Industry watchdog group Alcohol Justice is urging California Attorney General Xavier Becerra to conduct an independent investigation of Anheuser-Busch InBev and Reyes Holdings for what it believes could be antitrust violations related to acquisitions each company has made in the state.
In a letter to Becerra on December 15, Alcohol Justice executive director and CEO Bruce Lee Livingston focused primarily on A-B and its acquisition of Ace Beverage in Los Angeles, while also pointing to Reyes and its acquisition of Elyxir Distributing in the Monterey Bay Area.
Livingston requested Becerra to look into the “anti-competitive effects” of such acquisitions and “the ensuring duopoly” created by A-B and Reyes in the state.
“California antitrust law, the Cartwright Act, and other statutes and case law are relevant and probably violated,” he wrote. “Regardless of the federal government’s willingness to step in to enforce their own antitrust laws and monitored court decree, we believe our state Attorney General has the legal right and obligation to investigate this proposed acquisition and the duopoly that would result if this acquisition is allowed to proceed.”
Throughout his letter, Livingston writes as if A-B’s acquisition of Ace Beverage had not already closed, which it did last week.
“This global beer manufacturing titan is attempting to dramatically increase its influence in the Golden State with its recently announced desire to acquire the distribution company Ace Beverage LLC of Los Angeles, purchased shortly after unloading a distributorship in Colorado that was under unfair competition investigation and stipulated agreements with a federal agency,” he wrote, referencing the record $5 million offer in compromise (OIC) A-B paid to the Alcohol and Tobacco Tax and Trade Bureau (TTB) in July for alleged trade practice violations related to sports and entertainment sponsorships.
In September, A-B sold its Colorado distribution operations to Norcross, Georgia-based Eagle Rock Distributing, which will expand its operations to Colorado.
According to Livingston, A-B and Reyes Holdings would control about 85% of the wholesale market in California, with Livingston also claiming that A-B holds as much as 40% of the state’s beer market (it doesn’t; it’s under 30%, according to Beer Marketer’s Insights).
“While such duopoly in the distribution tier of alcohol regulation has all sorts of market competition and undue influence potential by itself, ABI’s role is particularly disturbing,” he wrote. “ABI occupies a dominant position in the ‘producer’ tier of California’s three-tier approach to enforcing Tied House restrictions, and ABI is the global, national, and state leader in beer manufacturing. Furthermore, ABI crosses into a third tier through its ownership of Golden Road Brewing craft beer and tap rooms.”
Zeroing in on A-B, Livingston warned Becerra of the potential “monopoly power” the world’s largest beer manufacturer would hold in California, which he referred to as “already great.” Nevertheless, he wrote that the A-B network could:
- “Potentially get inside information on retail activity at nearly every store, on-sale ABC licensee, or small producer.
- “Lower and raise beer prices at will.
- “Offer generous promotions and swag to retail tier purchasers to force out competitive brands.
- “Make it difficult for craft brew producers to get onto their trucks, while under lock-down conditions the craft brew industry is already suffering great economic stress.
- “Diminish distribution market share for any remaining independent distributors, forcing them out of business or forcing them to sell their assets and routes to ABI at deep discounts.”
In addition to those concerns, Livingston wrote that A-B’s acquisition of Ace “could violate the spirit, if not the actual letter,” of a final judgment issued by the U.S. Department of Justice clearing A-B’s merger with SABMiller. Livingston questioned whether the DOJ has reviewed and consented to the acquisition of Ace.
Livingston argued that although the final judgment limits A-B to 10% of distribution nationally and just 15 states allow producers to own distribution companies, “the relevant California market is well over the reasonable 10% cap on ABI distribution control.”
“If 10% distribution market control is bad from a national perspective, then how can 40% in the relevant California market be acceptable?” Livingston asked.
Livingston then turned to Reyes, which he wrote “is aggressively taking over smaller competitors, as noted with their acquisition of Elyxir,” which was the company’s 11th move in the state of California when announced.
A spokesperson for Reyes did not respond to a request for comment.
Asked for comment, a spokesperson from A-B shared the following statement:
“Our strong partnership with our independent wholesalers and the strength of the three-tier system have always been critical to the overall success of the beer industry. We look forward to continuing to work with our partners to ensure consumers have access to the wide range of brands available, so that we can continue to drive the beer industry forward.”