Seagram drinks deal blocked by competition concerns

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The drinks industry has been stunned by Tuesday's surprise decision by the US Federal Trade Commission (FTC) to block the joint $8.15bn acquisition of Seagram's drinks business by Britain's Diageo and France's Pernod Ricard.

The agency cited competition concerns because Seagram and Diageo are the number two and three sellers of rum in the US, behind market leader Bacardi.

Bacardi and Diageo/Seagram would control a "duopoly" created by the merger, the Commission ruled. The two firms would also be able to engage in "coordinated interaction" that could further injure competition, the FTC contends.

"The proposed merger would consolidate the second- and third-largest US rum producers, leaving only two large sellers of rum in the United States," FTC Bureau of Competition Director Joe Simons said in a statement. "This will create a dangerous likelihood of reduced competition and higher prices for consumers of rum."

The FTC authorised its staff to seek a federal district court order to stop the acquisition.

Last December, Diageo and Pernod Ricard agreed to buy and share Seagram's wine and liquor in a complex deal. Diageo would pay $5bn for several Seagram brands, including Captain Morgan Rum, Crown Royal, VO and Seagram's wine businesses. Pernod Ricard has agreed to pay $3.15bn for Chivas, The Glenlivet and Martell brands from the portfolio.