Competition Bureau statement regarding Anheuser-Busch InBev’s proposed acquisition of SABMiller and the concurrent divestiture of certain Miller brands to Molson Coors

Position statement

OTTAWA, May 31, 2016 ‑ On May 31, 2016, the Bureau issued a No Action Letter (NAL) with respect to the proposed acquisition by Labatt’s parent company Anheuser‑Busch InBev SA/NV (AB InBev) of SABMiller plc (SABMiller) and the concurrent divestiture of certain SABMiller brands to Molson Coors Brewing Company (Molson Coors). The NAL indicates that given the immediate sale of certain Miller brands to Molson Coors following the acquisition of SABMiller by AB InBev, as well as the other divestitures described below, the Commissioner of Competition does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the proposed transactions. In addition to the sale of certain SABMiller brands to Molson Coors, AB InBev has agreed to sell SABMiller’s Peroni, Grolsch and Meantime brand families and related businesses to Asahi Group Holdings, Ltd., as well as SABMiller’s business in Central and Eastern Europe, including the Pilsner Urquell, Tyskie, Kozel, Lech and Żubr brands sold in Canada, to a third party purchaser pursuant to a commitment made to the European Commission. Ultimately, pursuant to the proposed transactions in Canada, AB InBev will acquire the Foster’s Lager and Castle Lager brands and Molson Coors will acquire Miller Genuine Draft (MGD) and Miller Lite, among other brands.

This statement summarizes the approachFootnote 1 taken by the Competition Bureau in its review of the proposed transactions. The Bureau’s review focused on the competitive impact of the sale of the Miller brands to Molson Coors.

In the course of its review, the Bureau conducted interviews with numerous market participants and reviewed a significant volume of internal documents and data provided by the Parties and third parties. The Bureau also cooperated closely with its counterparts in other jurisdictions, including the United States Department of Justice throughout the review.

Background

Labatt (owned by Ambev S.A., which is an affiliate of AB InBev) and Molson are the two biggest brewers in Canada and they manufacture some of the top‑selling brands of beer. Brands managed by Labatt’s in Canada include Budweiser, Labatt Blue, Stella Artois, Corona and Alexander Keith’s, while Molson Coors’ brands include Coors Light, Molson Canadian, and the Rickard’s family of brands.

As of April 2015, SABMiller began marketing and selling some of its own brands in Canada, including MGD and Miller Lite. Prior to SABMiller’s entry, these brands were sold in Canada by Molson Coors and its predecessors under an exclusive licensing agreement. SABMiller does not have any brewing assets in Canada; all of its products are imported from either the United States or overseas for sale in Canada.

Analysis

In Canada, Labatt, Molson Coors and SABMiller (the Parties) compete to sell beer to off‑premise customers, such as liquor, convenience and beer stores, as well as on‑premise customers, such as bars and restaurants. Given SABMiller’s recent independent entry in Canada, the Bureau’s review focused on the effect of SABMiller’s entry on competition as well as whether SABMiller would have increased the level of competition in the relevant markets ‘but for’ the proposed transactions.

Generally, the sale of beer is regulated at the provincial/territorial level and as a result, the Bureau considered the effects of the proposed transactions on a provincial/territorial basis. The Bureau considered several product market definitions including all beer and beer price segments (ex. value, mainstream, specialty), as well as the products that were considered by the Parties to be the closest competing brands to SABMiller’s brands based on Parties’ internal documents. The Bureau used sales data from the Parties to calculate upward pricing pressures and illustrate the potential price effects using estimates of the Parties' ability to pass increased costs to their customers. The Bureau determined that the estimated price increases were not likely to meet the significance threshold set out in the Merger Enforcement Guidelines under any market definition, which was in part due to the relatively limited impact SABMiller had across the various markets. The Bureau also considered the impact of the proposed transactions on coordination, which was particularly relevant in this case given the significant concentration in each of the markets across Canada. While there were a number of characteristics of the beer industry that are conducive to coordination, such as transparent pricing, inelastic demand and multi‑market exposure, the Bureau concluded that the acquisition of SABMiller was not likely to have a substantial effect on coordination in any relevant ‎market.

With respect to future competition, the Bureau assessed whether SABMiller was likely to have introduced new products or grown existing brands to more aggressively compete with the incumbent firms. While SABMiller had plans to continue to grow its business in Canada, the Bureau concluded that its future plans would not satisfy the timely, likely and sufficient threshold set out in the Merger Enforcement Guidelines.

Conclusion

After assessing the impact of SABMiller’s entry in Canada, as well as its future plans, the Bureau concluded that the proposed transactions were unlikely to result in a substantial lessening or prevention of competition in any relevant market in Canada.

This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.

However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.


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