The Division protected competition and consumers through a number of cases favorably resolved through settlement this year. Settlements achieved in cases in a variety of industries, including movie theaters, advertising, banking, cable, transportation, and beer, will ensure that American consumers continue to enjoy the benefits of competition. Four particularly important settlements are those in connection with Anheuser-Busch InBev’s proposed acquisition of SABMiller, Charter’s proposed acquisition of Time Warner Cable, Nexstar’s proposed acquisition of Media General, and Faiveley’s proposed acquisition of Wabtec.
Promoting Competition in the Multi-Billion U.S. Dollar Beer Market
Photo Credit: Zoonar RF/Zoonar/Thinkstock
U.S consumers spend over $100 billion per year on beer. Anheuser-Busch InBev (ABI) is the largest beer brewer in the U.S., accounting for approximately 47% of beer sales across the U.S., and its brands include Budweiser, Bud Light, and Michelob, among others. MillerCoors, the joint venture between SABMiller and Molson Coors Brewing Company through which SABMiller operates in the United States, is the second largest beer brewer in the U.S., accounting for 25% of beer sales. Its more than 40 brands of beer include Coors Light and Miller Lite. In November 2015, ABI agreed to acquire SABMiller in a proposed merger that would have eliminated the head-to-head competition between ABI and MillerCoors. On July 20, 2016, the Division filed suit to block the merger.
Simultaneously with its complaint, the Division filed a proposed settlement that will preserve competition between these two largest beer brewers in the United States. The settlement requires ABI to divest SABMiller’s equity and ownership stake in MillerCoors, as well as other assets needed to protect MillerCoors’ competitiveness, including perpetual, royalty-free licenses to certain products and ownership of international rights to the Miller brands of beer. The settlement will also preserve and promote competition in the U.S. beer industry by imposing restrictions on ABI’s distribution practices and ownership of distributors, and requiring ABI to provide the Division with notice of future acquisitions, including acquisitions of beer distributors and craft brewers, prior to their consummation.
Preserving Options and Price Competition for Television and Movie Viewers
Photo Credit: nensuria/iStock/Thinkstock
Americans currently enjoy a variety of means of accessing their favorite television shows and movies. Millions rely on traditional cable television, and an increasing number are supplementing traditional cable with, or even “cutting the cord” and relying entirely on, online video distributors like Hulu, Amazon Prime, and Netflix in order to enjoy in-home entertainment. While cable remains the most popular way to access TV and movies, online video distributors are increasingly offering meaningful competition to cable companies for in-home entertainment. As they grow, they are developing a variety of offerings, and are likely to become stronger competitors.
Last year, Charter, the third-largest cable company in the United States, proposed to acquire Time Warner Cable, the second-largest cable company, and Bright House Network, the sixth-largest cable company. The Division negotiated a settlement with the merging parties that preserved competition in the market for video programming distribution. The settlement protects competition by prohibiting the merged company from using restrictive contract terms to harm the development of online video distributors. The merged company cannot enter into or enforce agreements that forbid, limit, or create incentives to limit the provision of video programming to online video distributors. Moreover, the merged company cannot discriminate against, retaliate against, or punish video programmers for providing programming to online video distributors.
In January 2016, Nexstar Broadcasting Group, Inc. announced that it planned to acquire for $4.6 billion Media General, Inc. Both companies own and operate broadcast television stations throughout the United States. The Division’s investigation concluded that the proposed transaction would result in higher prices for local and national advertisers that sought to advertise on broadcast television stations in six geographic markets: Roanoke-Lynchburg, Virginia; Terre Haute, Indiana; Fort Wayne, Indiana; Green Bay-Appleton, Wisconsin; Lafayette, Louisiana; and Davenport, Iowa/Rock Island-Moline, Illinois. The Division also concluded that the proposed transaction would result in higher licensing fees charged to cable and satellite TV companies that retransmitted broadcast television programming to their subscribers in the overlap markets. Because cable and satellite providers typically pass on the costs of retransmission fees to their subscribers, American consumers would pay more for cable and satellite TV packages.
To protect consumers and advertisers in the overlap markets from higher prices, the Division negotiated a settlement that resolved the Division’s competitive concerns. The settlement required Nexstar to divest broadcast television stations in each of the overlap markets. These divestitures will preserve competition in each of the overlap markets and ensure that consumers and advertisers will continue to enjoy the benefits of competition between broadcast television stations.
Protecting Competition in Railroad Equipment
Photo Credit: Artem_Egorov/iStock/Thinkstock
The U.S. freight rail network is the largest in the world and supports a $60 billion freight rail shipping industry. Railroad owners and freight car operators rely on a highly-engineered, fail-safe air brake system to slow or stop a train. Wabtec and Faiveley were two of the three largest railroad equipment suppliers in the world when, in July 2015, Wabtec made an offer to acquire Faiveley for $1.8 billion. The merger would have created the world’s largest rail equipment company.
The Division’s investigation concluded that the merger would eliminate head-to-head competition in the development, manufacture, and sale of several freight car brake components. After the merger, Wabtec likely would have grown its market power or gained monopoly power in several relevant markets, with shares of the combined firm ranging from approximately 41 to 96 percent in those markets. Most critically, the merger would have headed off Faiveley’s imminent entry into the U.S. market for freight brake control valves—the most technologically-sophisticated component of a freight car brake system. That market was characterized by a century-old duopoly between Wabtec and its closest rival.
In response to the Division’s substantial concerns, Wabtec agreed to divest Faiveley’s U.S. freight car brakes business, including its FTEN control valve. As a result, customers have a third industry-approved brake supplier and consumers are able to reap the benefits of invigorated competition for freight car brake systems and components.