After successful mega merger, AB InBev under scrutiny from European Commission

Written on 12 Jul 2016

Anheuser-Busch InBev SA (AB InBev) is the world’s largest brewer, with a number of well known brands including Corona, Stella Artois and Budweiser. AB InBev won clearance from the European Commission (Commission) on 24 May 2016 to acquire SABMiller (the world’s second largest brewer with brands such as Peroni, Pilsner Urquell and Grolsch), subject to the divestment of SABMiller’s business in France, Italy, the Netherlands and the UK. The deal, valued at £71 billion, has created a brewing behemoth which “will sell twice as much beer and earn four times more profit than Heineken, the third largest brewer.”

However, just one month after the successful acquisition, AB InBev is facing renewed scrutiny by the Commission, but this time for alleged abuse of dominance.

Restrictions on parallel trade

On 30 June 2016, the Commission announced that it had opened a formal investigation to examine whether AB InBev has restricted parallel imports of its beer and therefore abused its dominant position in the Belgian beer market, contrary to Article 102 of the Treaty on the Functioning of the European Union.

The Commission is concerned that AB InBev deliberately hindered imports of its beer from cheaper neighbouring countries, such as France and the Netherlands, into the more expensive Belgian market.

In particular, the Commission is investigating whether AB InBev:

  1. changed the packaging on its beer cans and bottles to make it more difficult to sell cross-border in other countries; and
  2. restricted “non-Belgian” retailers from accessing rebates and key products, in order to stop them from importing less expensive beer into Belgium.

Next steps

There is no timetable for competition investigations by the Commission, which can take a number of years to conclude.

AB InBev has confirmed the investigation and that it is cooperating with the Commission. If found to have infringed the EU competition rules, AB InBev faces a fine of up to 10% of its worldwide group turnover; c.$64 billion when SABMiller’s worldwide revenue is included.

The outcome of this investigation may provide some helpful guidance on parallel trade . In particular, clarity may be given on whether re-packaging of products for different geographical markets is unlawful, especially where the intention is to restrict cross-border sales. Any company with a strong market position making cross-border sales within the EU will therefore be watching closely.

Interestingly, the Commission has not indicated that it is investigating AB InBev under the anticompetitive agreement provisions of Article 101. Given that restrictions on retailers are under scrutunity, this might have been expected. We therefore wait to see how far this case will impact non-dominant companies.