The U.S. Department of Justice has filed suit to block brewing giant Anheuser-Busch InBev’s $20.1 billion acquisition of Grupo Modelo, arguing that the deal would result in higher beer prices and fewer choices for American consumers.

Anheuser already owns 50 percent of Mexico-based Modelo, which makes beers including Corona Extra and Negra Modelo. The merger would combine the first- and third-largest brewers of beer sold in the United States, giving the merged company control of nearly half of the U.S. beer market, according to DOJ.

“This matters to consumers,” said Antitrust Division chief William Baer, a former partner at Arnold & Porter who was confirmed by the U.S. Senate late last month, speaking on a conference call with reporters. Americans spent $80 billion last year on beer, he said, and even “a slight price increase as a result of this deal means American consumers could pay billions more.”

“The beer market in the U.S. is already highly concentrated,” he continued. “Prices have gone up in recent years because of this concentration. We believe this acquisition is a bad deal for American consumers.”

Anheuser, which in 2008 was bought by Belguim’s InBev for $52 billion, owns more than 200 beer brands, including Bud Light, the number one brand in the U.S. The number two beer maker is MillerCoors, with 26 percent of the U.S. market.

In the complaint, filed on January 31 in U.S. District Court for the District of Columbia, DOJ lawyers sounded almost scornful of the merging companies’ attempt to allay antitrust concerns.

“For no substantial business reason other than to avoid liability under the antitrust laws,” the complaint states, Anheuser offered up front to sell Modelo’s 50 percent interest in Crown Imports, which imports Modelo’s beer into the United States, to Crown’s other owner, Constellation Brands, Inc.

Constellation would have the exclusive right to import Modelo’s beers for 10 years, but it would acquire no brands or breweries. To DOJ, this merely creates “a façade of competition between [Anheuser] and its importer. In reality, Defendant’s proposed ‘remedy’ eliminates from the market Modelo—a particularly aggressive competitor—and replaces it with an entity wholly dependent on [Anheuser].”

Anheuser is represented by an antitrust team from Skadden, Arps, Slate, Meagher & Flom led by Steven Sunshine. Modelo has turned to Cravath, Swaine & Moore’s Christine Varney, who headed the Antitrust Division from 2009 until 2011.

Sunshine was not immediately available for comment and Anheuser did not respond to a request for comment. Varney also did not return a call seeking comment.

In most antitrust cases, market definition is a crucial issue. For instance, Baer won a landmark case in 1997 as head of the Federal Trade Commission’s Bureau of Competition by convincing the court to narrowly define Staples and Office Depot as a distinct “superstore” market for office supplies.

In this case, however, the complaint defines beer as a single, massive market, though the government acknowledges that brewers group beers into four categories: sub-premium-lagers like Keystone or malt liquor; premium-brands such as Budweiser, Miller and Coors; premium plus-fancier premium beers like Bud Light Lime and Michelob, and high-end, which includes micro-brews and imported beers, the best-selling of which is Modelo’s Corona.

ABI dominates the premium category, while Modelo’s strength is high-end. DOJ asserts that beers compete with each other across segments and that ABI and Modelo brands “are in regular competition.”

What’s less clear is whether a “small but significant and nontransitory increase in the price” in one category by a monopolist would also affect the prices in other categories.

The DOJ complaint stressed that Anheuser tends to lead the way on price increases, with MillerCoors following suit. Modelo, however, has more often declined to match price hikes, “encouraging consumers to trade up to Modelo brands.” According to DOJ, Anheuser’s premium brands such as Bud and Bud Light have lost market share to Corona because of Modelo’s “aggressive pricing.”

In addition to Baer, DOJ’s brief was signed by Renate Hesse, Patricia Brink, Mark Ryan, James Tierney and Michelle Seltzer.

Contact Jenna Greene at jgreene@alm.com.