INTERBREW JUDICIAL REVIEW

"I am pleased that Mr Justice Moses supported the Competition Commission’s (CC’s) Report on all matters of substance and on all but one point," Commission Chairman Dr Derek Morris said today.

Dr Morris said:
"The first thing to note is that after a thorough investigation the CC found that the merger would seriously reduce competition and increase beer prices. Interbrew did not challenge these findings that the merger was against the public interest.

The CC concluded in its Report that the divestment of Whitbread Brewing Company (WBC) with the rights to brew and sell Stella Artois in the UK was not an effective remedy and that Interbrew should be ordered to divest Bass Brewers.

The Court has today rejected all challenges to the CC’s reasoning, holding that:

the CC had explained clearly and cogently why divestment of WBC with rights to Stella Artois was not an effective remedy;
the CC was not required in this case to take into account any costs which Interbrew would incur in divesting itself of Bass;
the CC was entitled to recommend that divestment of Bass should be to a single buyer approved by the Director General of Fair Trading (DGFT);

The Judge did not question any of the CC’s standard procedures.

Mr Justice Moses upheld Interbrew on one point concerning paragraph 2.214. While the Court did not question the reasoning in the paragraph, it held that Interbrew should have been given an opportunity to comment on whether its position as owner of Bass Brewers, whilst at the same time being the licensor of Stella Artois to WBC, would inhibit competition were it required to divest WBC.

The parties will be returning to court to consider the next steps."

Notes to Editors

The Competition Commission report on Interbrew SA and the brewing interests of Bass PLC (Bass Brewers) was published by the Secretary of State for Trade and Industry on 3^rd January 2001.
The Judicial Review hearings took place on 9^th -11^th May 2001.
The CC found the transaction to be against the public interest because (a) it would make Interbrew the largest brewer and wholesaler of beer in Great Britain with a market share in each of these business activities of over 30%; (b) it would strengthen Interbrew's portfolio of leading brands, with four of the ten top selling beer brands, including two of the top three, Carling (brewed by Bass Brewers) and Stella Artois (brewed by Interbrew); (c) it would lead to a duopoly between Interbrew and Scottish & Newcastle PLC, which has a 26% share of the market in both brewing and wholesaling. The CC expected this to cause: higher prices for consumers; reduced choice of brands; and reduced competition in retailing.
Paragraph 2.214 reads:

Three of us are not convinced that this would be a sufficient remedy. We are not convinced that any undertakings in respect of the Stella Artois licence would be effective. Moreover, without Stella Artois in its portfolio, Interbrew would be forced to develop another premium lager, possibly Grolsch. We do not believe that Interbrew would use a licensed brand (ie Grolsch) to compete actively with a brand that it owns but is licensed to a competitor (ie Stella Artois), and on which it was receiving a stream of royalties (see paragraph 3.20). We think separating the management of a brand from its ownership will undermine the long-term health of the brand in a market where the brand manager and owner are both operating and where brands are of increasing importance. Furthermore, we are concerned that Interbrew would use its position as owner of the Stella Artois brand to persuade WBC not to compete as vigorously against Grolsch as it otherwise might do. Finally, we believe that WBC on its own would be a weak competitive force (being very reliant on Stella Artois for sales and profits) and an unattractive platform for other brewers to use as a vehicle for large-scale entry into the market.

Inquiries should be directed:

Katie Bunting, Information Department - Tel: 020 7271 0242