I am somewhere between amused, disgusted and confused. Since the passing of the Sherman Anti-Trust Act in 1890, the U.S. government has been stepping in to ensure markets are fair and free of anti-competitive practices.

Through the dot-com era and the wave of consolidation that followed, the Justice Department (DOJ) has been highly selective in challenging mergers on anti-trust grounds[i]. The value of acquisitions exceeded $5 trillion in the U.S. in 2015, with ten mergers challenged by the DOJ and Federal Trade Commission. Three mega-deals passed muster in 2015, including AT&T-DirecTV, Pfizer-Allergan, and DowDuPont. Meanwhile, several others such as the merger of Comcast and Time Warner, were challenged by the DOJ’s Anti-Trust Division.

The definition of what is anti-competitive is confusing at best. Consider the proposed $108 billion acquisition of SABMiller by InBev (Anheuser-Busch). When news of the deal went public, Anheuser-Busch announced that they would divest U.S. assets (including most of the MillerCoors portfolio) in an effort to stem the tide from regulators[ii].

It is well known that Anheuser-Busch is attempting to roll-up the craft brew market, which is growing at a clip of 15% during a time when their core products are in steep decline. In almost every major market, there are only two major beer distributors. The DOJ announced certain requirements in approving the deal, including the elimination of incentives offered by InBev for distributors to carry only craft brands owned by Anheuser-Busch.

You don’t have to be an economics major to see where this is headed. I was with an East Coast distributor this month, who reported pressure by Anheuser-Busch to sell to a competitor, as they try to eliminate distributors and control the ones who are left. This is the definition of predatory practices, and it is hard to believe that Anheuser-Busch will not exhaust every trick in the book to monopolize.

Conversely, the Justice Department recently stepped in to block Aetna’s $37 billion offer for Humana, as well as Anthem’s proposed acquisition of Cigna ($54 billion). Of course, in these cases Medicare is the customer, so the U.S. government has a vested interest in keeping prices low. Large health insurers are pulling out of exchanges with the claim that they can’t make money, even though prices are 30% higher than group benefit insurance. Customers in the form of physicians groups and hospitals have already consolidated. Naturally, the insurer’s inclination is to merge their way into profitability. It should be noted that the two healthcare deals combined would be smaller than the InBev/SABMiller deal.

It appears that what is good for the goose is not good for the gander.


[i] 2015 Anti-Trust Review, Crowell & Moring

[ii] U.S. Signs Off on Beer Deal, The Wall Street Journal