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Beer Giants Accused of Restraining Trade to Canada

The two biggest breweries in the country, Anheuser-Busch and Molson Coors, conspire to prevent pint-sized beer makers from competing with them in Canada, an independent brewer in Wisconsin said Tuesday in a federal antitrust complaint.

MADISON, Wisc. (CN) — The two biggest breweries in the country, Anheuser-Busch and Molson Coors, conspire to prevent pint-sized beer makers from competing with them in Canada, an independent brewer in Wisconsin said Tuesday in a federal antitrust complaint.

Mountain Crest SRL claims Anheuser-Busch and Molson Coors abused their monopoly power to restrain trade, particularly, beer exports to Ontario, Canada.

Anheuser-Busch is the nation’s biggest brewery, Molson Coors the second biggest.

Mountain Crest oversees distribution of the Minhas Craft Brewery in Monroe, Wisconsin, which was established in 1845. It describes itself as the 21st largest brewer in the United States, and the 12th largest independently owned brewery.

While it survived Prohibition and the Great Depression, Mountain Crest says it’s been powerless to fight the giant monopolists.

“Plaintiff’s injury is precisely the sort that the antitrust laws were intended to forestall: namely, two dominant businesses using their market power to stifle competition,” the complaint states.

Anheuser-Busch controls 45 percent of the U.S. beer market and 43 percent of the Canadian market. Molson Coors controls 28 percent of the U.S. market and 34 percent of the market in Canada, according to the complaint. The U.S. beer market alone was more than $34 billion for the year ending in January, according to industry publications.

In 2003, Mountain Crest started brewing beers for Ravinder Minhas, a Canadian entrepreneur, for export to Alberta. Since 2009, it’s been trying to expand its market to Ontario, but says the defendants have stiff-armed it through “secret agreements.”

Brewers can distribute beer in the province of Ontario in two ways: through the Liquor Control Board of Ontario, a government-owned retailer; or through Brewers Retail Inc., aka The Beer Store, which is jointly owned by the defendants.

The government-owned retailer does not charge listing fees to its brewer-suppliers, but The Beer Store does. Mountain Crest calls The Beer Store the world’s largest beer retailer, with more than 450 outlets in Ontario alone. And Mountain Crest says it charges hidden fees. “Defendants have raised TBS [The Beer Store] fees for other brewers every year, at a rate of approximately six times inflation,” according to the complaint.

The “most flagrant” restraint on trade was exposed on Dec. 9, 2014, “when the Toronto Star published a leaked copy of a secret anticompetitive market allocation agreement,” the complaint states. That story reported that The Beer Store had 80 percent of Ontario’s beer market.

“The Secret Agreement, signed by an executive of Molson Coors on behalf of a business jointly and exclusively controlled by defendants, stipulated that the defendants’ only retail competitor in Ontario ‘will not sell beer … in packages containing more than 6 containers and will not promote beer at price points greater than 6 containers,’” according to the complaint. (Ellipsis in complaint.)

In other words, if Mountain Crest, or any other smaller brewer, wanted to sell 12- or 24-packs of beer in Ontario, they would have to pay listing, handling and service charges to sell through The Beer Store. Anheuser Busch and Molson Coors brands were exempt from the fees. After the Star broke the story, the secret agreement was replaced by a new “Master Framework Agreement” in 2015.

Stewart Glendinning, CEO of Molson Coors International and a U.S. attorney, defended the operation. “I know what’s best for consumers,” he said. “And having seen a wide range of retailing across the world, I can tell you that [The Beer Store] is a system that is low-cost and passes that cost along to consumers.”

But Mountain Crest says it has had to pay The Beer Store $632,000 in listing fees, and that despite paying the money to be carried in 440 of the defendants’ stores, many of the outlets are “out of stock” of Mountain Crest’s beer at any given time.

“Defendants intended to, and actually did, unreasonably retrain plaintiff’s export sales to Ontario by engaging in a continuing combination and conspiracy that directly and negatively affected growth of plaintiff’s brewery in Monroe,” the complaint states.

Mountain Crest seeks declaratory judgment, an injunction and damages for Sherman Act violations and restraint of trade.

It is represented by Charles Benoit, of Washington, D.C., who did not immediately respond to a request for comment.

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