Seventh Circuit Revives Antitrust Beer Brawl

CHICAGO (CN) — The Seventh Circuit on Thursday partially revived a small brewer’s antitrust claims against Anheuser-Busch and Molson Coors, accusing the beer giants of making secret deals with Canadian authorities to monopolize the Ontario market.

Two years ago, Mountain Crest sued Anheuser-Busch and Molson Coors, America’s two biggest breweries, claiming they abused their monopoly power to restrain trade — particularly, beer exports to Ontario, Canada.

Mountain Crest, the 21st largest brewer in the U.S., brews beer 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.”

In Ontario, brewers can distribute beer only through the government-owned retailer, or through Brewers Retail aka The Beer Store, which is owned by Anheuser-Busch and Molson Coors.

The government-owned retailer allows sales only of six packs of beer, with few exceptions, and does not charge listing fees to its suppliers — but The Beer Store does.

Mountain Crest says it’s had to pay The Beer Store $632,000 in listing fees, and that despite paying so much 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.

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.

This secret agreement allegedly stipulated that if any small brewer, such as Mountain Crest, 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 allegedly was replaced by a new “master framework agreement” in 2015.

A federal judge dismissed the lawsuit as barred by the act-of-state doctrine, and Mountain Crest conceded at oral arguments before the Seventh Circuit in November 2018 that the 2015 agreement and six-pack rule were official acts of the Ontario government.

“To the extent that Mountain Crest seeks relief under [the Sherman Act] predicated solely on the six-pack rule, the act of state doctrine clearly precludes the action,” U.S. Circuit Judge Kenneth Ripple wrote in Thursday’s opinion. “Adjudication of liability on this basis would have the effect of invalidating the Ontario government’s choice to extend monopoly benefits to Anheuser-Busch and Molson Coors.”

But the act of state doctrine does not completely bar the brewery’s antitrust claims against Anheuser-Busch and Molson Coors, the court ruled.

“Mountain Crest sets forth facts that, if accepted by a trier of fact, might demonstrate that the defendants took concerted action to bring about the Ontario legislation,” Ripple wrote. “Holding Anheuser-Busch and Molson Coors liable for their antecedent and allegedly deliberate acts to bring about the six-pack rule and requiring them to pay damages to Mountain Crest would not, on its face, invalidate Ontario’s chosen regulatory scheme.”

However, “Mountain Crest has alleged a pattern of other marketing and distribution practices that it claims manipulated The Beer Store’s internal sales approach to disfavor American products, including Mountain Crest’s product,” the 41-page opinion continues. “We cannot discern any basis for saying that Mountain Crest has waived these claims.”

%d bloggers like this: