Merkley Urges DOJ To Protect Craft Brewers

The letter results in part from a proposed merger between the two largest beer conglomerates in the world, Anheuser-Busch InBev and SAB Miller. In October, Anheuser-Busch InBev announced plans to purchase SAB Miller.

Merkely was joined in the letter by Senators Angus King (I-Maine), Susan Collins (R-Maine), Richard Blumenthal (D-Conn.) and Chris Coons (D-Del.). The Senators highlighted the dramatic growth of small and independent craft breweries. They noted that the number of craft breweries in the country has doubled from 1,776 to 3,739 since 2011, and that craft brewers contribute roughly $55.7 billion to the U.S. economy and provide more than 424,000 jobs.

“The past decade has seen a dramatic change in the American beer industry, which was long dominated by a small number of products from large brewers such as AB InBev and SABMiller. Craft beer now drives expansion of domestic beer sales. Small and independent craft breweries exist in all 50 states and the District of Columbia,” the Senators wrote in their letter. “As members with robust craft brewing industries in our states, we ask that you take the necessary steps to ensure that AB InBev’s purchase of SABMiller does not allow the new combined company to squeeze out America’s craft brewing industry, stifle innovation, further constrain beer distribution to U.S. retailers, or create further barriers to entry. Large multinational brewers should not be allowed to use their market power to limit consumer choice and access to small innovative breweries. Put simply, we believe craft brewers must be able to conduct their business without being denied access to necessary raw materials and distribution companies.”

The letter also expressed particular concern about the potential for anti-competitive distribution practices to grow as the largest beer companies get even larger through mergers. The group raised concerns that Anheuser-Busch InBev may use their purchase of SABMiller to increase their market share, possibly by constraining distribution channels in order to crowd out smaller beer companies.

Merkely is not the only Oregon lawmaker to share concerns regarding the merger of SAB Miller and Anheuser-Busch InBev. As GoLocal reported, U.S. Senator Ron Wyden (D) also wrote a letter to the DOJ, as well as the Federal Trade Commission expressing his concern about the merger of the two beer giants.

He called on the agencies to weigh in in any future review process that would affect craft brewers, consumers and distributors in Oregon and throughout the country.

“I am concerned by recent reports suggesting Anheuser-Busch InBev and its wholly-owned distributors may have acted to curb competition in markets including Oregon,” Wyden’s letter reads. “The reports detail large brewers seeking to obstruct and outmaneuver craft brewers by purchasing distributors and exerting control over tap lines and store shelves. In light of these events, I ask you to consider not only the direct effects of any proposed merger’s impact on consumers and competitors in the large scale beer market, but also the effects on the ability for brewers of all sizes to enjoy fair access to distribution chains and consumers.”

READ MERKLEY’S FULL LETTER BELOW:

The Honorable Loretta E. Lynch

Attorney General

U.S. Department of Justice

950 Pennsylvania Avenue, NW

Washington, DC 20530

Dear Attorney General Lynch:

We write because our offices have been made aware of potentially unfair and illegal trade practices that may harm the ability of craft brewers in our states to compete on a fair and level playing field with large brewers. We are particularly concerned about large commercial beer companies attempting to gain market share by either purchasing distributors or pressuring independent distributors to favor their products. We understand the Department of Justice (DOJ) is investigating some of these practices and we want to express our support for that investigation. We also hope the Department keeps these concerns in mind as the Antitrust Division reviews AB InBev’s purchase of SABMiller.

The past decade has seen a dramatic change in the American beer industry, which was long dominated by a small number of products from large brewers such as AB InBev and SABMiller. Craft beer now drives expansion of domestic beer sales. Small and independent craft breweries exist in all 50 states and the District of Columbia. They have expanded at a staggering rate: since 2011, the number of craft breweries has more than doubled, going from 1,776 to 3,739. Small and independent craft brewers contribute some $55.7 billion to the U.S. economy and support more than 424,000 jobs.

Large brewers have taken notice and have taken actions that we believe may amount to exclusive dealing and other violations of antitrust law. For instance, while many craft brewers lawfully and successfully distribute beer in their local markets, the recent purchases of craft breweries and distributors by AB InBev suggests a dangerous plan to constrain distribution channels to the detriment of its competitors. Because of consolidation by distributors, there are now far fewer distribution channels for craft brewers. The purchase by AB InBev of one of the two distributors that deliver the vast majority of beer in a given territory effectively either forces other brewers out of that distribution channel or places those that stay in the uncomfortable situation of being distributed by their largest competitor. Reports also suggest that, in markets where two independent full-service distributors exist, AB InBev puts pressure on the distributors to favor AB InBev products—a practice that could well be deemed exclusionary and illegal.

Given these concerns, AB InBev’s October 16 announcement of its intention to purchase SABMiller should raise significant red flags. As members with robust craft brewing industries in our states, we ask that you take the necessary steps to ensure that AB InBev’s purchase of SABMiller does not allow the new combined company to squeeze out America’s craft brewing industry, stifle innovation, further constrain beer distribution to U.S. retailers, or create further barriers to entry.

While AB InBev announced plans to divest itself of SABMiller’s U.S. assets as part of such a transaction, DOJ should vigorously scrutinize the acquisition and any divestiture plan to ensure that AB InBev does not increase its already-dominant market position through the transaction. Moreover, even if the transaction does not result in an increase in AB InBev’s market share in the U.S., DOJ should carefully consider how global consolidation could impact the market for hops, barley, wheat, bottles, cans and other supplies needed by craft brewers. In addition, we hope DOJ will probe how each of these companies has acted with regard to distributors and investigate whether distributors owned by these companies also need to be divested.

Large multinational brewers should not be allowed to use their market power to limit consumer choice and access to small innovative breweries. Put simply, we believe craft brewers must be able to conduct their business without being denied access to necessary raw materials and distribution companies.

We appreciate your prompt attention to our letter and urge the Department to appropriately vet the AB InBev purchase of SABMiller and ensure that we maintain a market that does not disproportionately harm beer consumers and the craft brewing industry. We hope you will continue investigating our concerns and conduct additional outreach with craft brewers to gather evidence from their experiences. We look forward to hearing your findings.

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