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Sen. Mike Lee Holds a Hearing on the Ab Inbev/Sabmiller Merger

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Sen. Mike Lee Holds a Hearing on the Ab Inbev/Sabmiller Merger Page 1 1 of 1 DOCUMENT Political Transcript Wire December 9, 2015 Wednesday SEN. MIKE LEE HOLDS A HEARING ON THE AB INBEV/SABMILLER MERGER LENGTH: 18629 words SENATE COMMITTEE ON THE JUDICIARY, SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS HOLDS A HEARING ON THE AB INBEV/SABMILLER MERGER DECEMBER 8, 2015 SPEAKERS: SEN. MIKE LEE, R-UTAH CHAIRMAN SEN. CHARLES E. GRASSLEY, R-IOWA SEN. ORRIN G. HATCH, R-UTAH SEN. DAVID PERDUE, R-GA. SEN. THOM TILLIS, R-N.C. SEN. AMY KLOBUCHAR, D-MINN. RANKING MEMBER SEN. AL FRANKEN, D-MINN. SEN. RICHARD BLUMENTHAL, D-CONN. SEN. CHRIS COONS, D-DEL. SEN. PATRICK J. LEAHY, D-VT. EX OFFICIO WITNESSES: CARLOS BRITO, CEO, ANHEUSER-BUSCH INBEV, GREENWICH, CONN. BOB PEASE, CEO, BREWERS ASSOCIATION, BOULDER, COLO. CRAIG PURSER, PRESIDENT AND CEO, NATIONAL BEER WHOLESALERS ASSOCIATION, ALEXAN- DRIA, VA. J. WILSON, MINISTER OF IOWA BEER IN THE IOWA BREWERS GUILD, PRESCOTT, IOWA. DIANA MOSS, PRESIDENT, AMERICAN ANTITRUST INSTITUTE, BOULDER, COLO. MARK HUNTER, PRESIDENT AND CEO, MOLSON COORS, DENVER, COLO. [*] LEE: Welcome to this hearing of the Subcommittee on Antitrust, Competition Policy and Consumer Rights. And title what we've chosen for this hearing, is ensuring competition remains on tap, the AB In- Bev/SABMiller Merger and the state of competition in the beer industry. Before we start, I'd like to thank ranking member Klobuchar and to thank her staff for their attention to this issue and their assistance in preparing for today's hearing. I'd also like to thank the Chairman of the full committee, Senator Grassley for supporting this hear. A few housekeeping matters before we begin, after I, Senator Klobuchar and Senator Leahy give some opening remarks about this hearing, we'll hear from our panel of witness who I and Senator Grassley will in- troduce shortly and then we'll have a five minute -- a series of five minute question rounds. The subject of today's hearing is the proposed acquisition of SABMiller by Anheuser-Busch InBev, the sec- ond largest and largest beer producers in the world, respectively. AB InBev announced the acquisition for approximately $105 billion on November 11th. Concurrent with that transaction, the parties announced a plan to divest SABMiller's stake in Miller-Coors to joint venture partner Molson Coors Brewing Company. That stake represents the entirety of SABMiller's U.S. presences. As a result the parties expect their merger to have little if any impact on the American Beer Market. If true this will obviate the vast majority of the concerns that would otherwise accompany a merger of this size. Page 2 SEN. MIKE LEE HOLDS A HEARING ON THE AB INBEV/SABMILLER MERGER Political Transcript Wire December 9, 2015 Wednesday Other market participants however, have voiced concerns about AB InBev's influence on distribution chan- nels and the market access of small craft brewers, alleging that AB InBev is seeking greater vertical integra- tion in attempting to exclude craft brewers from the market. As we exam these central questions today and look at the overall state of competition in the beer industry we must focus that review on how the current competitive dynamics will be impacted by the deal at hand. This analysis must consider both components of the transactions, the acquisition, as well as the divestiture of SABMiller's entire USA business. Moreover, we will do well to remember that antitrust analysis is extremely fact intensive and not driven by meer speculation or suggestion. Well legitimate antitrust concerns may exist with respect to AB InBev's relationship with distributors, this hearing is first and foremost about its acquisition of SABMiller. Under the Clayton Act, de relevant inquiry is whether the effects of the deal "may be substantially to lessen competition or to tend to create a monopoly", not whether conditions might be attached to the merger's ap- proval to restructure the market to the liking of the government or private plaintiffs. When as is the case here, the acquiring party intends to divest the entirety of the acquired company's U.S. business, the transactions effects on competition in American markets are likely to be negligible. The American beer market is a more than $100 billion business, and delivers a product that in both its na- tional brand and regional craft brew forms holds a special place in American culture and hospitality. Today's hearing will provide a much needed opportunity to assess competition in the industry as it relates to this particularly historic deal. I look forward to hearing from our esteemed witnesses and the productive dis- cussion that their testimony will no doubt inspire today. So Senator Klobuchar will now deliver her opening statement and then I will swear in and introduce our wit- nesses after we hear from Senator Leahy -- or Klobuchar -- Senator Klobuchar. KLOBUCHAR: Thank you very much Mr. Chairman. Thank you. We have worked on this hearing together as we have on all hearings and I appreciate the partnership we have on taking on these important antitrust matters. I also want to thank each of the witnesses who've come today to testify. I do not come to this hearing with the conclusion but I do have a goal and that is to protect and foster competition. From one perspective there has been consistent consolidation in the beer industry. Over the last decade Anheuser-Bush, Miller and Coors all have been involved in major acquisitions. Today Anheuser-Bush InBev, ABI, owners of what was Anheuser-Bush and SABMiller account for 70 percent of beer sales in the United States. Within the remaining 30 percent, a different phenomenon is occurring. Across the country, craft brewers have brought new competition to the United States beer market. In 1978 there were fewer than 50 brewers in the United States. By one recent count there are currently over 4,100 craft brewers and their sales have grown from 15 of the beer market to 11 percent in the last 20 years. In Minnesota we now have more than 70 brewers, more than the entire country had back in 1978 when I graduated from high school. It wasn't legal for me to drink then back then. LEE: You weren't interested in beer at that point. KLOBUCHAR: Yes, I just -- I thought it was a good year. (UM): Did you drink it? KLOBUCHAR: Not -- I won't. Let's just say, you could go to Wisconsin. Our beers -- our beers stretch from Schell's Goosetown, to Finnegan's Dead Irish Poet, to Surly's Abrasive Ale, and everything in between. Page 3 SEN. MIKE LEE HOLDS A HEARING ON THE AB INBEV/SABMILLER MERGER Political Transcript Wire December 9, 2015 Wednesday I will say that Mr. Chairman that this was the first official senate tour I took that was one of our brewers that my husband actually asked to accompany me on. Craft brewers have succeeded in part because of the three tier distribution system. Brewers brew the beer. Wholesales distributed and Retailers sell it. Most beer wholesalers are independent but rely primarily on ei- ther ABI products or SABMiller products. Because of their independents, wholesalers also distribute a variety of smaller independent brands. As a result today's beer aisle in any retail outlet is a cornucopia of choice. Within this context, ABI, the largest brewer in the world, seeks to acquire SABMiller, the second largest brewer in the world. The size of the transactions is not only cause for concern, the Department of Justice is -- in investigating ABI's previous acquisition of Modelo Group found that large brewers engage in -- this is a quote, "In signifi- cant levels of coordination, and that coordination has reduced competition and increased prices." If ABI were simply acquiring SABMiller, the transaction would almost certainly be illegal. The merging parties themselves recognize that fact and have offered to divest SABMiller's stake in the MillerCoors joint venture to Molson Coors. That is why we have asked Molson Coors to testify to understand how it intends to compete in the United States market. I appreciate that ABI and SABMiller have a affirmably offered a solution at the beginning of the process. The question today then is whether the proposed divestiture resolves all competition problems. Because the market is highly concentrated the divestiture needs to be nearly perfect. If despite the divesture, ABI's market share were to increase even a small amount, the acquisition would likely be presumptively anti-competitive under the Department of Justice and Federal Trade Commission's horizontal merger guidelines. For the divestiture to be a successful remedy, MillerCoors needs to be as independent from ABI after the merger as it is today. We also need to make sure that nothing in this merger alters either the incentives or the ability for large brewers to foreclose retail access from craft brewers. Unless craft brewers have access to wholesalers, they will wither on the vine. That's kind of a wine analogy but it's a good one. Wholesalers make decisions every day on what brands and how much of each brand to put on their trucks. I want to ensure the consumer choice and producer power drivers those decisions. Mr. Chairman, the beer industry is moving in a good direction. Small innovative companies are transforming the marketplace from Vermont to Minnesota. Although the craft segment maybe beyond its infancy, it is far from mature. We need to ensure this merger does not stunt competition and that depends on the quality of the divestiture. Thank you Mr. Chairman. LEE: Senator Leahy? LEAHY: Thank you Mr.
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