Tribunal gives conditional green light to alcohol merger

AB InBev and Diageo have entered a licensing agreement whereby AB InBev will produce, market and sell Diageo’s Smirnoff ready-to-drink (RTD) alcoholic beverage and Guinness brands in South Africa.

This agreement required the approval of the competition authorities, given that it was filed as a merger. Genesis was appointed to assist with the merger assessment of the agreement.

Our work focused on assessing the competitive effects alleged by the Competition Commission, in particular concerns related to (i) market share accretion, (ii) impact the loss of alleged close competitors would have on consumer outcomes, and (iii) other potential anti-competitive effects, such as customer foreclosure and conglomerate effects.

Our work assisted the legal team in its responses to the Commission by showing that the concerns raised had no basis. We have also presented our findings to the Commission to assist in its deliberations and submitted a memorandum outlining our views on key competition issues.

Following the commission’s recommendation of a conditional approval of the transaction, Distell’s participation in the process at the Competition Tribunal led to claims regarding potential tying and bundling strategies AB InBev might undertake post-merger. We filed a report with the tribunal showing that the merger provided little reason for concern and rather suggested that AB InBev would be able to offer, on the merits, a stronger and more effective competition to Distell.

In August 2019, the tribunal provided its order that the merger be conditionally approved.