The 7th Circuit has reversed and remanded a district court’s dismissal of a small Wisconsin brewer’s antitrust challenge to allegedly anticompetitive and monopolistic practices in the Ontario beer market.
The district court had dismissed Mountain Crest SRL’s Sherman Act lawsuit against large brewers Anheuser-Busch Inbev and Molson Coors. The small brewer’s assertions were that the larger brewers allegedly conspired through their ownership of Canadian retail stores (the Beer Store) to keep other brewers from successfully selling into the Ontario beer market and from bringing beers packaged in anything larger than six-pack containers by contracting. The complaint asserted this was accomplished through contracts regarding trade practices with the Ontario liquor authority which the brewers wanted to keep secret.
The district court had found that the challenge ultimately violated the act of state doctrine as a decision in favor of the small brewer would arguably mean that the court was sitting in judgment of a foreign law (the contract allowing the practices in beer stores owned by Anheuser-Busch and Molson Coors). The 7th Circuit disagreed and found that the allegations that the anticompetitive practices were engaged in here in the United States and could lead to damages regardless of whether the court made determinations regarding the legality of the Candanian laws (the acts of the Ontario legislature in approving the allegedly secret beer contracts).
Here’s how they put it:
“Nevertheless, Mountain Crest’s operative complaint, fairly read, is not limited to the theories of recovery that we have just addressed. The Second Amended Complaint also sets out allegations that Anheuser-Busch and Molson Coors, acting through their officers and employees, violated the same provisions of the Sherman Act by conspiring to bring about the Ontario government’s approval of the six-pack rule. These allegations do not implicate the act of state doctrine. W.S. Kirkpatrick, 493 U.S. at 407, 110 S.Ct. 701, indicated that, where the plaintiff is “not trying to undo or disregard governmental action,” it may “obtain damages from [the] private parties that procured it” illegally. … 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. 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. …
“The Second Amended Complaint also addresses another area that, so far, has not come under the district court’s scrutiny. It plainly sets forth other activities of Anheuser-Busch and Molson Coors, perhaps independent of the six-pack rule, that, in Mountain Crest’s view, implicate the strictures of the Sherman Antitrust Act. 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. These practices, according to the operative complaint, prevented Mountain Crest from achieving the economies of scale necessary to make its participation in the Ontario market profitable. We cannot discern any basis for saying that Mountain Crest has waived these claims. Accordingly, on remand, the district court should address these claims in due course.”
This course of events leads one to wonder, would any of this have been possible if Canada had a strict tied-house prohibition that kept the brewers from owning the beer stores?
You can read the full opinion in Mountain Crest SRL v. Anheuser-Busch Inbev and Molson Coors here.
You can listen to the audio of the 7th Circuit’s oral argument on the matter here.