 
including establishing and maintaining direct contracts with the 
existing wholesaler network or negotiating agreements with 
replacement wholesalers on an individual basis, and enhancing our 
credit evaluation, billing and accounts receivable processes. Such 
an undertaking would require significant effort and substantial time 
to complete, during which the distribution of our products could be 
impaired. We are dependent on our wholesalers for the sale of our 
products.\11\ (Emphasis added.)
---------------------------------------------------------------------------

    \11\ See, Risk Factors'' section of CBA's 2018 10-K at pp. 16-
17.

    Furthermore, the challenge could be far greater because we are not 
aware of any publicly available information showing that the principals 
of PV have: (i) Experience in running a Hawaii-based hands-on beer 
brewing operation; (ii) experience with doing business in Hawaii; or 
(iii) experience with servicing all the retail connections that 
purchased Kona Brew beer from the WOD.
    Thus, we remain concerned that the entanglement of PV with ABI's 
WOD poses anticompetitive pricing problems.

Entanglement No. 3: ABI's Provisioning of Transition Services.

    Per the PFJ, at the option of PV, Defendants are required to enter 
into a contract to provide transition services to PV.\12\ PV will be 
entangled with and reliant upon ABI for the performance of critical 
business functions through the Transition Services Agreement which will 
give ABI influence if not a measure of control over these functions. 
These functions are:
---------------------------------------------------------------------------

    \12\ See, PFJ at ] IV(P) on pp. 13-14.
---------------------------------------------------------------------------

     Finance and accounting services;
     Human resources services;
     Supply and procurement services;
     Brewpub consulting;
     On-island merchandising;
     Brewing engineering; and
     Information technology services and support.\13\
---------------------------------------------------------------------------

    \13\ CIS at p. 17.
---------------------------------------------------------------------------

    The CIS describes the brewing engineering function as 
``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.'' \14\
---------------------------------------------------------------------------

    \14\ CIS at p. 17.
---------------------------------------------------------------------------

    Per the CIS:
     ``Any transition Services agreement may last for a period 
of up to 18 months;''
     The transition services agreement contemplates ``employees 
of Defendants'' being ``tasked with supporting the transition services 
agreement;'' and
     ``Any transition services agreement must be time-limited 
to incentivize [PV] to become a fully independent competitor of 
[ABI].'' \15\
---------------------------------------------------------------------------

    \15\ CIS at pp. 17 & 18. Interestingly, the CIS does not express 
the sentiment that PV be incentivized to become a ``fully 
independent competitor'' with respect to the distributor agreement 
with the WOD nor the non-exclusive supply contract with Defendants 
discussed later.
---------------------------------------------------------------------------

    But consider that a complete termination of services via the 
Transition Services Agreement will likely occur only if PV has acquired 
employees sufficient and capable of substantially performing the myriad 
functions without the assistance of Defendants. While there is an 
intent to limit the term of the agreement to 18 months, we are not 
aware of an absolute prohibition on an amendment to extend the term 
beyond 18 months to address any employment shortcomings experienced by 
PV. We also note that the CIS contemplates changes and provides on p. 
18 that ``to the extent PV Brewing or Defendants seek to amend or 
modify any transition services agreement, the United States must 
approve any changes.''
    Thus, we remain concerned that PV will remain entangled with ABI 
for critical services beyond 18 months.

Entanglement No. 4: Contract Brewing of PV Kona Brew by ABI

    Per the PFJ, at the option of PV, Defendants are required to enter 
into a non-exclusive supply contract for the production, packaging, and 
delivery of beer.\16\
---------------------------------------------------------------------------

    \16\ See, PFJ at ] IV(N) on pp. 12-13. The movement of PV Kona 
Brew from the mainland brewery to the WOD appears to be a continuous 
flow with title to the beer remaining with ABI.
---------------------------------------------------------------------------

    We understand the logic of the contract brewing arrangement given: 
(i) The history of ABI brewing Kona Brew beer for years due to the 
absence of a fully operational brewery in Hawaii capable of handling 
CBA's production requirements; and (ii) the fact that ABI and PV will 
both selling a common product such that the quality of PV Kona Brew 
must be commensurate with ABI Kona Brew.
    PV will be acquiring a new brewery that has been under construction 
since as far back as 2018 if not earlier.\17\ The exact timing of when 
the brewery will be certified as being fully operational is unknown. 
But we do know that Defendants will be deemed to have complied with 
their PFJ obligation on the new brewery if:
---------------------------------------------------------------------------

    \17\ The CBA 2017 10-K report at p. 23 stated that ``In 2016, we 
held a groundbreaking ceremony for a new brewery near our existing 
brewery and pub in Kona. The new brewery, which is being built with 
sustainability in mind, is scheduled to go online in the first 
quarter of 2019.'' The CBA 2018 10-K report at p. 7 stated that that 
the brewery was scheduled to go online in the latter half of 2019.
---------------------------------------------------------------------------

    (i) The new brewery achieves an average production capacity of 
1,500 barrels of saleable Beer each calendar week for three consecutive 
calendar weeks within 180 calendar days after the Court's entry of the 
Stipulation and Order; \18\ and
---------------------------------------------------------------------------

    \18\ It is not clear what ``1,500 barrels of saleable beer'' 
represents in terms of PV's production requirements nor clear as to 
the extent 1,500 barrels will free PV from ABI's contract brewing 
role.
---------------------------------------------------------------------------

    (ii) If Defendants warrant to PV that the new brewery is 
operational and without material defect.\19\
---------------------------------------------------------------------------

    \19\ CIS at p. 13 referring to PFJ at ] IV.B and J.
---------------------------------------------------------------------------

    If these metrics are not met, then Defendants will be required to 
pay $25,000 per day until they achieve compliance per the PFJ.\20\
---------------------------------------------------------------------------

    \20\ CIS at p. 13.
---------------------------------------------------------------------------

    At the moment, until the brewery is fully operational, there is 
uncertainty as to the true capability of the new brewery to produce the 
entire product spectrum and quantity of PV Kona Brew cans and draught 
beer. We therefore expect PV will remain reliant on ABI for the 
production, packaging, and delivery of beer sufficient to meet PV's 
immediate needs via the non-exclusive supply contract with ABI.
    This entanglement of PV with ABI through the non-exclusive supply 
contract should provide the products needed by PV and promote 
consistency between PV Kona Brew and ABI Kona Brew until the new 
brewery is fully operational. The supply agreement may be for a period 
of five (5) years as contemplated by the PFJ--an initial three year 
period plus two one-year periods.
    We remain concerned, however, that PV's entanglement with ABI via 
the non-exclusive supply contract will continue beyond five (5) years 
for three reasons. First, it is unclear whether and to what extent the 
new brewery will be able to brew all the canned beer and draught beer 
needed by PV.
    Second, we are not aware of an absolute prohibition on an amendment 
to extend the term of the non-exclusive supply contract beyond five (5) 
years months to address production

[[Page 15709]]

shortcomings experienced by PV. Here, we note that the CIS contemplates 
changes and provides on p. 16 that ``to the extent PV Brewing or 
Defendants seek to amend or modify any supply agreement, the United 
States must approve any changes.''
    Third, PV does not have the facilities in Hawaii to brew bottled 
beer.\21\ PV will therefore be reliant on the non-exclusive supply 
contract with ABI as long as PV decides to sell PV Kona Brew in 
bottles.
---------------------------------------------------------------------------

    \21\ CIS at p. 15.
---------------------------------------------------------------------------

    Admittedly, PV will have the option to contract with other brewers 
to brew its PV Kona Brew in bottles as well as in cans and draught. But 
the fact that PV may pursue a non-ABI brewing option does not mean the 
option is viable due to: (i) The intricacies of switching to a new 
brewery; (ii) the need to ensure quality control and consistency 
between the multiple PV Kona Brew products and ABI Kona Brew products; 
and (iii) the need to ensure sufficient production quantities. That 
``Defendants are already familiar with the recipes and brewing 
processes for Kona brands'' and have the brewing capacity provides much 
comfort if not inertia against pursuing a non-ABI brewing option.\22\ 
We are concerned that this entanglement between PV and ABI via the non-
exclusive supply contract with ABI will continue beyond 5 years as long 
as PV chooses to sell bottled beer and/or if the new brewery is not 
able to produce PV's entire requirements of PV Kona Brew cans and 
draught beer of sufficient quality and quantity after 5 years.\23\
---------------------------------------------------------------------------

    \22\ CIS at p. 15.
    \23\ We also remain concerned over the potential customer 
confusion that could be caused by: (i) ``locally-made'' PV Kona Brew 
cans being comingled with cans and bottles produced and packaged for 
PV by ABI on the U.S. mainland under contract; and/or (ii) mainland-
brewed beer being poured in bars and restaurants in Hawaii without 
any signage. One solution is packaging and notice to clearly and 
conspicuously inform consumers of where the particular PV Kona Brew 
was brewed. The notice provided by ABI on packaging used to date has 
not been as clear and conspicuous to inform consumers of where the 
beer was brewed.
---------------------------------------------------------------------------

Summary

    Based on the above, we are concerned that the PFJ does not meet the 
``public interest'' standard. Ongoing entanglements between ABI and PV 
raise concerns that the divestiture remedy will not establish PV to be: 
(i) Truly independent of ABI; and (ii) able to effectively compete with 
ABI in Hawaii:
     PV and ABI will be intertwined as they both will be 
selling the same branded product in their respective sales territories.
     PV's entanglement with and reliance on ABI's wholly-owned 
distributor may well mean that ABI will have pricing control and 
authority over the price-to-retailer of PV Kona Brew which could 
foster:
    [cir] ABI's price leadership and Molson Coors's willingness to 
follow ABI's announced price increases in Hawaii; and
    [cir] Anticompetitive pricing of the PTR of PV Kona Brew in 
comparison to other beers sold by ABI in Hawaii.
     PV's entanglement with and reliance on ABI for the 
performance of critical business functions through the Transition 
Services Agreement will give ABI influence and if not a measure of 
control over these business functions.
     By reason of the non-exclusive supply contract, PV will be 
entangled with ABI for production, packaging and delivery of PV Kona 
Brew:
    [cir] We expect PV to be close to 100% reliant on ABI as its 
contract brewer until the new brewery is fully operational;
    [cir] We expect PV to be reliant on ABI as long as PV chooses to 
sell bottled beer; and
    [cir] We expect PV to be reliant on ABI if the new brewery is not 
able to produce PV's entire requirements of PV Kona Brew cans and 
draught beer of sufficient quality and quantity after 5 years.
[GRAPHIC] [TIFF OMITTED] TN24MR21.000

7 December 2020

Robert A. Lepore, Chief,
Transportation, Energy, and Agriculture Section Antitrust Division,
Department of Justice, 450 5th Street NW, Suite 8000, Washington, DC 
20530
Re: Testimony; United States of America, Plaintiff, v. Anheuser-Busch 
INBEV SA/NV, Anheuser-Busch Companies, LLC, and Craft Brew Alliance, 
Inc.
Aloha Mr. Lepore,
    I would like to provide comment on the proposed sale of the Craft 
Brewers Alliance (CBA) assets in Hawaii to PV Brewing of Kansas as we 
feel that the divestiture process was unfairly administered, and a 
buyer was selected for their clear ties to Anheuser Busch InBev (ABI) 
and at a price substantially below ``fair market value''. In the 
currently proposed structure, there is

[[Page 15710]]

simply no separation in the short or long term from ABI.
    For a bit of background our company is 100% locally owned in 
Hawai[revaps]i and is a small closely held family business. We began 
brewing in 2005 with the simple idea that or State needed an authentic 
craft beer that was truly made in Hawai[revaps]i. At the time there 
were very few brewing operations and Kona was the only widely sold 
offering, and even then was not made in Hawai[revaps]i. Even back then, 
all the packaged product (cans did not exist at the time) and much of 
the draft was being brewed on the mainland, shipped to Hawai[revaps]i 
and sold as supposedly ``local'' and being from Hawaii. We saw an 
opportunity to bring authenticity and a sense of place to craft beer in 
Hawai[revaps]i and from that simple idea Maui Brewing Co. (MBC) was 
born.
    Maui Brewing Co. is Hawai[revaps]i's largest craft brewer, and 
brewery for that matter. No one brews as much beer in the State as we 
do. We have a 16-year history of brewing in the islands with volumes 
that far surpass those of our competitors by at least 4-fold. We also 
operate 4 restaurant locations; two on Maui and two on Oahu. Our craft 
beer is synonymous with authenticity, quality, innovation and sense of 
place. We are local and every drop of beer brewed to date has been 
brewed in Hawai[revaps]i.
    When we learned of the proposed divestiture of the Kona brands in 
State, along with the sale of the new brewery and retail locations we 
were intrigued at the opportunity to combine the two brands into a 
truly authentic Hawai[revaps]i organization leveraging the strengths of 
both. Most importantly I saw a vision of two brands coming together for 
the betterment of Hawai[revaps]i and to finally bring legitimacy to the 
Kona brands across the State, meaning that this would then be truly 
brewed in Hawai[revaps]i. In my eyes this was something to be 
celebrated and bringing the Kona brand back to Hawai[revaps]i would be 
my honor. We followed this transaction closely and were part of one 
offer through another group. This offer was not accepted and was likely 
ignored. The reason I say `ignored' is that when we learned to whom the 
sale was awarded, we were all shocked at the extremely low price and 
only I was not surprised by the fact that a former ABI executive was 
going to be purchasing the assets of Kona. I truly did not believe that 
the Department of Justice (DOJ) would approve this structure as a buyer 
as it does not in any way fully disconnect ABI from Kona.
    I look at the published information on the new brewing facility in 
Kona. A 30,000 square foot facility is simply not capable of producing 
100,000 barrels a year. There are many ways to evaluate this. By 
comparison we operate an 82,000 facility approximately 65,000 of which 
is dedicated to brewing and have a true 100,000-barrel capacity 
facility. The shipping and logistics challenges in Hawai[revaps]i alone 
do not allow for this to be achieved. I have done a comprehensive 
analysis on all the publicly available data for the new brewery in Kona 
and suffice to say it is not nearly capable of brewing all of Kona's 
beer for Hawai[revaps]i. Their own marketing materials when looking to 
sell the Hawai[revaps]i assets state that the ``new brewery will allow 
for the majority of its Hawaiian consumed products to be locally 
brewed''. This by definition means that any ``transitional brewing 
agreement'' is not meant to be temporary and in fact be a long-term 
reliance and as soon as no one is watching it is unlikely to believe PV 
will attempt to brew 100% of the beer in Hawai[revaps]i. Therefore, by 
allowing PV Brewing (backed by a private equity firm) to purchase 
Kona's assets with a former ABI executive with a full-time position as 
President/Chief Operating Officer of a larger grocer managing from 
afar, a brand that is owned in the rest of the world by ABI, selling 
beer brewed by ABI, to an ABI Wholly Owned Distributor (WOD). Where 
exactly is the disconnect from ABI?
    I subsequently placed a direct and unsolicited Indication of 
Interest for a significant premium over the PV Brewing offer for our 
company to acquire the Kona assets in Hawai[revaps]i. I was clear that 
this Indication of Interest (IOI) could be swiftly converted to Letter 
of Intent (LOI) and provide the basis for a Sale Agreement and close 
quickly to meet to needs of all parties. Prior to this direct offer, I 
was a consultant on an offer that was nearly a 3X premium above what 
was ultimately paid. I would think that the shareholders of CBA would 
have wanted their company to accept a qualified buyer and the highest 
bid.
    From an enterprise value viewpoint, the purchase price awarded to 
PV Brewing seems quite low. What was advertised as a 24MM+ new brewery, 
with 2 successful restaurants grossing north of 15MM, on top of over a 
million case equivalents of beer sold in State, could certainly not be 
sold for 16MM as a legitimate enterprise value. To me, and many others, 
it seems this process was not conducted fairly and there clearly were 
motives at play to keep Kona as much under ABI influence as possible. A 
reasonable person can see this for what it is. It is unlikely to 
believe that a former ABI executive, with a separate successful career 
decides to start a brewery in Hawai[revaps]i with no plans to move here 
to operate it, begins his career as a brewer with a brand like Kona. 
Furthermore, that the assets are sold at a price that could only be 
described as a ``sweetheart deal'' awarded to former ABI company men to 
ensure long-term influence over the Kona brand in Hawai[revaps]i and 
across the world.
    I then begin to look at the term ``qualified buyer''. It would seem 
to me that a company such as ours, with a dedicated, local, top-tier 
team operating 4 restaurants and the largest brewing operation in the 
State offering more money should at least be considered. From an 
experience standpoint, no one in Hawai[revaps]i and no one outside of 
Hawai[revaps]i has more experience brewing in the islands than we do. 
To say that it's a challenge to brew in Hawai[revaps]i is an 
understatement and we have proven our capabilities of brewing nearly 
60,000 barrels of beer each year. I am also a founding member of the 
Hawaiian Craft Brewers Guild, Vice-Chair of the Brewers Association, 
and have been led more than a dozen legislative actions in 
Hawai[revaps]i making a profound impact on the brewing community and 
access to beer. Additionally, our restaurant operations group has the 
capability to handle additional locations. I believe our company is not 
only a qualified buyer, but the most qualified buyer due to our 
experience and capabilities.
    It would seem that if the sale was meant to be a legitimate 
divestiture of the Kona Brewing assets in Hawai[revaps]i, the sale 
would have been awarded to a buyer exhibiting a history of brewing in 
Hawai[revaps]i at the annual volumes needed to meet demand, willing to 
pay a higher price, maximize shareholder value, has existing restaurant 
operations in Hawai[revaps]i capable of operating the two Kona pubs, 
and has a brewery with additional capacity to handle it's volume and 
augment the shortfall of the new Kona facility to meet demand without 
long term reliance on ABI for brewing. Again, it is inconceivable that 
PV Brewing can meet the Hawai[revaps]i demand for the various beers and 
packaging configurations without long-term reliance on ABI. Without 
true capabilities to brew 100% of the KBC demand in Hawai[revaps]i, ABI 
WOD in Hawai[revaps]i will simply be ordering and receiving direct 
containers of KBC brand beer from ABI facilities on the mainland, these 
containers would never even touch the loading dock at ``PV Brewing'' on 
the Big Island. With an integration of Maui Brewing Co. and Kona 
Brewing Co. operating as two separate ``partner'' brands we would be 
100% self-sufficient after a short

[[Page 15711]]

transition brewing agreement. Between the two facilities MBC and KBC, 
we would have capacity, redundancy and true economies of scale to 
execute this plan completely free from ABI influence.
    I have prepared a spreadsheet with data from my analysis of the 
publicly available information from the new brewery construction along 
with valuation metrics for the company. I can share this at the 
appropriate time in our discussion.
    In closing we feel that the divestiture process was unfairly 
administered, and a buyer was selected for their clear ties to ABI and 
the desire to maintain influence. We are still an interested party and 
would like the opportunity to be considered as a buyer for the Kona 
Brewing assets within Hawai[revaps]i.

Sincerely,

/s/
Garrett W. Marrero
CEO, Founder,
Maui Brewing Co.
[FR Doc. 2021-05988 Filed 3-23-21; 8:45 am]
BILLING CODE 4410-11-P