Megabrew will sail past ACCC: Lawyer
Despite media reports to the contrary, Anheuser-Busch InBev’s takeover of SABMiller faces no major regulatory hurdles in the Australian market, according to a leading competition lawyer.
McCullough Robertson partner John Kettle was responding to recent comments by former ACCC chairman Professor Allan Fels, that the transaction dubbed ‘Megabrew’ would not get an easy ride past the competition watchdog.
“I actually think he’s the best competition economist in Australia, but I think he was probably caught on the hop on this,” Kettle told Australian Brews News.
“He may not be fully on top of the brewing game. He’s treating it as a very homogenous, almost single issue market. It’s full of regional submarkets, it’s got different components.”
Kettle is a competition law and merger control expert who has worked on previous beer industry consolidation events, such as Carlsberg and Heineken’s 2008 takeover of Scottish & Newcastle in the UK, a transaction he said covered a lot of the same issues.
In assessing whether AB InBev’s takeover of SABMiller and therefore Carlton & United Breweries would substantially lessen competition in the Australian beer market, Kettle said the ACCC would ultimately review the implications for several different beer industry segments: Brewing capacity, distribution networks, tap beer, bottled beer and craft beer.
“AB InBev doesn’t have any brewing capacity in Australia, so there’s no change there,” he said.
“You still have the Lion distribution network, that’s not disappearing. You still have competing distributors in terms of SABMiller [CUB] and Lion. Where your concern would be is if you had Lion merging with SABMiller, but that’s not happening,” said Kettle.
AB InBev’s tap presence minor
He said the deal would not have any bearing on the issue of access to taps, which has already drawn the attention of the ACCC in the last 12 months.
“That’s a general issue and there’s no change there because you still have two powerful companies,” he said.
He pointed out that most of AB InBev’s brands – which include Corona, Beck’s and Budweiser – are heavily geared to packaged rather than draught beer in Australia.
“Compared to other markets, tap beer isn’t so important in Australia as it would be in a British market or an Irish market,” he said.
“That means it’s actually easier to get access into pubs, because you get access to shelf space rather than taps.”
Retailers will keep CUB in check
Where the off-premise sector is concerned, Kettle said Woolworths and Coles have “countervailing buyer power” that would prevent an AB InBev-owned CUB from raising the prices on any of the new brands that are likely to join its portfolio as a result of the merger.
And the transaction would be unlikely to curtail the craft beer sector’s rapid emergence as a competitive force, Kettle added, nor would the new-look CUB even dominate every Australian submarket.
“In each of the states there’s regional market preferences. Who’s got the market power in Brisbane? It’s [Lion’s] Castlemaine Perkins.”
Megabrew may increase competition
Kettle said it could certainly be argued that Lion’s loss of key brands may actually increase competition in the Australian beer market.
“If I was working on this deal, that’s what I’d be saying. It’s going to drive them to be more aggressive, in sourcing fresh brands to bring new competition and it’ll be more vigorous, there’ll be more vigorous price competition,” he said.
How it will play out
Kettle said the ACCC would nevertheless review the transaction based on the headline market share that would be transferred from Lion to AB InBev-owned CUB.
“But then once you get into the detail of it, all those submarkets will be dealt with or subcategories,” he said.
The watchdog may publish a statement of issueson the deal, Kettle suggested, similar to the process it followed in relation to Foxtel’s recent acquisition of a 15 per cent stake in Network Ten Holdings.
“Competition authorities like these sorts of transactions because they get to see the workings of the market,” he said.
“It’s a bit like Ten and Foxtel – they issued a statement of issues on that and then they waved it through the other week.”
The McCullough Robertson partner was in no doubt about what the final outcome will be for Megabrew.
“They’ll look at it, they may publisha statement of issues, but it will go through no problem,” he predicted.