Anheuser-Busch Inbev Deal for Modelo Blocked by Justice Department

Bottles of Anheuser-Busch Budweiser and Grupo Modelo, Modelo beers are displayed at the Chandi Wine and spirits store on January 31, 2013 in Miami, Florida. Federal authorities filed a lawsuit January 31, to stop the Anheuser-Busch InBev's $20.1 billion takeover of Grupo Modelo. (2013 Getty Images)

The U.S. Justice Department filed an antitrust lawsuit against Anaheuser-Busch Inbev on Thursday in an attempt to keep the American beer market competitive and block a $20.1 billion deal that would give the beer conglomerate control of the Mexican beverage company Grupo Modelo.

The deal would add Grupo Modelo’s Corona Extra beer to Anaheuser -Busch Inbev’s (ABI) already hefty string of brands, which includes Budweiser, Stella Artois and Beck’s.

“If ABI fully owned and controlled Modelo, ABI would be able to increase beer prices to American consumers,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division, in a statement.  “This lawsuit seeks to prevent ABI from eliminating Modelo as an important competitive force in the beer industry.”

The Justice Department filed its lawsuit in Federal District Court in Washington under the argument that the merger would reduce competition in the beer market throughout the country and, specifically in 26 major metropolitan areas. ABI would control 46 percent of annual sales in the U.S., which would far outpace that the MillerCoors company, ABI’s closest competitor.

The Justice Department’s move is the government’s first significant move against consolidation in the beer industry recently. Anaheuser -Busch Inbev itself went through a major merger in 2008.

The Anaheuser-Busch Inbev deal would be largest merger to face opposition from the Justice Department since the 2011, when it filed suit against AT&T to block the telecommunications company’s $39 billion acquisition of T-Mobile USA.

A Justice Department press release said the U.S. beer market is already highly concentrated and prices are increased by strategic moves from its largest brewers. Modelo Group aids in competiveness and keeping prices lower for the consumer.

“By pricing aggressively, Modelo–through its importer, Crown Imports–puts pressure on ABI to maintain or lower prices, especially in certain parts of the country,” the press release stated. “As a result, Modelo has become a particularly important competitor in the U.S. market.”

Anaheuser-Busch Inbev argued that the Justice Department’s lawsuit was conflicting with the law and that they will contest the suit to the fullest extent.

“The U.S. Department of Justice’s action seeking to block the proposed combination between AB InBev and Grupo Modelo is inconsistent with the law, the facts and the reality of the market place,” a company statement said. “We remain confident in our position, and we intend to vigorously contest the DOJ’s action in federal court.”