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Franchise Damages and Antitrust Analysis: Diageo North America


Diageo is the world’s leading supplier of alcohol beverage products across beer, wine, and spirit categories. Their products include Guinness, Smirnoff, Johnnie Walker, Baileys, J&B, Captain Morgan, Tanqueray, Crown Royal, Beaulieu Vineyard, and Sterling Vineyard. Diageo is a global company, trading in over 180 markets around the world.

Three large distribution agents in the state of Michigan, operating under a single venture, alleged in a lawsuit that the termination of their agreement with Diageo violated state antitrust statutes, and also caused damages due to a breach of contract. Anderson Economic Group was retained by Diageo to provide expert testimony on two issues: the amount of the alleged damages suffered by the plaintiffs in the case due to the termina¬tion of their distribution agreement, and the question of violations of federal or state antitrust laws.

AEG prepared a detailed examination of the antitrust issues involved, which were complicated by the fact that the 21st amendment authorizes state regulation of the alcoholic beverage industry, and this regulation imposes limitations of commerce that are similar to those that, if created by private firms acting in collusion, may violate federal antitrust laws. In addition, we reviewed the empirical evidence in the damage claim and created a preliminary analysis.