Given our previous posts on the topic you would be forgiven for thinking we have a particular interest in Corona sales.
Rather, the AB InBev / Grupo Modelo merger has been instructive both in terms of the Department of Justice’s theory of competitive harm and the process by which remedies can be negotiated so as to permit a merger to proceed. (The settlement with the DOJ was approved on 22 April 2013.)
However, in another last minute twist in the plot, the merger of AB Inbev and Modelo was faced with another unexpected hurdle in the path of its expected June closing.
On 22 March 2013, a class action was filed in the US District Court in San Francisco that sought to prevent the merger closing. After hearing the motion on the day closing was due to take place, the Court refused to grant an urgent restraining order that would have required the merged entity to hold the two brewers separate while the merits of a more permanent injunction, based on breach of US antitrust laws, were heard.
The plaintiffs are alleging a breach of section 7 of the Clayton Act, which prohibits mergers and acquisitions that are likely to result in a substantial lessening of competition. They argue that the settlement with the DOJ fails to ameliorate the competitive harm occasioned by the removal of Grupo Modelo as a direct competitor and price maverick.
In Australia, there is limited opportunity for a private party to seek to prevent a merger from completing on competition grounds, as only the ACCC may apply for an injunction by reason of a possible contravention of section 50 of the Competition & Consumer Act 2010 (Cth). A third party is however able to seek declarations of contravention as well as divestiture orders, which can be to similar effect.
This contrasts with the position in the US, where cases (and class actions in particular) are filed by consumers and shareholders more regularly. Research by Stanford and Cornerstone show that, of shareholder actions, almost 50% settle before closing.
The AB Inbev / Modelo merger closed as planned on 4 June 2013. The substantive proceedings continue.