No Small Beer Here – Appeals Court Confirms Massive Brewing Companies’ Merger

Beer giants Anheuser-Busch Companies, Inc. and InBev, NV/SA didn’t exactly meet at a bar, but they can go ahead and merge.  The Eighth Circuit, affirming a lower court’s decision, on October 27 held that there’s no reason to roll back the consummated merger under Sections 7 and 16 of the Clayton Act. 

Until their merger in 2008, each company was already huge:  Belgium-based InBev was the largest brewer in the world, and St-Louis-based Anheuser-Busch, was the largest brewer in the United States.  Other major players in this industry included SABMiller, Heineken, Carlsberg and Molson Coors.  Following up on concerns from the Department of Justice, InBev and Anheuser agreed to divest Labatt US, the InBev subsidiary which imported that Canadian beer into the U.S.

Despite the Department of Justice’s approval, Missouri beer drinkers moved for a preliminary injunction to block the merger asserting that it violated Sections 7 of the Clayton Act.  The United States District Court for the Eastern District of Missouri denied the plaintiffs’ motion for a preliminary injunction, on November 18, 2008 and the merger was consummated that same day.  Finally, in August 2009, the District Court granted the companies’ motion to have the entire case dismissed.

The Eighth Circuit affirmed.  It held that the beer consumer plaintiffs, as indirect purchasers, could only sue for injunctive relief, and since they failed to stop the merger, the only equitable relief available to them was divestiture.  The Court continued, however, that divestiture is a “drastic” remedy that courts hesitate to use.  And plaintiffs’ failure to act diligently in seeking Section 7 relief, by waiting nearly two months after the merger announcement to file their lawsuit and filing their motion for preliminary injunction less than 10 days before the anticipated closing date, weighed against ordering a divestiture.   Since the alleged antitrust injury was speculative and localized while divestiture would have widespread dramatic effects on the now combined companies, their employees and distributors, the Court declined to order additional divestitures.  Granting the appeal would have also resulted in discovery and trial that would have increased the cost of brewing and selling beer and ultimately increased the purchase price of beer – the very injury plaintiffs feared. 

The case, Ginsburg v. InBev NV/SA, No. 09-2990 (8th Cir. Oct. 27, 2010), is available here, and also on Westlaw at 2010 WL 4226533.  Plaintiffs asked for an en banc rehearing with the U.S. Court of Appeals for the Eighth Circuit last Wednesday.