SKADDEN. ARPS, SLATE, MEAGHER & FLOM LLP

1440 NEW YORK AVENUE, N.W.

WASHINGTON, D.C. 20005-2111

FIRM/AFFILIATE OFFICES

BY HAND

December 9, 2013

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BOSTON

CHICAGO

HOUSTON

LOS ANGELES

NEW YORK

PALO ALTO

WILMINGTON

BEloJlNG

BRUSSELS

F"RANKF"URT

HONG KONG

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MUNICH

PARIS

SÃO PAULO

SHANGHAI

SINGAPORE

SYDNEY

TOKYO

TORONTO

VIENNA

DIRECT DIAL

202.371.7065

DIRECT FAX

202.661.0505

EMAIL ADDRESS

JOHN .SEWARD@SKADDEN.COM

TEL: (202) 371 -7000

FAX: (202) 393-5760

www.skadden.com

Donald S. Clark

Secretary

Federal Trade Commission

600 Pennsylvania Ave., NW, Rm. H-I13

Washington, DC 20580

RE: In the Matter of Ardagh Group S.A., Docket No. 9356

Dear Mr. Clark:

Enclosed for fiing please find the original and two copies of non-pary

Anheuser-Busch Companies LLC's Motion for In Camera Treatment and supporting

materials. Also enclosed are (i) three paper copies ofthe public version of the

motion and supporting materials; (ii) a CD containing an in camera set of the motion

and supporting materials; and (ii) a CD containing a public set of the motion and

supporting materials.

Respectfully submitted,

~~
UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

OFFICE OF ADMINISTRATIVE LAW JUDGES

OR'G'NAl

In the Matter of

)

)

)

)

)

)

)

)

)

)

)

)

Ardagh Group S.A.,

a public limited liability company, and

PUBLIC

Saint-Gobain Containers, Inc.,

a corporation, and

Docket No. 9356

Compagnie de Saint-Gobain,

a corporation.

NONPARTY ANHEUSER-BUSCH COMPANIES, LLC'S MOTION FOR IN CAMERA

TREATMENT OF TRIAL MATERIALS

Pursuant to Rule 3.45(b) of the Federal Trade Commission's (the "Commission")

Rules of Practice, nonparty Aneuser-Busch Companies, LLC ("AB") hereby respectfully moves

for an order requiring in camera treatment of documents designated for use at trial by the

Commission and Respondents (collectively, the "Parties"), and certain portions of the declaration

and transcript of the deposition of Lee Keathley (together the "Keathley Testimony"). This

motion is supported by three concurrently-submitted declarations.

Nonparty AB is a leading global beer brewer whose products are sold to

consumers in many different types of containers, including glass bottles, which AB sources from

third-pary suppliers (including Respondents) and its own facilities. (Ardagh Admin. Answer at

3-5.) On November 19,2013, the Parties provided AB with formal notice of the documents and

Keathley Testimony they intend to offer into evidence at the administrative triaL. (Braden Decl.

ir 6.) Altogether, the Paries identified 79 documents and portions of over 200 pages of

deposition transcript. AB seeks in camera treatment for certain proposed trial exhibits and

portions of the Keathley Testimony.
ARGUMENT

Rule 3.45(b) of the Commission's Rules of Practice provides that "(aJ par or

third pary may obtain in camera treatment for material, or portions thereof, offered into

evidence. . . . (ifJ its public disclosure will likely result in a clearly defined, serious injury to the

person, parnership or corporation requesting in camera treatment." 16 C.F.R. § 3.45(b). "That

showing can be made by establishing that the documentary evidence is 'sufficiently secret and

sufficiently material to the applicant's business that disclosure would result in serious

competitive injury,' and then balancing that factor against the importance of the information in

explaining the rationale of Commission decisions." In re Union Oil Co. of Cal., Dkt. No. 9305,

2004 FTC LEXIS 197, * 1-*2 (Oct. 7,2004) (Chappell, 1.) (citations omitted).

Factors the Commission considers when determining materiality and secrecy

include:

(1) the extent to which the information is known outside of the applicant's

business; (2) the extent to which the information is known by employees and

others involved in the applicant's business; (3) the extent of measures taken by

the applicant to guard the secrecy of the information; (4) the value of the

information to the applicant and its competitors; (5) the amount of effort or

money expended by the applicant in developing the information; and (6) the ease

or difficulty with which the information could be properly acquired or duplicated

by others.

In re Hoeschst Marion Roussel, Inc., Dkt. No. 9293,2000 FTC LEXIS 138, *6 (Sep. 19,2000)

(Chappell, J.) (citations omitted).

Since nonparties have no' interest in the underlying litigation, yet stand to suffer

harm iftheir confidential information is disclosed, "(aJ request for in camera treatment by a nonpary warrants "special solicitude." In re ProMedica Health Sys., Dkt. No. 9346,2011 FTC

LEXIS 101, *4 (May 25,2011) (Chappell, J.) (quotations and citations omitted). "(AJs a policy

matter, extensions of confdential or in camera treatment in appropriate cases involving third

2
pary bystanders encourages cooperation with future adjudicative discovery requests." In re

Kaiser Aluminum & Chem. Corp., 103 F.T.C. 500,500 (1984).

I. IN CAMERA TREATMENT IS WARRNTED FOR PROPOSED TRIAL

MATERIALS

AB requests in camera treatment for the documents and Keathley Testimony

attached hereto as Exhibits 1-70, containing the following categories of information:

· Category A - Packaging Procurement Information;

· Category B - Packaging Research and Innovation Information;

· Category C - Internal Packaging Production Information; and

· Category D - Strategic Marketing and Product Development Plans for Beer

Business. 

1

Appendix A lists the documents and Keathley Testimony for which AB requests in camera

treatment and identifies each by the above categories. The information in these categories is

highly confidential, and AB does not disclose such information publicly or disseminate it widely

internally. (Braden Decl. irir 7, 11, 18; McGauley Decl. irir 4-5,8; Gavorik Decl. irir 7,9.)

Indeed, AB personnel are given specific training on confidentiality to ensure its sensitive

information remains protected. (Braden Decl. irir 1 1, 18; McGauley Decl. irir 4, 8; Gavorik Decl.

ir 9.) The information in the above categories was designated confidential during the course of

the Commission's investigation, this proceeding, and the related preliminar injunction

proceeding in federal court. (Braden Decl. ir 5.) As explained below, public disclosure of the

attached exhibits would cause significant harm to AB. AB accordingly requests that disclosure

of these materials continue to be limited to persons identified in Paragraph 7 of the July 1,2013

Protective Order for the time periods set forth in Appendix A.

The supporting declarations categorize the individual documents for which AB seeks in camera treatment.

3
a. Category A - Packaging Procurement Information

AB requests in camera treatment for documents and Keathley Testimony

containing information about AB's procurement strategy for beer containers, the terms of AB's

glass bottle supply agreements, AB's relationships with its glass suppliers, AB's prior, curent

and projected container volumes, and the profitabilty of beer sold in different container types.

(Braden Decl. irir 8-14.) AB currently is negotiating new contracts with all of its U.S. glass

suppliers, including Respondents. (Id. at ir 10.)

The disclosure of the above information would severely disadvantage AB in

curent and future negotiations with beer-container suppliers. See In re Polypore Int'l, Inc., Dkt.

No. 9327, 2009 FTC LEXIS 100, * 11 (May 6, 2009) (granting in camera treatment for

documents containing information regarding ongoing contract negotiations). Respondents and

other suppliers could use this information as leverage in negotiations with AB, seeking to secure

better terms at AB's expense. (Braden Decl. irir 9-10.) In addition, AB's competitors could use

this information as leverage in negotiations with their own container suppliers, using AB's own

information to gain a competitive advantage against it. (Id. at ir 9.)

AB requests in camera treatment for 12 years for certain documents and Keathley

Testimony in Category A as set forth in Appendix A. The materials for which AB seeks 12

years of protection contain sensitive information about AB' s existing contract terms, contract

terms under negotiation and strategies for negotiating with Respondents and other suppliers.

Extended in camera treatment is warranted for this type of information where necessary to

protect the moving pary from competitive har. See In re General Motors Corp., Dkt. No.

9114, 1984 FTC LEXIS 89, *2-*3 (Dec. 22, 1982) (granting extended in camera treatment for

information about negotiating strategies). Here, maintaining the confidentiality of AB' s existing

supply contract terms, contract terms under negotiation and negotiation strategies for 12 years is

4
warranted because this information wil remain competitively sensitive through the next period

of negotiations, which wil occur five to ten years from now. The contracts currently being

negotiated with Respondents and other glass suppliers wil commence next year, last five to ten

years, and wil incorporate many of the terms from the existing contracts, which served as the

starting point for the curent negotiations. (Braden Decl. irir 10, 12.) In turn, the contracts

currently under negotiation wil serve as the staring point for the next round of negotiations, and

many of the terms wil again carryover into new contracts. (Id at ir 12.) Further, AB expects its

curent negotiation strategies and analyses to remain applicable for the next round of

negotiations. (Id) Keeping AB' s supply terms and negotiation strategies confidential for 12

years wil prevent Respondents and others from using this information to AB' s disadvantage

during those future negotiations.

One of the documents for which AB seeks to protect for 12 years (ABI-LIT0002008) is a spreadsheet containing AB's beer sales margins by package type. Extended in

camera treatment is warranted for margin information where necessary to protect the moving

pary from competitive har. See In re Champion Spark Plug Co., Dkt. No. 9141, 1982 FTC

LEXIS 92, *6-*7 (Mar. 4, 1982) (granting extended in camera treatment for information about

gross profit margins, among other financial information). The margin information AB seeks to

protect does not vary significantly from year to year, and thus wil remain competitively

sensitive for a prolonged period. (Braden Decl. ir 13.) AB's business parners and suppliers,

including Respondents, could use AB's margins by package as leverage against it in current and

future negotiations ifnot protected. (Id.) Accordingly, in camera treatment for a period of 12

years is waranted to protect AB from being disadvantaged in future negotiations.

5
For the remaining materials in Category A-which includes correspondence

between AB and its suppliers and information about AB's spend, volumes and packaging mixAB requests in camera treatment for a period of five years. Under Commission precedent, in

camera treatment for up to five years is appropriate for these types of business records. See, e.g.,

In re ProMedica Health Sys., 2011 FTC LEXIS 101 at *5; In re Polypore Intl, Inc., 2009 FTC

LEXIS 100 at *4.

b. Category B - Packaging Research and Innovation Information

AB requests in camera treatment for proposed trial exhibits and Keathley

Testimony containing information about AB's plans for packaging innovations. (McGauley

Decl. irir 4-6.) These materials also contain research conducted by AB about consumer

packaging preferences and AB' s analysis of those preferences, which forms the basis of its

innovation plans. (Id at ir 4.)

Disclosure of AB' s packaging research and innovation information would result

in significant competitive harm. See In re Rambus, Inc., Dkt. No. 9302,2003 FTC LEXIS 68, *9

(Apr. 23, 2003) (granting in camera treatment for documents containing information that if

disclosed "could adversely affect (a nonparty's) strategies and decisions regarding future

products it intends to build (and) its plans to innovate"). AB spends significant time and

resources on its packaging research and innovation, which could not be recreated by AB' s

competitors without substantial effort and expense, if at all. (McGauley Decl. ir 5.) If disclosed,

AB's competitors could use this information to preempt AB's innovation strategies and its

introduction of new packaging. (Id at ir 4.) Further, AB's competitors would have access to

confidential industry and consumer research prepared by AB, which they could use to AB' s

competitive disadvantage. (Id.) Because these innovation plans cover several years, AB

requests that materials identified in Appendix A as containing information from Category B be

6
granted in camera treatment for five years. See In re Polypore Int'l, Inc., 2009 FTC LEXIS 100

at *4.

c. Category C - Internal Packaging Production Information

AB requests in camera treatment for the proposed trial exhibits and Keathley

Testimony containing information about AB's internal packaging production capabilities.

(Braden Decl. at irir 15-19; Gavorik Decl. irir 7-10.) These materials include information about

capacity, strategic plans, production costs and potential capital improvements for AB's internal

glass bottle production and metal container facilities (Braden Decl. ir 15; Gavorik Decl. ir 6.)

Disclosure of AB's packaging production information would significantly

disadvantage AB in present and future negotiations with beer container suppliers. See, e.g., In re

Rambus, 2003 FTC LEXIS 68 at *5 (granting in camera protections to documents that contain,

in part, a third party's "manufacturing costs and capital investments"). AB's suppliers could use

the information-which took substantial time and resources to develop (Braden Decl. ir 18;

Gavorik Decl. ir 9)-as leverage to gain concessions from AB on contract terms. (Braden Decl.

ir 15; Gavorik Decl. ir 7.) Similarly, companies that supply input products (e.g., aluminum,

cullet, limestone) to AB for its internal packaging production, could use this information to AB's

disadvantage during their contract negotiations. (Braden Decl. ir 16; Gavorik Decl. ir 8.) Finally,

disclosure of AB's internal production information would harm AB's competitive position by

providing competitors with insight into AB' s cost structure and future plans for packaging

production. (Braden Decl. ir 16.)

For nearly all materials identified in Appendix A as containing information from

Category C, AB requests in camera treatment .for a period of five years because its packaging

production plans may take a considerable amount of time to complete or even initiate. For two

Category C documents containing infOfIation on AB's internal glass bottle production capacity,

7
AB seeks in camera treatment for 12 years. Extended in camera treatment of operational

information is waranted where necessary to protect the moving party from competitive har.

See In re Union Oil Co. of CaL., 2004 FTC LEXIS 197 at *14-*15 (granting extended in camera

treatment for production information). Information about AB's internal glass bottle production

capacity is particularly sensitive due to its relevance to AB's ongoing and future negotiations

with its glass bottle suppliers. This capacity information is unlikely to change significantly over

time due to the significant capital expenditure required for expansion. (Braden Decl. ir 17.)

Since capacity is unlikely to change, it wil remain competitively sensitive at least through AB's

next round of glass bottle supply negotiations, which wil be up to 10 years away, and in camera

treatment for 12 years is waranted to prevent AB from being disadvantaged in those

negotiations.

d. Category D - Strategic Marketing and Product Development Plans for Beer

Business

AB requests in camera treatment for the proposed trial exhibits containing

competitively sensitive information about AB's sales and marketing plans for beer. (McGauley

Decl. irir 7-9.) The designated documents include detailed information about AB's business

operations, the performance of its beer brands, strategic planing, product positioning and

marketing strategies for the next several years. (Id. at ir 7.) They also include information about

brand extensions and product innovations that AB is evaluating. (Id.)

These materials, which are the result of intensive work and analysis by AB, are

vitally important to AB' s beer business (id at ir 8), and AB would suffer serious competitive

harm if they were made public. (Id at ir 7.) Competitors could use AB' s operational and

strategic planing information to gain an unfair competitive advantage. (Id.) Furher, they could

adjust their own strategies based on AB' s brand plans to better position their products against

8
AB. (Id.) Because AB's business strategies and plans wil remain competitively sensitive for at

least several years, AB requests that materials identified in Appendix A as containing

information from Category D be granted in camera treatment for a period of five years.

II. AB'S MOTION SHOULD RECEIVE "SPECIAL SOLICITUDE"

Finally, as a nonparty who has cooperated with the discovery requests made by

the Parties, AB's request for in camera treatment warants "special solicitude." In re ProMedica

Health Sys., 2011 FTC LEXIS 101 at *4. Disclosure of the highly confidential and

competitively sensitive information contained in the proposed trial exhibits and Keathley

Testimony identified herein undoubtedly wil cause serious competitive injury to AB.

Conversely, public disclosure of this information wil not progress resolution of the litigation,

nor wil it substantially assist the Commission in explaining the rationale for its decision.

Indeed, much of the information AB seeks to protect does not even relate to its container supply

and is not relevant to this litigation.

CONCLUSION

For the foregoing reasons, AB' s motion requesting in camera treatment as set

forth above for the proposed trial exhibits and Keathley Testimony identified in Appendix A

should be granted.

DATED: December 9,2013 Resp~ctf~y submitted, Ár~ John R. Seward

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

1440 New York Avenue, N.W;

Washington, DC 20005-2111

Telephone: (202) 371-7065

Facsimile: (202) 661-0505

Email: John.Seward@skadden.com

Attorney for Nonpary ANHEUSER-BUSCH

COMPANIES, LLC

9
Appendix A

PUBLIC

Documents for which In Camera Treatment is Sought

Dec!. .....Triár ...... . Hp.O"lnRiifp'j;' ..... ,

".',',";,-, ',.-'- ',', DllU Dë:LCIS Xii Ii . Î3ki~lt ..... ...... -:',..ftd. ..... ,'::' .... ....

........ ..............cr

EXhbif..' . "..'...~... '." "c

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......................

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'. ..... ......,.:...., "',. ........... ....:..... .....i.; ............ "

.'

1 PX4019 4/26/2013 Skadden N/A Twelve Years C

Letter to FTC re:

CID to ABI

2 PX4028 ABI-FTC-0002313 ABI-FTC-0002345 Twelve Years A

DX465

3 PX4030 ABI-FTC-0002875 ABI-FTC-0002933 Twelve Years A

DX513

4 PX4031 ABI - FTC-0002844 ABI-FTC-0002874 Twelve Years A

DX168

5 PX4032 ABI-FTC-0002591 ABI - FTC-0002607 Twelve Years A

DX151

6 PX4493 ABI - FTC-000234 7 ABI-FTC-0002355 Twelve Years A

7 PX4507 ABI - LIT -0000267 ABI-LIT-0000270 Twelve Years A

8 PX4508 ABI-FTC-0001301 ABI-FTC-0001321 Twelve Years A

9 PX4512 ABI-FTC-0001169 ABI-FTC-0001300 Twelve Years A

10 PX4513 ABI-FTC-0001158 ABI-FTC-0001168 Twelve Years A

11 PX4525 ABI-LIT-0000331 ABI-LIT-0000331 Twelve Years A

DX700

12 PX4549 ABI - LIT -0002069 ABI-LIT-0002070 Twelve Years A

13 PX4551 ABI - LIT -0000318 ABI-LIT-0000318 Twelve Years A

DX169

14 PX4553 ABI - LIT -0000262 ABI - LIT -0000262 Twelve Years A

15 PX4554 ABI - LIT -0000263 ABI - LIT -0000263 Twelve Years A

16 PX4555 ABI-LIT-0002056 ABI-LIT-0002056 Twelve Years A

17 PX4576 ABI - FTC-0002609 ABI - FTC-0002609 Twelve Years A

18 PX4598 ABI - LIT -0000271 ABI-LIT-0000271 Twelve Years A

19 DX167 ABI-FTC-OOOOOOI ABI - FTC-000003 8 Twelve Years A

20 DX077 ABI - FTC-0002689 ABI - FTC-000283 7 Twelve Years A

21 DX152 ABI-FTC-0003457 ABI-FTC-0003609 Twelve Years A

22 DX438 ABI-LIT-0001955 ABI-LIT-0001955 Twelve Years A

23 DX440 ABI - LIT -0001986 ABI - LIT -0001987 Twelve Years A

24 PX4082 ABI-FTC-0005164 ABI-FTC-0005165 Five Years A

25 PX4502 ABI - LIT -0001963 ABI-LIT-0001966 Five Years A

26 PX4509 ABI - FTC-0002286 ABI - FTC-0002293 Five Years A

27 PX4511 ABI - LIT -0000291 ABI - LIT -0000291 Five Years A

28 PX4514 ABI-LIT-0002008 ABI - LIT -0002008 Twelve Years A

29 PX4524 ABI-FTC-0005616 ABI - FTC-0005620 Five Years A
Peel..

EX4ipit

Number

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

TriaL.1 ~.~ .. ....+....~ ....1.1

'Exhkif ld7~0'7~ . ~r .... I. ";,:fd,~,1~. ..... It . r-"\d\£, 1'-

Number ............. . ..... . ..... .... ...... .. . .... ..,c\.,!. '.' ........,.i,.,\/, I;'

PX4526 ABI-LIT-0000266 ABI-LIT-0000266 Twelve Years A

PX4531 ABI-LIT-0000315 ABI-LIT-0000315 Five Years A

PX4542 ABI-FTC-0002937 ABI-FTC-0002939 Twelve Years A

DX472

PX4543

PX4545

PX4546

PX4547

DX506

DX508

DX506

PX4084

DX698

DX713

PX4494

PX4497

PX4516

PX4517

PX4530

DX435

DX389

DX402

DX427

DX639

DX575

DX699

DX458

DX696

PX4510

DX484

DX441

DX562

DX170

PX4533

DX697

PX4492

DX565

DX380

ABI-LIT-0002142

ABI - LIT -0002144

ABI - LIT -0002139

ABI-LIT-0002137

ABI - FTC-0002219

ABI-LIT-0000255

ABI-FTC-0004431

ABI - FTC-0002629

ABI Document

accompanying

Respondents'

Notice Letter

ABI-LIT-0000342

ABI-LIT-0002092

ABI- LIT -0001811

ABI-LIT-0000345

ABI - FTC-0000926

ABI-FTC-0000940

ABI-FTC-0001061

ABI-LIT-0000344

ABI-LIT-0001832

ABI-LIT-0002115

ABI-FTC-0003058

ABI - LIT -0002090

ABI - FTC-0002545

ABI-LIT-OOOI837

ABI-FTC-0003036

ABI - LIT -0002013

ABI - LIT -0002016

ABI - LIT -0000403

ABI - FTC-0002628

ABI-FTC-0001674

ABI-FTC-0001439

ABI-FTC-0001772

ABI - LIT -000214 3

ABI-LIT-0002145

ABI - LIT -0002141

ABI - LIT -0002138

ABI -FTC-0002228

ABI-LIT-0000256

ABI-FTC-0004432

ABI-FTC-0002630

N/A

ABI-LIT-0000342

ABI-LIT-0002092

ABI-LIT-0001811

ABI - LIT -0000345

ABI-FTC-0000939

ABI - FTC-OOO 1 022

ABI-FTC-0001112

ABI-LIT-0000344

ABI-LIT-0001833

ABI-LIT-0002115

ABI-FTC-0003072

ABI-LIT-0002090

ABI-FTC-0002556

ABI-LIT-0001837

ABI - FTC-0003057

ABI - LIT -0002015

ABI-LIT-0002017

ABI-LIT-0000536

ABI - FTC-0002628

ABI-FTC-0001771

ABI - FTC-OOO 1472

ABI - FTC-OOO 1918

2

Five Years

Five Years

Five Years

Five Years

A

A

A

A

Five Years

Five Years

Five Years

Five Years

Five Years

A

A

A

A

A

Five Years

Five Years

Five Years

Five Years

Five Years

B

B

B

B

B

Five Years

Five Years

Five Years

Five Years

Five Years

Five Years

Five Years

Twelve Years

Five Years

B

B

B

B

B

B

B

C

C

Five Years

Five Years

Five Years

Five Years

Five Years

Five Years

Five Years

Five Years

C

C

C

C

D

D

D

D
peck

Exhibit

Ntibêr

64

.......TriaFc

Eilbit'

Nuiber

DX315 ABI-FTC-0002488 ABI - FTC-0002529

Testimony for which In Camera Treatment is Sought

Dec¡;) Ê;ibit

Nufbêr'

65

66

;dTriål .....-;...... ......;: ...~. .......;~ iT ;'i . "'iT..

ExhlJitl/.,i ;/:;.. 'C .d\ .....;i'.: Ntûber i"';';' ..... ...., \/, 7"Y PX5020 Lee Redacted portions of 3, 4, Twelve Years

Keathley 6, 7, 11, 15, 17,22,23,26,

Decl. 28,29,30,31,32, and 33

PX6034 Lee 55:11-61:2; 62:4-64:3; Twelve Years

Keathley 64:21-66:4; 66:24-67:24;

Dep. Tr. 70:9-71:3; 72:5-76:18;

77:12-88:17; 90:14-93:3;

94:4-95:1; 98:13-100:24;

101 :24-103:10; 105:16-

109:7; 110:3-113:22;

114:7-14; 116:10-118:1;

120:18-123:13; 123:21-

129:1; 129:13-22; 143:13-

145:4; 145:16-146:12;

182:21-183:16; 184:17-

194:13; 198:18-202:3;

202:21-210:25; 214:1-

215:12; 216:1-217:10;

220:10-223:17; 224:5-25;

229:2-236:2; 237:9-19;

241:13-250:2; 251:10-

254:12; 266:10-25; 270:17-

271 :20; 274:23-277:9;

283:5-285:12; 286:18;

287:1-8

,-;, ',.'.,

. .

,

I:,:'

I..'

A

A

3
67 PX6034 Lee 27:19-29:15; 32:22-33:24; Five Years A

Keathley 34:25-35:5; 37:4-39:13;

Dep. Tr. 47:1-50:23; 51 :21-52:3;

97:8-18; 118:7-120:3; ;

130:2-135:15; 138:5-

139:25; 142:1-21; 155:8-

12; 171 :20-23; 176:25-

179:2; 180:6-181 :20;

182:8; 195:7-22; 197:13-

21; 225:11-228:7; 250:17-

23; 255:18-25; 258:1-25;

260:19-263:16; 264:4-

265:7; 268:7-269:2;

272:5-274:8; 277:22-

278:25

68 PX6034 Lee 141 :4-9; 148:11-25; Five Years B

Keathley 160:12-18; 162:19-163:1;

Dep. Tr. 164:1-9; 164:23-165:20;

166:15-169:17; 174:16-

175:22; 239:2-240:7

69 PX5020 Lee Redacted portions of Twelve Years C

KeatWey paragraphs 5 and 8

Decl.

70 PX6034 Lee 218:24-219:1; 219:20- Five Years C

Keathley 220:5; 279:20-282:22

Dep. Tr.

4
CERTIFICATE OF SERVICE

I hereby certify that on December 9, 2013, I caused to be delivered via hand delivery one

paper original, two paper copies and a true and correct electronic copy of the in camera and

public, redacted versions of the foregoing Motion for In Camera Treatment and supporting

declarations to:

Donald S. Clark

Secretary

Federal Trade Commission

600 Pennsylvania Ave., NW, Rm. H-I13

Washington, DC 20580

I also certify that I caused to be delivered via hand delivery one paper copy and a true and

correct electronic copy of the in camera and public, redacted versions of the foregoing Motion

for In Camera Treatment and supporting declarations to:

The Honorable D. Michael Chappell

Administrative Law Judge

Federal Trade Commission

600 Pennsylvania Ave., NW, Rm. H-110

Washington, DC 20580

I further certify that I caused to be delivered via hand delivery one paper copy and a true

and correct electronic copy of the in camera and public, redacted versions of foregoing Motion

for In Camera Treatment and supporting declarations to:

Edward D. Hassi

U.S. Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, DC 20580 .

Counsel Supporting the Complaint

I furher certify that I caused to be delivered via Federal Express one paper copy and a

true and correct electronic copy of the in camera and public, redacted versions of foregoing

Motion for In Camera Treatment and supporting declarations to:

Alan Goudiss

Dale Collins

Richard Schwed

Lisl Dunlop

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022

(202) 848-4906

Counsel for Respondent Ardagh Group s.A.

Christine Varey

Y onatan Even

Athena Cheng

Cravath, Swaine & Moore LLP
825 Eighth Avenue

New York, NY 10019

(212) 474-1140

Counsel for Respondent Saint-Gobain Containers, Inc.

CERTIFICATE OF ELECTRONIC FILING

I certify that the electronic copy sent to the Secretary of the Commission is a true and

correct copy of the paper original being fied this same day, December 9, 2013 via hand delivery

with the Office of the Secretary, Room H-I13, Federal Trade Commission, 600 Pennsylvania

Avenue, N.W., Washington, D.C. 20580.

DATED: December 9,2013

/' John R. Seward g~
UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

OFFICE OF ADMINISTRATIVE LAW JUDGES

In the Matter of )

)

)

)

)

)

)

)

)

)

)

)

Ardagh Group S.A.,

a public limited liability company, and

PUBLIC

Saint-Gobain Containers, Inc.,

a corporation, and

Docket No. 9356

Compagnie de Saint-Gobain,

a corporation.

(PROPOSED) ORDER GRATING NONPARTY ANHEUSER-BUSCH COMPANIES,

LLC'S MOTION FOR IN CAMERA TREATMENT

Presently before the Cour is nonparty Aneuser-Busch Companies, LLC's

("AB") Motion for In Camera Treatment of Trial Materials pursuant to Rule 3 .45(b) of the

Federal Trade Commission's Rules of Practice. "A party or third party may obtain in camera

treatment for material, or portions thereof, offered into evidence. . . . (ifJ its public disclosure

wil likely result in a clearly defined, serious injury to the person, partnership or corporation

requesting in camera treatment." 16 C.F.R. § 3.45(b). Disclosure of the information contained

in the documents and declaration and transcript excerpts identified in AB's Motion for In

Camera Treatment, either to the public or to Respondents, would result in significant

competitive harm to AB.

For the foregoing reasons, AB's motion is hereby GRATED. The documents

and declaration and transcript excerpts identified by AB wil be afforded in camera treatment for

the time periods set forth in the chart below and disclosed only to: 1) the Administrative Law

Judge presiding over this preceding and personnel assisting the Administrative Law Judge; 2)

Respondents' outside counsel, experts or trial consultants retained for this proceeding; 3) the
Federal Trade Commission and it experts and trial consultants retained for this proceeding; 4)

court personnel of any court having jurisdiction over any appellate proceedings involving this

matter; and 5) any witness who may have authored or receive the information in questions.

Documents

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1~ ~ .

PX4019 4/26/2013 Skadden N/A Twelve Years

Letter to FTC re: CID

toABI

2 PX4028 ABI-FTC-0002313 ABI-FTC-0002345 Twelve Years

DX465

3 PX4030 ABI-FTC-0002875 ABI-FTC-0002933 Twelve Years

DX513

4 PX4031 ABI-FTC-0002844 ABI- FTC-000287 4 Twelve Years

DX168

5 PX4032 ABI-FTC-0002591 ABI - FTC-0002607 Twelve Years

DX151

6 PX4493 ABI - FTC-000234 7 ABI-FTC-0002355 Twelve Years

7 PX4507 ABI-LIT-0000267 ABI-LIT-0000270 Twelve Years

8 PX4508 ABI-FTC-0001301 ABI-FTC-0001321 Twelve Years

9 PX4512 ABI-FTC-0001169 ABI-FTC-0001300 Twelve Years

10 PX4513 ABI-FTC-0001158 ABI-FTC-0001168 Twelve Years

11 PX4525 ABI-LIT-0000331 ABI-LIT-0000331 Twelve Years

DX700

12 PX4549 ABI-LIT-0002069 ABI-LIT-0002070 Twelve Years

13 PX4551 ABI-LIT-0000318 ABI-LIT-0000318 Twelve Years

DX169

14 PX4553 ABI- LIT -0000262 ABI - LIT -0000262 Twelve Years

15 PX4554 ABI - LIT -0000263 ABI- LIT -0000263 Twelve Years

16 PX4555 ABI-LIT-0002056 ABI - LIT -0002056 Twelve Years

17 PX4576 ABI - FTC-0002609 ABI-FTC-0002609 Twelve Years

18 PX4598 ABI-LIT-0000271 ABI - LIT -0000271 Twelve Years

19 DX167 ABI- FTC-OOOOOO 1 ABI - FTC-000003 8 Twelve Years

20 DX077 ABI-FTC-0002689 ABI-FTC-0002837 Twelve Years

21 DX152 ABI-FTC-0003457 ABI-FTC-0003609 Twelve Years

22 DX438 ABI-LIT-0001955 ABI-LIT-0001955 Twelve Years

23 DX440 ABI-LIT-0001986 ABI-LIT-0001987 Twelve Years

24 PX4082 ABI - FTC-0005164 ABI-FTC-0005165 Five Years

25 PX4502 ABI-LIT-0001963 ABI - LIT -0001966 Five Years

26 PX4509 ABI-FTC-0002286 ABI-FTC-0002293 Five Years

2
r- - 6Æ~;(~¡~----l~-;¡¡.r~ P-I~~~'K~'j' 'i~Æ~ l(¡--~--I~---IÌ~~Yf j-'~ki,f,(-~~---7--1'-------l),~~j:t;D (Qi;---~~ , ) . "t" I' I~¡' ,;, '" 't ¡ i ' I ¡ t"'.jAfl1J 0" U ' l~¡)\Jl1LO!ìl\~ ¡ ~l , I, ; ,J" ,~:;' J; ,\ -, .., " r I '" " ,,' : l ¡ J~0Ll,'.'A'cj_, Ii, J!0J,0.)Qg iQi)l' , ,', Ii' " , t.~ ~ J~ -'c ~Li "-' .. "'.:' I ¡ - --- ~- --- ---~- -- ~----------~_.- -~___... ~___ ___ ~~~~______~L_"~_'~_~.____"______~___~_._~__~_

27 PX4511 ABI - LIT -0000291 ABI-LIT-0000291 Five Years

28 PX4514 ABI- LIT -0002008 ABI-LIT-0002008 Twelve Years

29 PX4524 ABI - FTC-0005616 ABI-FTC-0005620 Five Years

30 PX4526 ABI- LIT -0000266 ABI- LIT -0000266 Twelve Years

31 PX4531 ABI-LIT-0000315 ABI- LIT -0000315 Five Years

32 PX4542 ABI-FTC-0002937 ABI-FTC-0002939 Twelve Years

DX472

33 PX4543 ABI-LIT-0002142 ABI-LIT-0002143 Five Years

34 PX4545 ABI - LIT -0002144 ABI-LIT-0002145 Five Years

35 PX4546 ABI-LIT-0002139 ABI-LIT-0002141 Five Years

36 PX4547 ABI-LIT-0002137 ABI-LIT-0002138 Five Years

DX506

37 DX508 ABI - FTC-0002219 ABI-FTC-0002228 Five Years

38 DX506 ABI-LIT-0000255 ABI-LIT-0000256 Five Years

39 PX4084 ABI-FTC-0004431 ABI-FTC-0004432 Five Years

40 DX698 ABI-FTC-0002629 ABI-FTC-0002630 Five Years

41 DX713 ABI Document N/A Five Years

Accompanying

Respondents' Notice

Letter

42 PX4494 ABI-LIT-0000342 ABI-LIT-0000342 Five Years

43 PX4497 ABI - LIT -0002092 ABI-LIT-0002092 Five Years

44 PX4516 ABI-LIT-0001811 ABI-LIT-0001811 Five Years

45 PX4517 ABI- LIT -0000345 ABI - LIT -0000345 Five Years

46 PX4530 ABI -FTC-0000926 ABI-FTC-0000939 Five Years

DX435

47 DX389 ABI - FTC-0000940 ABI- FTC-OOO 1022 Five Years

48 DX402 ABI - FTC-OOO 1061 ABI-FTC-0001112 Five Years

49 DX427 ABI-LIT-0000344 ABI-LIT-0000344 Five Years

50 DX639 ABI-LIT-0001832 ABI-LIT-0001833 Five Years

51 DX575 ABI-LIT-0002115 ABI- LIT -0002115 Five Years

52 DX699 ABI-FTC-0003058 ABI-FTC-0003072 Five Years

53 DX458 ABI-LIT-0002090 ABI - LIT -0002090 Five Years

54 DX696 ABI-FTC-0002545 ABI-FTC-0002556 Twelve Years

55 PX4510 ABI-LIT-0001837 ABI - LIT -0001837 Five Years

DX484

56 DX441 ABI-FTC-0003036 ABI-FTC-0003057 Five Years

57 DX562 ABI - LIT -0002013 ABI-LIT-0002015 Five Years

58 DX170 ABI - LIT -0002016 ABI-LIT-0002017 Five Years

59 PX4533 ABI - LIT -0000403 ABI-LIT-0000536 Five Years

60 DX697 ABI-FTC-0002628 ABI-FTC-0002628 Five Years

3
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61

62

63

64

PX4492

DX565

DX380

DX315

ABI - FTC-OOO 1674

ABI-FTC-0001439

ABI-FTC-0001772

ABI-FTC-0002488

ABI-FTC-0001771

ABI-FTC-0001472

ABI-FTC-0001918

ABI - FTC-0002529

Five Years

Five Years

Five Years

Five Years

Declaration and Transcript Excerpts

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65 PX5020 Lee Keathley Redacted portions of3, 4,6, 7, Twelve Years

Decl. 11, 15, 17,22,23,26,28,29,

30,31,32, and 33

66 PX6034 Lee Keathley 55:11-61:2; 62:4-64:3; 64:21- Twelve Years

Dep. Tr. 66:4; 66:24-67:24; 70:9-71:3;

72:5-76:18; 77:12-88:17;

90:14-93:3; 94:4-95:1; 98:13-

100:24; 101 :24-103:10;

105:16-109:7; 110:3-113:22;

114:7-14; 116:10-118:1;

120:18-123:13; 123:21-129:1;

129:13-22; 143:13-145:4;

145:16-146:12; 182:21-183:16;

184:17-194:13; 198:18-202:3;

202:21-210:25; 214:1-215:12;

216:1-217:10; 220: 10-223:17;

224:5-25; 229:2-236:2; 237:9-

19; 241:13-250:2; 251:10-

254:12; 266:10-25; 270:17-

271 :20; 274:23-277:9; 283 :5-

285:12; 286:18; 287:1-8

67 PX6034 Lee Keathley 27:19-29:15; 32:22-33:24; Five Years

Dep. Tr. 34:25-35:5; 37:4-39:13; 47:1-

50:23; 51 :21-52:3; 97:8-18;

118:7-120:3; ; 130:2-135:15;

138:5-139:25; 142:1-21; 155:8-

12; 171:20-23; 176:25-179:2;

180:6-181:20; 182:8; 195:7-22;

197:13-21; 225:11-228:7;

250:17-23; 255:18-25; 258:1-

25; 260:19-263:16; 264:4-

265:7; 268:7-269:2; 272:5-

274:8; 277:22-278:25

4
~ i ( i ~ :LQ(;~'~~--I~~~liJr(j1~-il~' 'i~~Yr;~í1í¡~~;Y:-~~~~--'"Jl'H)~(t:J/Y ~~ ~(---'~-~-~~i~:~~' 'IÐ:,:j¡ i11J:~J;;~~-!

'J"ì;Jr;Íh'~' J'o,l'C");,, ¡-'i "'i' ", Ii)'. ~ ~~J;\\JJ:l.8JJ1; I ;~t.Lt~i'I))A , ,~:JJJ1\)f~~1;;V.( -'ì11 ;\S\.i,(ai,~i~i~ "',--" " , '

! 1~\~:iJ,lL'í;cq~/'I, ~\I¡\~í)11,)!:-,f , , " .: :' , , - ',' , ~" ßJi - ~ " , ' " ~~. ",

ORDERED:

DATE:

68

69

70

PX6034 Lee Keathley

Dep. Tr.

PX5020 Lee Keathley

Decl.

PX6034 Lee Keathley

Dep. Tr.

141:4-9; 148:11-25; 160:12-18;

162:19-163:1; 164:1-9; 164:23-

165:20; 166:15-169:17;

174:16-175:22; 239:2-240:7

Redacted portions of

paragraphs 5 and 8

218:24-219:1; 219:20-220:5;

279:20-282:22

Five Years

Twelve Years

Five Years

D. Michael Chappell

Chief Administrative Law Judge

5
UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

OFFICE OF ADMINISTRATIVE LAW JUDGES

In the Matter of )

)

)

)

)

)

)

)

)

)

)

)

Ardagh Group S.A., PUBLIC

a public limited liability company, and

Saint-Gobain Containers, Inc.,

a corporation, and

Docket No. 9356

Compagnie de Saint-Gobain,

a corporation.

Statement Regarding Meet and Confer

Pursuant to Paragraph 4 of the Scheduling Order, Counsel for Anheuser-Busch

Companies, LLC ("AB") met and conferred in good faith with Respondents' counsel and the

Federal Trade Commission (the "Commission") regarding AB's Motion for In Camera

Treatment. Respondents' counsel and the Commission have indicated to AB that they do not

intend to oppose AB's motion.

DATED: December 9,2013 ReSpeZbrntted,

/1O. ew

~~

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

1440 New York Avenue, N.W.

Washington, DC 20005-2111

Telephone: (202) 371-7065

Facsimile: (202) 661-0505

Email: John.Seward@skadden.com

Attorney for Nonpary ANHEUSER-BUSCH

COMPANIES, LLC
UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

OFFICE OF ADMINISTRATIVE LAW JUDGES

In the Matter of )

)

)

)

)

)

)

)

)

)

)

)

Ardagh Group S.A., PUBLIC

a public limited liability company, and

Saint-Gobain Containers, Inc.,

a corporation, and

Docket No. 9356

Compagnie de Saint-Gobain,

a corporation.

DECLARATION OF TIMOTHY W. BRADEN IN SUPPORT OF NONPARTY

ANHEUSER-BUSCH COMPANIES, LLC'S MOTION FOR IN CAMERA TREATMENT

OF TRIAL MATERIALS

I, Timothy W. Braden, declare pursuant to 28 U.S.C. § 1746 as follows:

1. I am Senior Director, Procurement for the North America Zone at Anheuser-Busch

Companies, LLC ("AB"). I make this declaration in support of Nonpary Anheuser-Busch

Companies, LLC's Motion for In Camera Treatment of Trial Materials. Unless otherwise

indicated, I have personal knowledge of the matters set forth herein and, if called upon to do so,

could competently testify thereto.

2. I have held the position of Senior Director, Procurement for the North America Zone

since January 2012. In that position, I am responsible for procurement of primary packaging,

including glass bottles, cans, lids, aluminum bottles and PET bottles for the North America Zone.

Therefore, I am familiar with the information contained in the materials discussed in this

declaration.

3. During the course of the Federal Trade Commission's (the "Commission") investigation

of Ardagh Group, S.A.'s ("Ardagh") proposed acquisition ofSaint-Gobain Containers, Inc., AB

provided materials in response to two subpoenas, issued on March 11 and March 21,2013, and
one Civil Investigative Demand ("CID") calling for information about AB' s glass bottle

manufacturing entity, Longhorn Glass Corporation ("Longhorn"), issued on March 11,2013.

AB's Vice President of Procurement for the North America Zone, Lee Keathley, also submitted a

declaration on June 14,2013 in response to Subpoenas Ad Testificandum issued by the

Commission on March 11 and 21, 2013 and was deposed pursuant to a subpoena from Ardagh

issued on July 29,2013 (collectively, the "Keathley Testimony").

4. I understand that on July 2,2013, the Commission fied a lawsuit in the U.S. District

Cour for the District of Columbia (the "Preliminary Injunction Action") seeking to preliminarily

enjoin the proposed transaction pending resolution of this litigation. In the Preliminary

Injunction Action, AB responded to two additional nonparty subpoenas, one issued by the

Commission dated July 26,2013 and one from Ardagh dated July 24,2013.

5. AB designated all materials produced during the investigation stage as confidential under

the applicable Commission statutes, including 15 U.S.C. §§ 46(f), 57b-2(b), 57(b)-2(c), 16

C.F.R. § 4. 10 (d) and 15 U.S.C. § 18a(h). Furher, AB designated all materials produced during

the litigation stage as "Confidential" pursuant to the Protective Order entered in this matter,

which protects AB's competitively sensitive information from disclosure to the public or

Respondents.

6. By letter dated November 19,2013, the Commission informed AB that it intended to

introduce 44 documents AB produced in response to the various subpoenas and CID, as well as

portions of the Keathley Testimony, as evidence at the administrative trial set to begin on

December 19,2013. On November 19, Respondents informed AB by letter that they intended to

introduce at the administrative trial 35 documents AB produced in response to the various

2
subpoenas and CID, as well as portions of the Keathley Testimony. AB seeks in camera

treatment for select documents and portions of the Keathley Testimony.

7. I have reviewed the documents and Keathley Testimony for which AB seeks in camera

treatment related to its container sourcing and internal container production. As detailed furher

below, these materials contain highly confidential, sensitive information that AB maintains in

strict confidentiality. The disclosure ofthese materials would result in serious competitive injury

to AB by disadvantaging AB relative to its competitors and impairing AB' s ability to negotiate

with customers, suppliers or other business parners.

8. As detailed in paragraph 14, the Commission and Respondents have identified a variety

of documents and testimony related to AB's procurement of beer containers. These materials

include: (i) information about AB's procurement strategies, plans and objectives; (ii) AB's

analysis of curent bids from Ardagh, Saint-Gobain and other glass bottle suppliers that contain

proposals for terms related to price, volume and payment; (iii) the terms of existing agreements

between AB and its suppliers that are subject to confidentiality provisions included in those

agreements; (iv) confidential correspondence between AB and its glass bottle suppliers; and (v)

financial information (such as sales volumes, margins and profitabilty by container type), which

AB uses to determine its goals for supply terms and its negotiation strategies.

9. Disclosure of materials containing this information would severely impair AB' s abilty to

negotiate with its container suppliers. Suppliers could use this information as leverage to extract

more favorable terms (e.g., higher prices, lower quality of products or lower standards of service)

to AB's detriment. Further, AB's competitors could use information about AB's supply terms to

extract better terms for themselves, resulting in injur to AB' s competitive position.

3
';

10. The harm AB would suffer from disclosure of its supply strategy and negotiation

information is heightened at present because it is currently negotiating renewed contracts with

several glass bottle suppliers, including Respondents, to go into effect January 1,2014.

Disclosure of this information to either the public or Respondents would seriously weaken AB' s

negotiation position, which, in tur, would negatively affect AB's glass bottle supply, a crucial

component of AB's ability to compete effectively.

11. AB has spent significant time and resources developing its supply strategy and attempting

to successfully negotiate its container supply agreements. AB's efforts even have included

retaining a strategic consulting firm, Mars & Co., to assist with developing procurement and

negotiation strategies. Because of the importance glass bottle supply plays in AB's business,

maintaining confidentiality is key to AB preserving its negotiating position. Therefore, AB

employees undergo internal confidentiality training to help ensure this information is not

disclosed publicly or distributed broadly within AB.

12. AB's packaging supply agreements typically run from three to ten years, and those

curently under negotiation wil last from five to ten years. When AB negotiates new terms for

glass bottle supply, it does not completely replace existing agreements. Instead, AB uses the

terms of the existing contracts as a staring point and renegotiates only certain terms. Many of

the terms remain exactly the same from contract to contract. As a result, many of the terms from

AB's contracts remain in effect for a prolonged period of time. Similarly, because many terms

remain so similar from contract to contract, AB' s negotiation strategies often remain the same,

and build off existing strategies and related analysis.

13. From year to year, AB's margins by package type do not change significantly. As a

result, information about AB's margins remains competitively sensitive for an extended period

4
of time and could be used as leverage against AB in curent and future negotiations with

suppliers and other business partners.

14. Materials that, if disclosed, would reveal confidential information about AB's

procurement of beer containers include:

a. The following notes, presentations, spreadsheets and emails prepared by

AB containing current and future sourcing strategies, plans and objectives,

supplier evaluations and ongoing negotiation information (including proposed

pricing and volume terms) - Exhibit 2 (ABI - FTC-0002313-0002345); 1 Exhibit 6

(ABI-FTC-0002347-0002355); Exhibit 8 (ABI-FTC-0001301-000'1321); Exhibit

12 (ABI-LIT-0002069-0002070); Exhibit 21 (ABI-FTC-0003457-0003609);

Exhibit 22 (ABI-LIT-0001955-0001955); Exhibit 23 (ABI-LIT-0001986-

0001987); Exhibit 30 (ABI-LIT-0000266-0000266); Exhibit 32 (ABI-FTC0002937 -0002939);

b. The following presentations by AB' s strategic consultant, Mars & Co.,

containing analysis and proposals for sourcing strategies, supplier negotiation

strategies generally and by supplier, analysis of ongoing negotiations and

proposed terms and analysis of the proposed transaction's potential impact on

AB's glass supply options - Exhibit 3 (ABI-FTC-0002875-0002933); Exhibit 4

(ABI-FTC-0002844-0002874); Exhibit 5 (ABI-FTC-0002591-0002607); Exhibit

7 (ABI-LIT-0000267-0000270); Exhibit 18 (ABI-LIT-0000271-0000271);

Exhibit 20 (ABI-FTC-0002689-0002837);

c. The following emails discussing information about AB' s glass bottle

supply arrangements and communications with suppliers - Exhibit 24 (ABI-FTC0005164-0005165); Exhibit 25 (ABI-LIT-0001963-0001966); Exhibit 29 (ABIFTC-0005616-0005620); Exhibit 39 (ABI-FTC-0004431-0004432);

d. The following handwritten notes from AB employees containing

information about AB' s ongoing negotiations with glass bottle suppliers -

Exhibit 33 (ABI-FTC-0002142-0002143); Exhibit 34 (ABI-FTC-0002144-

0002145); Exhibit 35 (ABI-LIT-0002139-0002141); Exhibit 36 (ABI-LIT0002137-0002138); Exhibit 38 (ABI-LIT-0000255-0000256);

e. The following materials prepared by AB containing existing terms of

AB's packaging agreements and those currently under negotiation - Exhbit 9

(ABI-FTC-0001169-0001300); Exhibit 10 (ABI-FTC-0001158-0001168); Exhibit

11 (ABI-LIT-0000331-0000331); Exhibit 13 (ABI-LIT-0000318-0000318);

Exhibit 14 (ABI-LIT-0000262-0000262); Exhibit 15 (ABI-LIT-0000263-

Exhibit numbers herein refer to the exhibits to AB's Motion for In Camera Treatment.

5
0000263); Exhibit 16 (ABI-LIT-0002056-0002056); Exhibit 17 (ABI-FTC0002609-0002609); Exhibit 19 (ABI-FTC-000000I-0000038);

f. The following materials prepared by AB containing information regarding

AB's prior, current and projected container spend and volumes, packaging mix,

margins by packaging type and current request for proposal regarding the supply

of glass bottles - Exhibit 26 (ABI-FTC-0002286-0002293); Exhibit 27 (ABI-LIT0000291-0000291); Exhibit 28 (ABI-LIT-0002008-0002008); Exhibit 31 (ABILIT-0000315-0000315); Exhibit 37 (ABI-FTC-0002219-0002228); Exhibit 40

ABI-FTC-0002629-0002630; Exhibit 41 (ABI spreadsheet that contains AB's

container volume figures which accompanied Respondents' notice letter of

November 19, 2013);

g. The following excerpts ofthe Keathley declaration of June 14,2013

containing information about curent and futue supply and packaging strategies,

supply sources, supply negotiation strategies and ongoing negotiation details -

Redacted portions of paragraphs 3, 4,6, 7, 11, 15, 17,22,23,26,28,29,30,31,

32, and 33;

h. The following excerpts of the Keathley deposition transcript containing,

negotiation strategy and supply options - 55:11-61 :2; 62:4-64:3; 64:21-66:4;

66:24-67:24; 70:9-71:3; 72:5-76:18; 77:12-88:17; 90:14-93:3; 94:4-95:1; 98:13-

100:24; 101:24-103:10; 105:16-109:7; 110:3-113:22; 114:7-14; 116:10-118:1;

120:18-123:13; 123:21-129:1; 129:13-22; 143:13-145:4; 145:16-146:12; 182:21-

183:16; 184:17-194:13; 198:18-202:3; 202:21-210:25; 214:1-215:12; 216:1-

217:10; 220:10-223:17; 224:5-25; 229:2-236:2; 237:9-19; 241:13-250:2; 251:10-

254:12; 266:10-25; 270:17-271:20; 274:23-277:9; 283:5-285:12; 286:18; 287:1-8;

i. The following excerpts of the Keathley deposition transcript containing

information about the status of the negotiations, conversations with Saint-Gobain

and Ardagh about the proposed transaction, information about AB' s packaging

mix and costs and viability of switching between different types of packaging -

27:19-29:15; 32:22-33:24; 34:25-35:5; 37:4-39:13; 47:1-50:23; 51:21-52:3; 97:8-

18; 118:7-120:3;; 130:2-135:15; 138:5-139:25; 142:1-21; 155:8-12; 171:20-23;

176:25-179:2; 180:6-181:20; 182:8; 195:7-22; 197:13-21; 225:11-228:7; 250:17-

23; 255:18-25; 258:1-25; 260:19-263:16; 264:4-265:7; 268:7-269:2; 272:5-

274:8; 277:22-278:25.

15. AB also seeks in camera treatment for documents and Keathley Testimony containing

information about its internal packaging production, including information about capacity,

production costs, capital improvements under consideration and strategic plans. This includes

information about Longhorn, AB's glass bottle production subsidiary, DIFA, the Mexican glass

producer acquired as partofthe acquisition of Grupo Modelo and Metal Container Corporation

6
("MCC"), AB's metal container production subsidiar. Disclosure of this information would

give AB's suppliers insight into AB's production costs, capacity, and operation strategy, which

those suppliers could use to their advantage in negotiations with AB.

16. In addition, AB procures input products for its container manufacturing facilities,

including sand, limestone and cullet, among other products. Disclosure of materials containing

information about AB' s packaging production would provide suppliers of these input products

with insight into AB' s sourcing requirements, which would disadvantage AB in negotiations

with those suppliers. Similarly, AB's competitors would gain insight into AB's cost structure

.1

1 and strategy for internal production, which would result in competitive harm to AB.

17. Information about AB's internal glass bottle production capacity is particularly important

in negotiations with AB' s glass bottle suppliers. This information plays a significant role in

AB's development of its negotiation strategies. Any change to AB's internal glass bottle

production capacity would have to result from expansion of existing facilities or construction of

new facilities, which would require substantial capital expenditure by AB. AB expects its

internal glass bottle production capacity to remain the same for an extended period of time.

18. AB' s container production and sourcing strategies are developed through extensive

research and analysis performed internally and with the help of consultants. Maintaining

confidentiality of this information is a key component of AB maintaining its competitive

position, as well as its negotiating position with suppliers. Therefore, AB employees undergo

internal training regarding confidentiality that helps ensure this information is not made public or

widely disseminated within AB.

19. Materials that, if disclosed, would reveal information about AB' s internal packaging

production include:

7
a. The following presentations prepared by AB and its consultants containing

strategic plans for MCC and DIF A, including capital expenditures and supply

projections - Exhibit 55 (ABI-LIT-OOOI837-0001837); Exhibit 59 (ABI-LIT0000403 -00005 3 6);

b. The following documents prepared by AB containing information about

Longhorn's and MCC's production capacities - Exhibit 1 (Trial Exhibit PX4019);

Exhibit 54 (ABI-FTC-0002545-0002556);

c. The following emails discussing information about the potential opening

of an additional glass bottle production facility, including estimated costs,

timeline and permitting information - Exhibit 57 (ABI-LIT-0002013-0002015);

Exhibit 58 (ABI-LIT-0002016-0002017);

d. The following excerpts ofthe Keathley declaration of June 14,2013

containing information about Longhorn and DIF A operations (including capacity

and supply feasibility) and expansion plans - Redacted portions of paragraphs 5

and 8;

e. The following excerpts of the KeatWey deposition transcript containing

information about AB' s internal supply options and the viability of expanding its

of internal glass bottle production capacity - 218:24-219: 1; 219:20-220:5;

279:20-282:22.

8
I declare under penalty of perjury that the foregoing is tre and correct.

EXECUTED this Sixth day of December, 2013 in St. Louis, Missouri.

Timothy Bradeh

ý,_.'. j/~ q- ~,~
UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

OFFICE OF ADMINISTRATIVE LAW JUDGES

In the Matter of

)

)

)

)

)

)

)

)

)

)

)

)

Ardagh Group S.A., PUBLIC

a public limited liability company, and

Saint-Gobain Containers, Inc.,

a corporation, and

Docket No. 9356

Compagnie de Saint-Gobain,

a corporation.

DE CLARA TION OF MICHAEL D. GA VORNIK IN SUPPORT OF NONPARTY

ANHEUSER-BUSCH COMPANIES, LLC'S MOTION FOR IN CAMERA TREATMENT

OF TRIAL MATERIALS

I, Michael D. Gavornik, declare pursuant to 28 U.S.C. § 1746 as follows:

1. I am Director of Financial Accounting of Metal Container Corporation ("MCC"). I make

this declaration in support of Nonparty Anheuser-Busch Companies, LLC's Motion for In

Camera Treatment of Trial Materials. Unless otherwise indicated, I have personal knowledge of

the matters set forth herein and, if called upon to do so, could competently testify thereto.

2. I have held the position of Director of Financial Accounting since December 2011. In

that position, I am responsible for strategic planing, performance measurement and budgeting

for MCC. Therefore, I am familiar with the information contained in the documents discussed in

this declaration.

3. MCC is a subsidiary of Aneuser-Busch Companies, LLC ("ABC," together with MCC,

"AB") that manufactures metal beverage containers, including cans and lids. MCC supplies

ABC with beer cans and lids in the United States. MCC also produces cans and lids for major

u.s. soft drink companies including PepsiCo and Hansen Natural Corp.

1
4. Although MCC is a subsidiary of ABC, the two companies operate independently

because MCC supplies companies other than ABC with metal containers.

5. AB produced MCC materials in response to discovery requests issued by the Federal

Trade Commission (the "Commission") and Ardagh Group, S.A. ("Ardagh") in connection with

the Commission's investigation of, and litigation challenging, Ardagh's proposed acquisition of

Saint-Gobain Containers, Inc.

6. It is my understanding that the Commission and Respondents intend to offer into

evidence at trial documents containing information regarding MCC.

7. AB seeks in camera treatment for certain of these documents, which I have reviewed.

These documents contain highly confidential, sensitive information about MCC's operations

(including capacity, production costs, and capital improvements under consideration) and

strategic plans. Disclosure of this information would give ABC's packaging suppliers insight

into AB's internal production costs, capacity, and supply options, which those suppliers could

use to their advantage in negotiations with AB. Similarly, these packaging suppliers are MCC's

competitors who could use information about MCC's operations to compete more effectively

against it. Furher, MCC's customers could use information about its operations, and its costs in

paricular, as leverage during negotiations to extract better terms from MCC.

8. In addition, AB procures input products for its container manufacturing facilities,

including aluminum. Disclosure of documents containing information about AB' s packaging

production would provide suppliers of these input products with insight into AB' s sourcing

requirements, which would disadvantage AB in negotiations with those suppliers.

9. MCC's strategic and operational plans are developed through extensive internal analysis

and are not publicly available. In addition, these materials are not shared broadly with AB

2
personneL. MCC employees are required to paricipate in training that stresses the confidential

nature of these materials and helps ensure that they are not disclosed publicly or disseminated

broadly within AB.

10. Materials that, if disclosed, would reveal information about AB' s operations and strategic

plans include:

a. Exhibit 56 (ABI-FTC-0003036-0003057):! April 13, 2012 AB

presentation entitled "Metal Container Corporation 3YP" that contains plans for

MCC, including performance targets and details about strengths and weakesses

ofMCC.

The exhibit numbers herein refer to the exhibits to AB' s Motion for In Camera Treatment.

3
I declare under penalty of perjur that the foregoing is true and correct.

EXECUTED this Fift day of December, 2013 in St. Louis, Missour.

Michaevornk /"..~~
UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

OFFICE OF ADMINISTRA TIVE LAW JUDGES

In the Matter of )

)

)

)

)

)

)

)

)

)

)

)

Ardagh Group S.A., PUBLIC

a public limited liability company, and

Saint-Gobain Containers, Inc.,

a corporation, and

Docket No. 9356

Compagnie de Saint-Gobain, a corporation. .

DECLARATION OF PATRICK J. MCGAULEY IN SUPPORT OF NONPARTY

ANHEUSER-BUSCH COMPANIES, LLC'S MOTION FOR IN CAMERA TREATMENT

OF TRIAL MATERIALS

I, Patrick 1. McGauley, declare pursuant to 28 U.S.C. § 1746 as follows:

1. I am Vice President, Innovation at Anheuser-Busch, LLC. I make this declaration in

support of Nonpary Aneuser-Busch Companies, LLC's ("AB") Motion for In Camera

Treatment of Trial Materials. Unless otherwise indicated, I have personal knowledge of the

matters set forth herein and, if called upon to do so, could competently testify thereto.

2. I have held the position of Vice President, Innovation since 2005. In that position, I am

responsible for the initial strategic development and execution of all new products and packaging

for Aneuser-Busch, LLC's U.S. portfolio of brands. Therefore, I am familar with the

information contained in the materials discussed in this declaration.

3. It is my understanding that, in connection with the Federal Trade Commission's (the

"Commission") lawsuit challenging Ardagh Group S.A.'s proposed acquisition of Saint-Gobain

Containers, Inc., the Commission and Respondents intend to offer into evidence documents and

excerpts from the deposition of AB's Vice President of Procurement for the North America
Zone, Lee Keathley, that contain information regarding AB's strategic packaging plans and

strategic marketing and product development plans.

4. AB seeks in camera treatment for certain materials that contain information about its

strategic marketing and packaging plans, which I have reviewed. These materials contain highly

confidential, sensitive information about AB' s packaging innovations, research conducted by AB

about consumer packaging preferences and AB' s analysis of that research. Disclosure of

materials containing this information would result in significant competitive har to AB because

it would provide AB' s competitors with insight into its packaging innovations plans. AB' s

competitors could use AB's own research and analysis to take advantage of marketplace

opportunities they failed to identify themselves and to thwar successful introduction of new

products planned by AB.

5. Innovation is vitally important to AB' s continued success. Offering new products and

packaging that wil entice new and existing consumers alike is a cornerstone of AB's competitive

strategy, and confidentiality is key to AB maintaining its competitive advantage in the

marketplace. As a result, AB spends considerable time and resources developing its product and

packaging innovations and maintains its related research, analysis and strategies in strict

confidence, including limiting dissemination within AB itself. Employees authorized to review

product and packaging innovation materials participate in internal training that helps ensure

confidentiality both inside and outside of AB.

6. Materials that, if disclosed, would reveal information about AB's strategic packaging

plans include:

a. The following presentations and spreadsheets prepared by AB or its

consultants containing information about new packaging product performance,

packaging innovation plans and strategies (including timelines), and consumer

research regarding packaging preferences and analysis of that research - Exhibit

2
42 (ABI-LIT-0000342-0000342);! Exhibit 43 (ABI-LIT-0002092-0002092);

Exhibit 44 (ABI-LIT-0001811-0001811); Exhibit 45 (ABI-LIT-0000345-

0000345); Exhibit 46 (ABI-FTC-0000926-0000939); Exhibit 47 (ABI-FTC0000940-0001022); Exhibit 48 (ABI-FTC-0001061-0001112); Exhibit 49 (ABILIT-0000344-0000344); Exhibit 51 (ABI-LIT-0002115-0002115); Exhibit 52

(ABI-FTC-0003058-0003072); Exhibit 53 (ABI-LIT-0002090-ABI-LIT0002090);

b. The following email discussing details about sourcing for a planed bottle

innovation - Exhibit 50 (ABI-LIT-0001832-0001833);

c. The following excerpts of the Keathley deposition transcript containing

information about AB' s research and analysis into customer packaging

preferences - 141 :4-9; 148: 11-25; 160:12-18; 162:19-163:1; 164:1-9; 164:23-

165:20; 166: 15-169:17; 174:16-175:22; 239:2-240:7.

7. AB also seeks in camera treatment for documents that contain information about its

strategic marketing and product development plans. These materials contain highly confidential,

sensitive information about AB' s sales and marketing plans for its beer business. Most

importantly, these documents contain competitively sensitive information related to AB's brand

strategies, such as product positioning, brand performance and profitability, pricing, marketing

plans, and plans for new products and innovations under consideration. Disclosure of documents

containing this information would result in significant competitive harm to AB. AB's

competitors could use this information to better compete against AB by repositioning products,

matching AB's innovation and taking advantage of marketplace opportities identified by AB.

8. AB's brand strategies, and its innovations in particular, represent the core of AB's

business and are vital to AB' s ability to compete. A substantial portion of AB' s resources are

devoted to developing its brand strategies and innovation plans, and AB engages numerous

strategic consultants to help develop these strategies and plans. Maintaining confidentiality of

this information is a key component of AB maintaining its competitive advantage in the

Exhibit numbers herein refer to the exhibits to AB's Motion for In Camera Treatment.

3
marketplace. Therefore, employees authorized to review AB' s strategic marketing and product

development plans undergo internal training regarding confidentiality that helps ensure this

information is not made public or widely disseminated within AB.

9. Documents that, if disclosed, would reveal information about AB' s strategic marketing

and product development plans include:

a. The following presentations and spreadsheets prepared by AB containing

information about market shares, profitability, pricing, economic and share

targets, competitive overviews, brand marketing plans and initiatives, long-range

brand strategies, and innovation ideas - Exhibit 60 (ABI-FTC-0002628-

0002628); Exhibit 61 (ABI-FTC-0001674-0001771); Exhibit 62 (ABI-FTC0001439-0001472); Exhibit 63 (ABI-FTC-0001772-0001918); Exhibit 64 (ABIFTC-0002488-0002529).

4
I declare under penalty of perjury that the foregoing is true and correct.

EXECUTED this Fifth day of December, 2013 in St. Louis, Missouri.

~;/~ patric~Uiey

i

-I

I
Alan Goudiss (agoudiss@shearman.com)

Dale Collns (wcollns@shearman.com)

Richard Schwed (rschwed@shearman.com)

Lisl Dunlop (ldunlop@shearman.com)

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022

(202) 848-4906

Counsel for Respondent Ardagh Group s.A.

Christine Varney (cvamey@cravath.com)

Yonatan Even (yeven@cravath.com)

Athena Cheng (acheng@cravath.com)

Cravath, Swaine & Moore LLP

825 Eighth Avenue

New York, NY 10019

(212) 474-1140

Counsel for Respondent Saint-Gobain Containers, Inc.

CERTIFICATE OF ELECTRONIC FILING

I certifY that the electronic copy sent to the Secretary of the Commission is a true and

correct copy of the paper original and that I possess a paper original of the signed document that

is available for review by the parties and the adjudicator.

DATED: December 9,2013

lsI John R. Seward

John R. Seward
UNITED STATES OF AMERICA

BEFORE THE FEDERA TRAE COMMISSION

OFFICE OF ADMINISTRA TIVE LAW JUDGES

In the Matter of

)

)

)

)

)

)

)

)

)

)

)

)

Ardagh Group S.A., PUBLIC

a public limited liabilty company, and

Saint-Gobain Containers, Inc.,

a corporation, and

Docket No. 9356

Compagnie de Saint-Gobain,

a corporation.

NOTICE OF APPEARNCE

Please note my appearance as counsel for non-part Anheuser-Busch Companies

LLC in the above referenced matter. In accordance with Rule 4.1(d) of the Federal Trade

Commission's Rules of Practice, I certify that I am a member of the Bar of the District of

Columbia (ID No. 469820), and am in good standing within the legal profession.

DATED: December 9,2013 Respectfully submitted,

lsi John R. Seward

John R. Seward

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

1440 New York Avenue, N.W.

Washington, DC 20005-2111

Telephone: (202) 371-7065

Facsimile: (202) 661-0505

Email: John.Seward@skadden.com

Attorney for Non-Part ANHEUSER-BUSCH

COMPANIES LLC
CERTIFICATE OF SERVICE

I hereby certify that on December 9, 2013, I fied the foregoing document electronically

using the FTC's E-Filing System, which wil send notification of such fiing to:

Donald S. Clark

Secretary

Federal Trade Commission

600 Pennsylvania Ave., NW, Rm. H-I13

Washington, DC 20580

I also certify that I delivered via electronic mail and hand delivery a copy of the

foregoing document to:

'I

The Honorable D. Michael Chappell

Administrative Law Judge

Federal Trade Commission

600 Pennsylvania Ave., NW, Rm. H-II0

Washington, DC 20580

I further certify that I delivered via electronic mail a copy of the foregoing document to:

Edward D. Hassi (ehassi@ftc.gov)

James E. Abell Gabell@ftc.gov)

Monica Castilo (mcastillo@ftc.gov)

Steven A. Dahm (sdahm@ftc.gov)

Joshua Goodman Ggoodman@ftc.gov)

Sebastian Lorigo (slorigo@ftc.gov)

Brendan 1. McNamara (bmcnamara@ftc.gov)

Angelike Mina (amina@ftc.gov)

Catharine M. Moscatell (cmoscatell@ftc.gov)

Angel Prado (aprado@ftc.gov)

Kristian Rogers (krogers@ftc.gov)

Danielle Sims (dsims l@ftc.gov)

Eric M. Sprague (esprague@ftc.gov)

Steven L. Wilensky (swilensky@ftc.gov)

Thomas H. Brock (tbrock@ftc.gov)

Michael B. Kades (mkades@ftc.gov)

Michael A. Franchak (mfranchak@ftc.gov)

Amanda Hamilton (ahamilton l@ftc.gov)

Sean D. Hughto (shughto@ftc.gov)

Victoria Lippincott (vlippincott@ftc.gov)

Meredith Robinson (mrobinson@ftc.gov)

U.S. Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, DC 20580

Counsel Supporting the Complaint
UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

OFFICE OF ADMINISTRATIVE LAW JUDGES

In the Matter of

)

)

)

)

)

)

)

)

)

)

)

)

Ardagh Group S.A., PUBLIC

a public limited liability company, and

Saint-Gobain Containers, Inc.,

a corporation, and

Docket No. 9356

Compagnie de Saint-Gobain,

a corporation.

MATERIALS IN SUPPORT OF NONPARTY ANHEUSER-BUSCH

COMPANIES, LLC'S MOTION FOR IN CAMERA TREATMENT OF

TRIAL MATERIALS

EXHIBITS 1-70

REDACTED

SKADDEN. ARPS, SLATE, MEAGHER & FLOM LLP

1440 NEW YORK AVENUE, N.w.

WASHINGTON, D,C. 20005-2111 FIRM/AFFILIATE OFFlCES

CONFIDENTIA

BOSTON

CHICAGO

HOUSTON

LOS ANGELES

NEW YORK

PALO ALTO

WILMINGTON

BEloJlNG

BRUSSELS

F"RANI(PURT

HONG KONG

LONDON

MOSCOW

MUNICH

PARIS

SÃO PAULO

SHANGHAI

SINGAPORE

SYDNEY

TOKYO

TORONTO

VIENNA

DIR£CTDJAL

(202) 371-7305

DIRECT FAX

(202) 661-2305

EMAIL ADDRES

JAMES.ATIIDGE@SKADDEN,cOM

TEL: (202) 371 -7000

FAX: (202) 393-5760

www.skadden.com

April 26, 2013

Sean Hughto, Esq.

Federal Trade Commission

Bureau of Competition

601 New Jersey Avenue, N.W.

Washigton, DC 20580

RE: Civil Investigative Demand Issued to Aneuser-Busch

InBev SA/ on March 11, 2013

Dear Sean:

Aneuser-Busch InBev SA/ ("ABI") responds to the Civil Investigative

Demand issued on March 11,2013 in connection with the Federal Trade

Commssion's investigation in File No. 131-0087 as follows:

1. List each relevant product manufactured or sold by the Company, and (a)

provide a detailed description of the product including its end uses; (b) state the

division, subsidiary, or affliate of the Company that manufactures or sells or has

manufactured or sold the product; (c) state the Company's sales to all customers in

each relevant area, stated separately in pounds, units and dollars, monthly since

January 1,.2008; (d) state the Company's sales of each relevant product into each

end-use market for which the product is sold (e.g., beer, spaghett sauce) since

January 1,2008; and (e) indicate each relevant facilty at which the relevant

product is manufactured. If a relevant product is manufactured at more than one

relevant facility, please indicate in the response to items 1 (c) and 1 (d) the portion

of sales that correspond to each relevant facilty.

Response:
Sean Hughto, Esq.

April 26, 2013

Page 2

ABI manufactues one relevant product - 120z amber bottles used for

bottling beer. The relevant product is manufactued by ABI's subsidiar Longhorn

Glass Corp. located in Jacinto City, Texas. Longhorn sells 100% of its production to

ABI's Houston and other breweries priced at Longhorn's cost of sales. Sales data is

included with ABI's response to the March 11,2013 and March 21,2013 subpoenas

duces tecum at ABI-FTC-0002530-2544.

2. State the location of each relevant facilty for the Company, and for each

such facilty state: .

(a) the current nameplate capacity and practical capacity and the annual

capacity utiliztion rate for production of each relevant product manufactared at

the facilty, specifying all other factors U!~ed to calculate capacity, the number of

shifts normally used at the facilty, and the feasibilty of increasing capacity,

including the costsoand time required; and

Response:

Facilty: Longhorn Glass Corp" Jacinto City, Texas

The Longhorn facilty operates at a current nameplate full holding capacity of

.tons. Based upon melting time, the fuace should be capable of a daily pull o~

tons. The facilty's actual pull is approximately.tons per day. The annual capacity

utilzation rate is approximately" Longhorn employs four crews who work_

hour shifts. There are_hour shifts per day. See ABI-FTC-0002582.

Information regarding the feasibilty of increasing capacity at the Longhorn

facilty can be found in the following documents: ABI-FTC-0002612, ABI-FTC0002591, and ABI-FTC-0002689.

(b) whether the facilty has converted production from one type of glass

container to another (e.g., beer bottles to wine bottles), and describe the length of

time and cost in dollars required for each such conversion that has occurred since

January 1, 2008. If more than five such conversions have occurred in that time

period, please provide information for the five most recent conversions.

Response:

The Longhorn facilty has not converted production from one type of glass

contaner to another durng the applicable period.

3. For each month and year (startng January 1, 2008 through present),

provide, in pounds, units, and dollars, that portion of the Company's production of

relevant product that was sold or transferred after production to the Company
Sean Hughto, Esq.

April 26, 2013

Page 3

itself (including affliates or joint venture partners) for use in an end-product also

produced by the Company (including affliates or joint venture partners), and

identify any such end-product. For example, if the Company produced ber bottles

that were then used to bottle beer also produced by the Company (including by

affliates or joint venture partners), please indicate as directed what porton of the

Company's total production of beer bottles was sold or transferred within the

Company for bottling the Company's beer.

Response:

See response to Specification 1 above.

Ths letter and its enclosure are submitted pursuant to the confdentiality

protections of Section 21(f) of the Federal Trade Commission Act, 15 U.S.C. § 57b2(f), and Rule 4.10 of the Federal Trade Commission Rules of Pratice, 16 C.F.R. §

4.10, and conta confdential business information. ABI requests that this letter and

its enclosure be treated as confdential to the full extent permitted by law. In the

event that the Federal Trade Commission intends to disclose, in the course of any

litigation or to thd paries pursuat to discovery requests, any ABI information,

documents or data relating to trade secrets, intellectu propert rights, or

commercial or financial information, ABI should be afforded reasonable wrtten

notice to seek an appropriate protective or in camera cour order.

It is ABI's intention in providing you with ths inormation not to waive any

claim of privilege to which it is entitled. Accordingly, any inadvertent submission of

privileged information does not preclude the subsequent assertion of a claim of

attorney-client, work product, or any other applicable privilege in the futue with

respect to the inormation.

Please call me at (202) 371-7305 or John Seward at (202) 37t-7065 if you

have any questions.

Regards,

/~ ¿;, cr

~ames W. Attdge

Enclosure
Sean Hughto, Esq.

April 26, 2013

Page 4

cc (w/o End): Jim Abell, Esq.

Josh Goodman, Esq.

Brendan McNamara, Esq.

John Seward, Esq.

Steve Sunshine, Esq.

Exhibits 2-64 Redacted for Public Version

DECLARATION OF LEE KEATHLEY

Pursuant to 28 U.S.C. § 1746, I, Lee Keathley, declare and state as follows:

1. I am thé Vice President of Procurement for the North AmerIcan Zone of Anheuser-Busch

Companies, LLC, a subsidiary of Anheuser-Busch InBev ("ABl"). The North American Zone, as

delineated by ABI, includes the UnitedStates and Canada. I am also Vice President of

Procurement for Anheuser-Busch, LLC ("AB"), a subsidiary of Anheuser-Busch Companies, LLC

and the u.s. beer manufacturer. I have been in my current position for approximately two years,

and have been with the company for 23 years, during which time I have held a variety of

procurement positions. I am presently responsible for all Nort American procurement activities,

including the procurement of glass bottles for ABI's beverages brewed and filled in North

America.

2. ABI is the world's largest brewing company. In 2012, AB produced approximately 119

milion hectoliters of beer, themajority of which was made up of the Budweiser and Bud Light

brands. This beer is produced in AB's 12 U.S. breweries located in S1. Louis, Missouri; Newark,

New Jersey; Los Angeles, Californa; Houston, Texas; Columbus, Ohio; Jacksonvile, Florida;

Merrimack, New Hampshire; Wiliamsbùrg, Virginia; Fairfield, California; Baldwinsvile, New

York; Fort Collns, Colorado; and Cartersvile, Georgia. In addition, in 2012 AB imported

approximately 2.1 milion hectoliters of beers from breweries located abroad. Altogether, AB

sells over 115 brands of beer in the United States.

3. AB spends approximately_annually to purchase roughly_glass

bottles _gross) for our breweries in the United States. AB's glass bottle demand rose

slightly in 2012 with the introduction and success ofour Bud Light Platinum brand. Going

forward, AB expects its glass bottle demand to

Indeed, in our glass bottle Request for Proposal ("RFP") issued to our glass bottle suppliers earlier

this year, AB provided guidance that it expects its bottle volumes to

Over"of A.'g glass container demand is-for

anber colored bottles. Our next biggest demand is for flint (i.e., clear) bottles, which represent

about "of our demand. The remainder of out demand is for green bottles, as well as some

specialty colors, such as blue and black. the vast majority of our bottles are 12 ounces in size, but

we also use many other sizes, including, for example, smaller seven-ounce bottles and larger 18,

32, and 40-ounce bottles.

4. AB presently sources our bottles from five suppliers. Currently, our three main suppliers

are Verallia North America ("VNA"), which supplies approximately_our needs, Ardagh

Group SA. ('oArdagh"), which supplies~ateiy _qf our needs, and OwensIlinois C'O-I"), which supplies around__ The remaining_or so is split roughly

evenly between a Mexican supplier, Fevisa,and ABI's own dedicated glass bottle plant,

Longhorn. Other than its present suppliers, ABI is unaware of any other vi.able options for

sourcing beer bottles that could meet AB's U.S. needs. More distant beer bottle manufacturers

would face significant freight disadvantages in supplying AB's U.S. operations.

5. Longhorn, located in Jacinto City, Texas, is the only glass container plant owned by AB.

AB uses all of Longhorn's glass bottle output internally. For the most part, Longhorn's entire

production is dedicated to serving AB'g Houston brewery. Longhorn is able to meet .

approximately_ofthe.Houstort brewery's anual glass botte needs. While operating.

glass bottle plants is not within AB's area ofeore competency, Longhorn's operation provides AB

Page 11
with insights into glass production costs and potential effciencies that are useful to AB in

negotiating with third-part glass bottle suppliers.

7. Although the Mexican supplier, Fevisa, does supply our Los Angeles brewery, I believe all

other Mexican glass bottle suppliers seeking to supply to any of AB's other U.S. breweries would

carry freight costs that would render their delivered beer bottle cost signifcantly higher than the

delivered costs available from AB's present domestic suppliers. The only other AB brewery close

to Mexico is our Houston brewery, but it is primarly supplied by our Longhorn lass lant. _

Heinekeu/PEMSA, a large beer brewer in Mexico, alsuowns a Mexican glass plant. If

Heineken/FEMSA supplied beer bottles to third-parties, it is highly likely that given its plant's

location in Southern Mexico, it would face a large freight disadvantage in supplying breweries in

the United States. AB would also be reluctant to source bottles from I-einekenIEMSA because it

is a significant rival in the sale of beer.

9. In the past, ABl has occasionally analyzed the viability of potential overseas import of

glass bottles from places like China, Europe, and tlie Middle East. In addition to freight expenses

. that make them uncompetitive compared to domestic supplies. overseas imports have other

drawbacks as welL. For example, most of AB's glass is supplied from glas plants that are within

a few hundred miles of a given brewery and delivered within hours of when the bottes are going

to be filled. Foreign supplies would impose significant additional logistical costs in the form of

warehousing and managing a more'complicated supply stream. In addition, AB requires quality

Page 12
and service for its glass ranging froII maintaining cleanliness in the glass production facilty to

using shipment methods that keep the bottles clean, unbroken, and free of insects and debris. Monitoring foreign production facilties would be diffcult and costly, ànd the much longer transit

time during ocean shipment increases risks of breakage and contamination. In short, overseas

suppliers are not presently a viable alternative source of glass supply for ABI in the U.S.

10; . ABI is aware genetàllythat some smaller U.S. glass producers exist and make glass

coritainersfor various products like wine and liquor. During my tenure, AB has not received bids

from any of these companies to make beer bottles for AB. To produce beer bottles effciently for

AB's needs, these small glass companies would likely need to invest huge amounts of capital in

Iarge~section fanning machines that press and blow beer bottles at an extremely fast rate. For

example, machines like those used by VNA, Ardagh, and 0-1 to make AD's bottes, such as tensection trip.le-gob machines, each produce approximately 1.2 milion bottles per year.

11. The U.S. glass supply market for beer bottles is dominated by three suppliers: 0-1, VNA,

and Ardagh. In recent years, ADI bas seen these thee suppliers take excess capacity out of the

market and increase their profi margins. For the past several years, 0-1 has been the exclusive

supplier to ABls bIgge~1 rival in the U.S., MilerCoors. As such, Owl lacks the production

capacity to provide more than_or so of AB's anual glass needs. With Fevisa and

Longhorn together able to provide only about_of AB's glass bottle needs, AB curently

relies on only two suppliers. VNA and Ardagh, to lleet roughly_f its bottle requirements. .

12. The three main glass suppliers, VNA, 0-1, and Ardagh, have very little excess capacity

because the supply of glass containers in the U.S. is close.ly matched with demand. As a result,

when customer demand spikes unexpectedly or a fuace or plant suffers a disruption, shortages

have resulted. This lack of excess capacity is apparent to AB based upon our glass bottle

suppliers' reports to us as well as ABl's observations from visiting or auditing supplier's plants.

From time to time, AD ex.periences instances where its glass bottle suppliers cannot fulfill AB

requested shipments. Having muItiple suppliers allows AD to arrange substitute shipments from

competing suppliers so that AB production is not disrupted.

13. Glass bottle suppliers compete to serve AB in many ways. In addition to competitve

pricing and contract terms, AB wants our glass suppliers to be innovative, efficient, reliable, and

responsive, and to provide high-quality and defect-free bottles, am"ong other things. Meaningful

competition from other glass bottle suppliers incentivizes individual glass suppliers to provide

more value to AB on all these fronts. AB has changed suppliers or realocated volumes on given

products among its glass suppliers when one supplier failed to deliver on one or more performance

metrics - for example, when a glass bottle company supplied too many defective bottles, could not

. produce a required new bottle design, or failed to address delivery or bottle-packaging problems.

14. ABl's glass supply contracts typicaIIy have terms of three to five years. Along with base

prices for the bottles themselves and charges for packing the bottles on pallets or in varous boxed

configurations, the contracts include price adjustent formulas intended to capture fluctuations in

the costs of the inputs required to make the glass bottes, Natual gas, which is used to fire the

glass furaces and is a large part of the bottle cost, has its own surcharge formula, and'there is a

separate formula to account for the other major input costs for producing glass bottles. The

contracts also providè an opportity for AD to receive effective discounts from suppliers in the

form oÜëbateseaied when certain volume targets are achieved; These complex contracts

routinely include many other provisions as well, such as most favored nation clauses, meet

Page 13
competition clauses (which relate solely to meeting competition from alternative glass bottle

suppliers), cost saving initiatives, and so forth. ABl's glass supply contracts result fr()m a lengthy

RFP process, during which ABI negotiates with all àvaHable glass bottle suppliers to arrive at the

best value in meeting ABI's needs. ABI has historically benefited from this competitive process

by achieving better pricing and service from its glass suppliers.

15. Beer is distributed and sold in a variety of packages to meet consumer preferences. Glass

bottles, aluminum cans, and kegs on tap (draf) are the main package fonnats. In 2012, AB sold

approximately_of its volume in glass bottles._in aluminum cans, and'

_in kegs for draft. The remaining one ot two percent oföur beer is sold in aluminum

bottles and plastic bottles. These 2012 percentages are similar to recent prior years.

16. AB maintains aiiarketing deparent thatrout:nely.researches customer preferences that

inform our new product introductions, branding, and our packaging mix across our product

portfolio. For example, our marketing department has found that many customers prefer beer

bottled in glass to cans or plastic contaners. AB canot afford to ignore these consumer

preferences or we risk customers not accepting our offerings and the consequent loss of business.

17. Traditional aluminum cans have historically been approximately_expensive than

glass bottles, based on comparing a 12-ounce can and a 12-ounce bottle. There are also related

freight advantages for cans based on weight and dimension.

consumer preferences for beer in glass bottles ånd the premiüm image glass

confers, among other things, are reasons why AB markets roughly_of its beer in glass.

AB projects that its glass demand wil_for the foreseeable future.

18. AB sells brands in all the major beer segments. Sales oflower-priced "value" brands, also

known as "sub-premium" brands, tend. to include a higher proportion of cans versus glass bottles

than higher~priced premium and high-end beers, which tend to have a higher proportion of sales in

glass bottles. Cans are often packaged in large groups, such as 30 or 36 packs, as a value or

economy offering, and bottles tend to be sold in no larger group than packs of24.

19. A key component of successful competition in the beer market is building a successful

brand image, and glass conveys quality. Consumer preferences are the main drivers in our

packagIng mix decisions, and consumers consistently associate glass bottle~ with higher-quality

beer. Inådditìon, premium and high-end brands are consued more frequently at venues that

value the premium image that a glass bottle conveys, such as bars and restaurants. If AB were to

ignore consumer preferences for glass bottles and tr to substitute other packages, such as

alunioum Cà.S, it would run an unacceptably high rIsk oflosing sales to its competitors.

20. Our need for glass bottles is increasing for the high-end beer segnient, which has

experienced the strongest growt rate in the beer industr for the past few years. Estab1ìshing a

high-quality image with glass is critical to our strategy because consumers of high-end beers

expect to receive a premium product in exchange for paying a higher price.

Page 14
2 i. Cans are not ready substitutes for glass bottles at AB. For example, glass suppliers often

are unable to supply shipments when AB's demand rises unexpected or when a glass supplier's

plant experiences a production problem. In such cases, AB cannot simply use cans, but rather

must seek alternative glass supplies from other glass bottle suppliers. We try to provide bottles to

the distributors and retailers who request bottles because that is what their customers want to buy.

We have had situations where our distributors have sufficient supplíes of our brands in cans, but

are short of the same brands il glass bottles and order more of the bottled versions from AB.

22. Many large venues, such as stadiums and arenas, prohibit beer from being sold in glass

bottles or other types of containers for safety reasons. Plastic bottles of beer are sold almost

exclusively at these venues. AB produces only a small amount of beer in plastic bottles - less than

1 %" of its anual output, and really does' so only to meet demands of specialty venues like stadiums

where products tend to be soid at a higher price. To keep beer fresh in plastic requires specialized

plastic bottles that tend to cost approximately_more than a similar-sized glass bottle.

While our largest competitor, MilerCoors, has anmiiced an intention to use lastic bottles for

th 32- and 40:-ounce offerings of some of its sub-premium brands,

In addition, AB' s present fillng lines

for cans and bottles would not accommodate plastic containers without significant modifcations

requiring large capital investments.

23. AB's package mix also includes a small fraction of non-traditional aluminum containers,.

such as our aluminum bottles and a new bowtie-shaped can. AB views aluminum bottles not as an

alternative for glass bottles, but rather as a premiu package that attracts consumers with its

premium image, builds brand loyalty. and differentiates our brands in the market. _

The bowtie cans are

also used to provide a premium image for the Budweiser brand and are more.expensive than

traditional cans, but less expensive than glass. AB is hopeful that the bowtie can wil be popular

with customers, but we do not consider bowtie-shapèd cans to be a viable substitute for glass

bottles.

24. In 2012, ABI introduced a new product called Bud Light Platinum. This product's

introduction and history provides a recent example of how AB depends on competition among

glass suppliers to meet its needs and succeed in its business. ABconceived of Bud Light Platinum

as a brand extension of its historically most popular brand, Bud Light. To set the new offering

apar, AWs Marketing Deparent conceived ofa unique and eye~catching bottle made of cobalt

blue glass. AB feltglass was necessary to convey the high-quality, sophisticated image of the new

product, âìd the cobalt blue provided dífèientiation from other.. brown, green; and clear - bottled

beers that, it was hoped, would attact consumers. AB solicited its main glass suppliers, VNA and

Ardagh? to make sample versions of the bottle so that AB could assess the look and cost of the

product each glass manufacturer could produce. Ultimately, VNA made the best-looking bottle

and offered it at the lowest price. AB! and VNA reached an agreement for the supplies ofthe

bottle during the first year of its introduction. Soon after its introduction, Bud Light Platinum

demand far exceeded AB's projected volume expectations. The product was a hit. Throughout

2012, AB taxed VNA's available capacity for glass production to ineet demand for Bud Light

Platinum. During this time, AB was forced to seek replacement supplies for amber and flnt

(clear) bottles it had been receiving from VNA whiêh were now displaced by the blue bottle

Page 15
."

production. Ardagh was able tö provide substitute amber and flint bottles tu keep ABI supplied

with the bottles it needed for its other products. By the end of20l2, with Bud Ligllt Platinum a

proven sUccess in the marketplace, AB decided to seek bids to see if other glass suppliers might be

able to make the bra:nd's signature cobalt bottle for a lower price than that originally agreed

between ABI and VNA when the volumes of the Bud Light Platinum were uncertain and expected

to be lower. 0;'1 and VNA competed for the blue glass business, which resulted in a lower price

and a change to 0-1 as the supplier beginning in the. second halfof2013.

25. Bud Light Platinum also provides an example of how AB typically proceeds with the

introduction of a caned offering for new brands. As described above, AB offered Bud Light

Platinum exclusively in glass bottles at first to establish the brand's premium image in the minds

of consumers. AB expects Bud Light Platinum in glass bottles to continue to sell well. However,

AB is now also offering Bud Light Platinum in cans for the convenience of our customers.

Despite consumers' general preference for bottles in a brand like Bud Light Platinum, consumers

at times prefer cans, such as for outdoor events like cookouts, camping, and boating. There are

also certain venues,.lìke sports stadiums and golf courses, that prohibit the use of glass còntainers

or other containers for .safety reasons.

26. ABI is presently in the midst of an RFP process to obtain new long-term supply

agreements for effectively all of our glass bottle needs for: at least the next thee years. ABI issued

the RF at the end of Januar 2013 to VNA, Ardagh, 0-1, Fevisa, and Vittö. ABI is aware of no

other suppliers that would be capable or interested in offering competitive bids.

0-1 is strongly aligned with

ABI's main U.S. beer rival, MilerCöors, ànd curently supplies one hundred percent of

MilerCoors' glass bottle needs, which leaves 0-1 with limited available capacity to supply AB.

As a result, AB wil need to obtain the majority of its glass bottle supply from VNAand Ardàgh in

the United States.

27. As part of the intense effort to negotiate our crucial glass supply for the next few years,

ABI retained a strategic consulting company, Mars & Co. ("Mars"). During the fall of2012, as

well as during the on-going negotiations, Mars has provided. assistance to ABI in developing its

overall strategic approach and responses to proposals.

28. While VNA and Ardagh have different manufacturing "footprints" in terms of plant

locations, several oftheìr glass bottle plants presently configured to make beer bottles are close

enough to AB breweries that they can compete with each other to supply those breweries. For

example, in connection with ABI's current glass botte RFP process, our consultant, MarS,

roduced otential sourcin strate,y assessments for AB's U.S. breweries.

lbe abilty of VNA and Ardagh to supply

significant overlapping portions of AB's glass bottle demand is also evident in the periodic

instances where one firm covers for the oiler when there are shortages and substitute supplies are

needeçl.

Page i 6
30. Recently, ABI has reached a tentative agreement with Ardagh that would span seven years.

In each year, the prices woulçl increase by set percentagès over current levels in addition to price

adjustment formulas intended to address inflation of coSts for input materials and energy. While

further changes to the agreement may yet take pla"ce, under the present proposal~ from 2014 to

2020,

ABI has not completed its negotiations with VNA.

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I

i

34. VNA and Ardagh currently supply approximately 48% of beer glass in the U.S., including

approximately"of AB's U.S. beer glass requirements under agreements that ends in December

2013. 0-1 is the largest U.S. beer glass supplier, accounting for approximately 43% of the market,'

but given that a significant amount of its capacity is locked in with MiUerCoors until 2015, ABI

had limited options entering the 2013 RFP negotiation process. The merger would take away one

of two alternative suppliers to 0-1. And because the glass container industry has been contracting

over several years and presently is in a flat to very low growth posture, ABI is unaware of any

likely candidate for entering the U.S. glass container market.

Pursuant to 28 U.S.C. § 1746, I declare under the penalty ofperjury that the foregoing is true and

correct. I understad that by submitting this declaration to the Federal Trade Commission I have

not waived my Tights or my company's' rights to confidentiality as protected by the FTC Act or

other law. I hereby request thatmy identity and the content of this declaration be kept confidential

and be exempt from public disclosure as provided by applicable law.

Executed on June 14, 2013

c~~¡¿¿¡L1¡l.~, . ¡;~ ßJ

Lee Keathley

Vice President, Procurement- orth American Zone

Anheuser-Busch Companies, .LC and

Anheuser-BuscJi, LLC

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1 Q.

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Okay. And that's because Platinum took

2 some of the glass needs?

3

4 2012.

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Q.

A.

Q.

Platinum increased our glass needs in

Platinum increased it?

It increased it from prior year.

Okay. Is that because of problems with

8 the Platinum?

9 A.

11

10 well in the marketplace.

It's because Platinum performed very

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1

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3 A. So let me ask this question. Given

4 that you're the attorney for Ardagh --

5

6

Q. Uh-huh.

A. -- this is confidential information

7 related to another supplier.

8

9

10

Q. Yes.

A. I'm a bit uncomfortable discussing it.

MR. GOUDISS: We understand, sir, and

11 we're respectful of that. In this sort of

12 proceeding the parties have entered into a

13 protecti ve order that strictly limits the

14 dissemination of this sort of information.

15 Information, for example, will not be shared with

16 anybody at Ardagh or VNA.

17 It is strictly for the use of outside

18 counsel in connection with this case. It has been

19 so approved by the Court, and unless your counsel

20 instructs you, I think -- and I apologize for your

21 discomfort -- you do need to answer my questions.

22 MR. SEWARD: We appreciate that, Alan,

23 but I think our -- our client just wanted to get it

24 on the record that this is very sensitive.

25 MR. GOUDISS: I -- I completely

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1 understand.

2 A. Okay. So would you repeat the

3 question?

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Q. Okay. Are you familiar with a company

called Vitro?

A. I am.

Q. Has AB as part of its footprint

strategy considered the possibility of contracting

with Vitro?

A. Vitro was included in our request for

proposal.

Q. Uh-huh.

A. They declined to bid.

Q. Okay. Did they tell you why?

A. They didn't tell me why. We've asked

them to bid, though, historically, and they've never

been price competi ti ve for our business.

Q. Is that because of freight cost?

A. That's my belief, it's because of

freight.

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Q. Okay. Could you turn back to slide

three?

A. Okay.

Q. It's entitled, Combination of Margins.

Do you see that?

7

A. I do. I see the slide.

Q. Okay. And then the fourth bullet point

12 says, Current Margin on ABI U. S. Business. Do you

13 see that?

14

15

A. I do.

Q. What is that -- does that refer to the

16 glassmakers' margins or ABI' s margins on the glass

18

17 supplied?

A. That refers to the glassmakers'

20

19 proj ected margin on AB' s business.

Q. Okay. And -- and do you know what the

22

21 reference period is for this?

A. That would be our view of their current

23 margin. 24 __ --

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acquisi tion?

A. That's correct.

Q. And there is a fourth plant in Piedras

Negras that is going to come on-line at some point?

A. That's -- that's my understanding.

Q. Okay. And how would those four plants

figure in the vertical strategy to mitigate price

increases?

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Q. Okay. Separate and apart from Longhorn

5 and the four DIFA, that's D-I-F-A, facilities, and

6 putting aside any plants ABI might acquire as part

7 of a di vesti ture here, has ABI considered acquiring

8 other glass plants as part of its vertical strategy

A.

9 to mitigate the impact of price increases?

10 Not that I'm aware of.

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Q.

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Q.

Okay.

In the U. S.

14 possibility of a greenfield plant?

Okay. You mentioned earlier the

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Correct.

17 greenfield plant part of the vertical strategy to

Is the possibility of investing in a

18 mi tigate price increases?

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Q.

Yes.

21 possibility of investing in a greenfield plant as

Okay. And is ABI still considering the

23

22 part of that vertical strategy?

A. It's not under serious consideration

24 today.

25 Q. Has it been ruled out?

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1 A. I wouldn't say it's been completely

2 ruled out. We've determined the economics are not

3 at such a point where it makes a lot of sense for us

4 to invest the capital.

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19 MR. HASSI: Obj ect to form.

20 MR. SEWARD: Obj ection, calls for

21 speculation.

22 Q. (By Mr. Goudiss) You can answer.

23 A. I don't.

24 Q. Okay. Now, the -- under the goals, it

25 talks about keep cost evolution in line with

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1 three-year plan. Do you see that?

2

3

A.

Q.

I do.

Okay. I take it that's a reference to

4 an internal ABI three-year plan?

5

6

A.

Q.

It is.

7 plan cover, if you know?

And what three-year period does that

8

9

A.

Q.

The plan would cover '14, '15, and '16.

And is that a typical time frame for

10 the internal planning at ABI?

11

12

A.

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It is.

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MR. GOUDISS: You can put that one to

the side for now. I'm going to ask the reporter to

mark as Exhibit 5 a mul tipage document bearing the

Bates number ABI-FTC-0002689 through 2837.

(WHEREIN, Exhibit 5, ABI-FTC-0002689

through 2837, was marked for identification by the

court reporter.)

Q. (By Mr. Goudiss) It's a long document.

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1 you see that?

2

3

A. I do.

Q. Okay. At the time Mars thought that

4 that acquisition was a posi ti ve for the industry.

5 Do you see that?

6 A. I do see that in the headline.

7 Q. Okay. Did you agree with that

8 assessment at the time?

9 A. I didn't agree or disagree with it. It

11

10 was a statement that they made.

Q. Okay. You didn't have a view one way

12 or the other?

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4 Q.

Page 93

Would you turn to page sixteen? That's

A.

5 the one entitled, Beer Package Mix by Player.

6 Okay.

7 Q.

8 the mix of can, bottles, and others is to your

I take it at least with respect to ABI

A.

9 knowledge accurate?

10 It is accurate.

11 Q. Okay. So cans make up by far the

12 larges t of your packaging needs?

13

14 A.

MR. HASSI: Object to the form.

That's correct. Based on, again,

Q.

15 different segments, different brand styles.

16 (By Mr. Goudiss) Uh-huh.

17 A. Value versus premium, so on and so

Q.

18 forth. That is our total aggregated --

19 Right.

20

21

A.

Q.

-- demand needs.

Right. And cans are, generally

A.

22 speaking, cheaper, right?

23 Generally speaking, yes.

24 Q.

25 is the one entitled, Current ABI price versus

Okay. Could you turn to page 24? This

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1 "should be" cost by supplier for 12-ounce amber. Do

2 you see that?

3

4

A. I do.

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2

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MR. GOUDISS: We're at the end of a

3 tape. I'LL try to make this quick for you, John.

4 THE WITNESS: Yeah, please, so folks

5 can catch flights and stuff. Thank you.

6 VIDEOGRAPHER: We're going off the

7 record at approximately 10: 15 a. m.

8 (WHEREIN, a recess was taken.)

9 VIDEOGRAPHER: We're back on the record

10 on tape three at approximately 10:24 a.m.

11 Q. (By Mr. Goudiss) I think you may have

12 answered this before, but in preparation for your

13 deposition today, did you speak to anybody at the

14 FTC staff?

15

16

A. No.

Q. Okay. Did you know that yod've been

17 identified as a witness who will testify live at the

18 hearing of this matter in October?

19

20

A.

Q.

I may have been told that~

Okay. Are you currently planning on

21 appearing at that hearing live?

22

23

24

MR. SEWARD: That's fine to answer.

Q.

I f compelled to, I will.

(By Mr. Goudiss) But only by

A.

25 compulsion?

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1 Q. Okay. So -- so the scores

2 themselves

3 A. Oh, wait a minute. This is not a

4 quality scorecard.

5

6

Q. Okay.

A. Sorry. Strike that. This is Mars's

7 brewery scorecard view.

Q. Okay. So it's not AB' s --

A. It is Mars.

Q. This is Mars's. And do you see under

11 Ideal Supply?'

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Page 101

1 of the document. I f you start at page 126, it's

2 called, Backup brewery by brewery evaluation.

3

4

A. Okay.

Q. The first one is Houston. And my first

5 question is, again, focusing on say page 128, those

6 are Mars's numbers or estimates as opposed to ABI' s?

7 A. So I would assume Mars got the ABI

8 numbers got the numbers on the left and the table

9 on the left from ABI. So those would be our -- our

10 requirements and current supply numbers.

11

12

Q. Uh-huh.

A. And then their cost estimates, if this

13 is a similar chart. Let me look at it for a second.

14 Q. Sure. Take your time.

15 A. So this would be their estimates of at

16 least the other suppliers' costs, and I don't know

17 if -- if any other information on Nava production

18 costs were provided to Mars or not.

19 Q. Okay. Well, I'll start there. What

20 does Nava refer to?

21 A. Nava -- Nava I believe refers to the

22 DIFA production locations. Nava would be the Modelo

23 glass supplier locations. 24 II

II

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Q. (By Mr. Goudiss) Okay. And when

12 you're making those investment decisions, you are

13 attempting to make investments where you think you

14 can recover that investment and earn some kind of

15 return, right?

16

17

A. Yes.

Q. Okay. And that would be true öf the

18 third-party glass suppliers as well, right?

19

20 Q.

MR. HASS I: Obj ect to --

(By Mr. Goudiss) When they make

21 investments, they're expecting to recover the cost

22 of those investments and a reasonable rate of

23 return, right?

24

25

MR. HASSI: Object to the form.

A. That seems like a reasonable

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Page 105

1

2

A. Okay.

Q. Okay. And again, I'm sorry to do this

3 to you, but these were numbers that were in part

4 supplied by by ABI and then -- and then, if you

5 will, input in this format by Mars?

6 A. So it's my belief we would have

7 provided information around volumes and/or pricing.

8 Mars would have made the estimated analysis on what

9 a glass -- what these individual plants' cost

10 structures would have been.

Q. Uh-huh. Okay. And am I correct that

12 according to this chart your -- your principal

13 suppliers in St. Louis have been Anchor and 0- I?

14 A. Our principal suppliers in St. Louis

15 have been Verallia/Saint-Gobain Pevely. 16 .

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8 Q. Okay. And if you look at Williamsburg

9 on page 141, that shows that Saint-Gobain is

10 supplying all size bottles to Williamsburg, and

11 Warner Robins, the Anchor facility, is supplying

12 some of the 12-ounce?

13 A. I know Saint-Gobain Wilson is the

14 primary supplier for Williamsburg. Honestly, I'm

15 I'm not aware of any bottles Warner would be

16 providing to Williamsburg unless it's a -- a flint

17 situation that we wouldn't be able to provide from

19 Q.

18 -- from Saint-Gobain.

20 understanding is that it's Saint-Gobain that's the

So as you sit here, your -- your best

21 principal supplier to that plant?

22

23

A.

Q.

Correct.

25 Robins plant?

24 are closer to that plant than, say, the Warner

Okay. Do you know if 0- I' s facilities

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1 A. The 0-1 Toano facility is in very close

2 proximi ty to the brewery, wi thin thirty miles.

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Okay. Okay. If you turn to 148.

Okay.

There -- this is the scorecard for

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Merrimack.

A. It is.

Q. Okay. And -- and that's been

exclusively supplied at least as of this date by

Saint-Gobain, right?

A. That's correct.

.

Page 114

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MR. GOUDISS: We're going to mark

another exhibit, sir.

(WHEREIN, Exhibit 6, ABI-FTC-0002844

through 2874, was marked for identification by the

court reporter.)

MR. GOUDISS: For the record, Exhibit 6

is a mul tipage document bearing the Bates numbers

ABI-FTC-0002844 through 2874. It appears to be a

Mars & Company presentation dated February 27, 2013.

It is entitled, NA Glass Strategy Responding to

Ardagh's Big Bang.

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1 Q. It also attempts to break down margin

2 by segment. Do you see that, the fourth squared

3 bullet?

4

5

A. I do.

Q. Okay. And of all the segments -- and I

6 guess ABI and Miller are treated as separate

7 segments, but they're both considered mass brewers,

8 . right?

A. Yes.

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2 Q. Okay. Would you turn to -- to page

3 three, that presentation? And it's the, Impact of

4 merger on sourcing options by brewery. Do you see

5 that?

6 A. I do.

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4 Q. Okay. And -- and I think we've

5 established this, but the Anchor facility in

6 Jacksonville is clearly the closest facility for

7 those, correct?

A. For Jacksonville.

Q. Yes.

A. Correct.

Q. And -- and Warner Robins is the closest

13

12 for Cartersville, right?

A. Actually, the 0-1 Atlanta facility is

14 closer to Cartersville than the Warner Robins

15 facility.

16

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A. Geographically.

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15 return to page six of the presentation, it says,

17

16 Realistic Negotiation Options. Do you see that?

I do.

18

A.

Q. And if you look at the Supplier

19 alignment options, do you see that?

20

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2 Any other potential new entrants that

3 you can think of as you sit here today?

Q.

4

5

A.

Q.

Not that I can think of.

6 This is an estimate of synergies done by Mars on the

Okay. Now, if you turn to page eight.

7 Ardagh/Verallia deal?

8

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A.

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I'm asking if you --

I believe that i s what this is.

-- recognize it as such.

I do.

.

23 Q. Could you turn to page eleven?

24 Initial and this is, Options assessment,

25 recommended approach, 202?

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10

1 MR. SEWARD: Do you have another copy,

2 Lisl?

3 (WHEREIN, Exhibit 10, ABI-LIT-0001986

4 and 1987, was marked for identification by the court

5 reporter. )

6 Q. (By Mr. Goudiss) That's an e-mail

7 chain that includes you and others on the

8 procurement team?

A. That's correct.

Q. Okay. Can you start at the end, which

11 I guess is the first e-mail?

12

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A. I see it.

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MR. HASSI: Object to the form.

A. Define "strong-arm."

7 MR. GOUDI SS : Well, let me mark as the

8 next exhibit a one-page document bearing the Bates

9 number ABI-LIT-0001955.

10 (WHEREIN, Exhibit 11, ABI-LIT-0001955,

11 was marked for identification by the court

13

12 reporter. )

Q. (By Mr. Goudiss) Is that an e-mail

14 from you to the team?

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16

A. It is.

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Q. Okay. Okay, sir. Do -- has

Anheuser-Busch from time to time looked at both

aluminum bottles as an al ternati ve packaging source

to glass?

A. We have. As an -- as an al terna ti ve

packing source to glass?

Q. Yes.

A. No.

Q. Okay. You've looked at it as a

packaging source, correct?

A. That's correct.

MR. GOUDISS: Okay. Let's have the

reporter mark as Exhibit 11 -- 12, sorry, the

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ABI knew that at the end of 2013 it had contracts

expiring with each of Ardagh and Verallia; is that

right?

A. Yes, we did.

Q. And it engaged Mars to assist you in

the upcoming negotiations with those two supplièrs?

A . Given the magnitude of spend for us in

was appropriate to begin building a strategy around

how we would manage those contracts going forward

all the way back into 2012. So we considered -- we

worked on this strategy for some time.

Q. And did the strategy require some

adj ustment when Ardagh announced it was acquiring

Verallia?

A. Yes, it did.

Q. What was. the -- strike that.

Why did it require changes as a result

of that acquisition?

MR. GOUDISS: I obj ect. Go ahead.

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Q. (By Mr. Hassi) And the RFP that ABI

19

18 put out, when did you put that out?

A. Wow. I know we have the document here.

20 I think it was sometime around end of January, early

21 February. I -- somewhere in that time frame.

22 Q. Was it after the proposed merger was

24

23 announced?

A. I think the formal document actually

25 went out after we knew about the merger. But I

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could be wrong. That's my recollection.

Q. And the first responses you received

from Ardagh and Verallia, tnose came in after they

had announced their intent to merge?

A. They did.

Q. Okay. And in those responses Ardagh

declined to -- well, strike that.

In the RFP did you ask Ardagh to bid on

business where Verallia was the incumbent?

A. We gave all the suppliers in the RFP

the opportunity to bid on any pieces of volume that

they would be interested in. So yes.

Q. And so you likewise offered Verallia

the opportunity to bid on business where Ardagh was

the incumbent?

A. That's correct.

.

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Q. (By Mr. Hassi) You mentioned in

regards to that meeting, you said something about

concern about two big suppliers reducing competition

in the industry. Can you tell us what you meant by

that?

MR. GOUDISS: Again, I object. Go

ahead.

A. Well, so with two big suppliers now

merging in the industry, that -- that essentially

creates in the U. S. for suppliers that are of

significant competition for us a duopoly type of

environment now: Instead of three players, you

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Page 198

1 Q. Okay. You were asked a number of

2 questions about the Mars estimates of the various

3 companies' EBITDA margins. Do you remember that?

4

5

A. I do.

Q. If you had access to Mars's estimates

6 or the actual company's internal documents that show

7 their EBITDA, which one would you rely upon?

8

9

MR. GOUDISS: I object. Go ahead.

A. So to make sure I understand the

10 question, if I had actual audited financial

11 statements from the supplier versus Mars's

12 estimates, I would have to rely on the suppliers'

13 audited financial statements.

Q. (By Mr. Hassi) Okay. In other words,

15 the Mars estimates are just that, they're estimates,

16 right?

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MR. HASSI: Okay. Let me show you a

document we marked as PX4~2 6.

(WHEREIN, Exhibit PX4526, List of

opportuni ties, was marked for identification.)

Q. (By Mr. Hassi) And if you could take a

minute to look at it and identify it for me.

A. So this looks like a listing of

opportuni ties to save money in the glass area.

Q. Okay. And if you -- and Tim Braden,

that's somebody who's on your team?

A. It is.

Q. Okay. I f you could turn to the second

page, it' s l~sted, Top Fifteen Opportunities Glass.

And if you 'could take a look at the very first

opportuni ty and the largest opportunity on the page

and explain to us what that opportunity is according

to Mr. Braden?

.

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14 sales are -- at least in cans are seasonal?

Q. Okay. I take it beer sale -- beer

b ",

15

16

MR. GOUDISS: I object. Go ahead.

18

17 seasonal.

A. Beer sales across the board are

Q. (By Mr. Hassi) Okay. Are cans more

19 popular in the summer months than they are in the

20 winter months?

21

22

23

24

25

A. So cans and glass are both more popular

in the summer months than they are in the winter

months since we have a seasonal product.

Q. Okay. People just generally drink more

beer in the summer?

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Page 217

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11 Q. (By Mr. Hassi) Do you know how long it

12 would take to greenfield a plant in the U. S. ?

13 A. Our estimates based on the work that's

14 been done as part of the negotiation analysis is

15 approximately three years.

16 MR. HASSI: I'll show you a document

17 that's been marked PX4491.

18 (WHEREIN, Exhibit PX4491, Schedule for

19 greenf ield glas s plant, was marked for

20 identification. )

21

22

Q. (By Mr. Hassi) Can you identify this?

A. I can. This is a schedule that we put

23 together to estimate the time to actually construct

24 a greenfield glass plant.

25 Q. And how long did you estimate it would

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6 Q. Okay. If you could -- I'm going back

7 now, I'm sorry, to Exhibit 4, which was the

8 PowerPoint.

A. Okay.

. ..

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MR. HASSI: I see. We need to change

20

19 the tape.

VIDEOGRAPHER: We're going off the

21 record at approximately 2: 14 p.m.

22 (WHEREIN, a recess was taken.)

23 VIDEOGRAPHER: We're back on the record

25

24 on' tape six at approximately 2: 26 p.m.

MR. HASSI: Let me show you another

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1 Mars document that's been marked PX4598.

2 (WHEREIN, Exhibit PX4598, Slide

3 presentation, was marked for identification.)

4

5

THE WITNESS: Okay.

.

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1 b'y an Anheuser-Busch person.

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3 Q. Was there a third option presented,

4 which would be swinging to cans?

5

6

7

A. No.

Q. Why not?

A. Again, we have not evaluated really

8 moving to cans as a strategy for consumer preference

9 reasons.

,.

10 Q. When -- when you say "for consumer

11 preference reasons," can you explain that?

12 A. So consumers demand packaging again,

13 we've talked a little bit about this -- package and

14 brand configurations that meet their needs. So just

15 because as an example we put more cans in the

16 market, it doesn't mean a consumer will move from a

17 glass package to a can package. We provide the

18 combinations to the marketplace and then the

19 consumer determines what they're going to buy.

20 Q. If you were to offer your brands only

21 in cans, does the analysis suggest that the

22 consumers might move to someone else's glass brand?

23

24

25

MR. GOUDISS: I obj ect . Go ahead.

A. It suggests that they would move away

from our brand. I don't know that we've done

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3 Q. Are you familiar with a consultant by

4 the name of Wallace Church or Robert Wallace?

5

6

A. I am.

Q. Okay. Have you employed -- has ABI

7 employed Wallace Church in the past?

8 A. At one time we did employ them for a

9 short engagement.

Q. And what was the purpose of that

12

11 engagement?

A. So I believe the purpose of that

13 engagement was to provide conceptual views on

14 Budweiser packaging. So very high level conceptual

15 thoughts on primary packaging and secondary

16 packaging for the Budweiser brand. 17 .

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Q. And when you say -- you said glass and

25 secondary. What are the secondary options? What do

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2 A. So secondary would be anything that

Page 251

3 goes around a primary package, a folding carton, a

4 shrink wrap case, a container like that that wraps a

5 primary package.

6 Q. Do you know whether any of the Wallace

7 Church designs that were looked at have been adopted

8 by ABI?

9 A. They have not.

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Q.

14 you a document we've marked as PX4514.

On the issue of MACO, I'd like to show

15 (WHEREIN, Exhibit PX4514, Spreadsheet,

17

16 was marked for identification.)

Q. (By Mr. Hassi) So what I really want

18 to walk through is the last page. This is from an

19 Excel spreadsheet. There are three different

20 workbooks here.

21

22

A.

Q.

Okay. Page nine?

Yes. And I just want to make sure that

23 we understand the categories here. Well, first, are

24 you familiar with this document or this information?

25 A. I am.

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A.

Q.

Okay. I'm there.

Okay. So in the -- in 2009 AB

4 renegotiated its glass contracts; is that right?

5

6

A.

Q.

That's correct.

7 than you do today with Owens-Illinois; is that

And at the time you had more volume

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MR. GOUDISS: I obj ect. Go ahead.

Page 270

A. I'm not aware of a study that addresses

that.

Q. (By Mr. Hassi) Okay. Under

negotiations, we were just talking about this, but

the second bullet says, Moved volume from 0-1 based

on large increases and awarded to SGC and regional

players. It goes on to say Anchor and Fevisa. So

did Anchor capture some of the volume from former

would it formerly have been supplied by 0- I?

A. So again, I'm not familiar with the

details at that time, but according to this

document, which looks like a presentation that was.

made to management relative to approvals needed to

enter into these agreements, Anchor would have won

some of that volume, as well as Fevisa.

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22 we've marked as PX4494.

MR. HASSI: Let me show you a document

23 (WHEREIN, Exhibit PX4494, Graphs, was

24 marked for identification.)

25 (By Mr. Hassi) I asked you some

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10 proposed terms with Fevisa, was marked for

9 (WHEREIN, Exhibit PX4 52 5, Summary of

12

11 identification.)

Q. (By Mr. Hassi) Let me show you a

13 document we've marked as PX4525.

14

15

A. Okay.

Q. This is a summary of the proposed terms

17

16 with Fevisa that was presented to the -- is this to

the DAG, is that the global board of directors or

18 who is that?

19 A. That's -- that's delegation of

20 authority. That's -- that's the term around

21 requiring a level of approval that the board would

23

22 need to -- to execute for this contract.

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MR. HASSI: I ' 1 1 show you a document

11 we've marked as PX4524.

12 (WHEREIN, Exhibit PX4524, E-mail chain,

14

13 was marked for identification.)

Q. (By Mr. Hassi) It's a lengthy

15 document. My question is just going to relate to

16 Mike Fair's e-mail at the top of the page.

17

18

19

A. Okay.

Q. Do you know who Mike -- Mike Fair is?

A. I think Mike Fair used to be the

20 quali ty manager for Anchor. I'm assuming he

21 continues to reside in that position.

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2

A. You can go ahead. I see it here.

Q. Yeah. So in -- in -- this is an e-mail

3 you sent on or about April 2nd, 2012; is that right?

4 A. It is.

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Q. Okay. And so if I wanted to get an

all-in cost for cans, where would I find that?

A. So you would add the -- the can

pricing the can total together with the lid

total, and that would be an all-in price.

Q. There's a separate sort of in the

19 bottom right-hand corner, a section on plastic

20 bottles.

21

22

23

24

A. Correct.

Q. Are those also cost per thousand?

A. They are.

Q. And are there any additional costs

25 associated with plastic bottles? Now, there's cap

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1 -- bottle caps or is that sort of an all-in price to

2 the can?

3 A. So to have a comparable cost to the can

4 and the lid together, you would need to add the

5 plastic bottle price shown here, the roll-on lid

6 closure price which is not shown here, and -- and a

7 label which is also not shown here.

8 Q. And the aluminum bottle to the left of

9 that 16-ounce IE, is that -- can you tell us what

10 those prices represent?

11 A. That is our cost of a 16-ounce impact

12 extruded aluminum bottle purchased from Exal.

13 Again, in cost per thousand.

14 Q. And what's the difference between

15 standard and case packaging?

16 .A. So stan -- case packing would be when

17 we require them to pack the bottles in cases for us.

18

19 Q. Can you take a look at your

20 declaration? I don't remember what number it was

21 marked at. It was --

22 A. I know I have it here.

23

24

25

Q. - - 8, 9 ,or 1 0 , I t h ink. 7 ,8 , 9 ?

MS. GRAIVIER BARNES: 8.

A. I got it.

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9 MR. HASSI: Subj ect to recross, I have

10 no further questions at this time.

11 MR. GOUDISS: I'm going to just take

12 two minutes, talk to my colleagues.

13 VIDEOGRAPHER: We i re going off the

14 record -- watch your microphone. We i re going off

15 the record at approximately 4:13 p.m.

16 (WHEREIN, a recess was taken.)

17 VIDEOGRAPHER: We i re back on the record

18 at approximately 4:16 p.m.

19 MR. GOUDISS: Sir, we have no further

20 questions for you. Thank you very much for your

21 time.

22

23

THE WITNESS: Thank you.

MR. HASS I: Thank you for your time,

24 sir.

25 THE WITNESS: Thank you.

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Page 27

Anheuser-Busch considered the possibility of

acquiring any plants that might be divested as part

of a resolution of this matter with the FTC?

MR. HASSI: Obj ect to the form.

A. We would consider it based on the

condi tions.

Q. (By Mr. Goudiss) So depending on

condi tions, Anheuser-Busch might be interested in

acquiring one or more of the plants that might be

di vested in this matter?

MR. HASS I: Obj ect to the form,

leading.

A. Correct.

Q. (By Mr. Goudiss) Do you know which

plants?

A. I know we 've ~onsidered a list .of

plants, but we've made no specific decisions on

on specific facilities, no.

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Q. And other than ~hat your counsel is

taking as privileged communications, I take it you

don't know the state of any discussions between ABI

and the FTC on any proposed di vesti ture plan?

MR. HASSI: Obj ect to the form.

A. I do not.

Q. (By Mr. Goudiss) Okay. This is a yes

or no question. Have you reviewed any documents,

memos, e-mails, any documents from or to your

counsel that address the subj ect of potential

Page 29

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Q. Okay. When was the last such occasion?

MR. SEWARD: Obj ection, privilege.

Q. (By Mr. Goudiss) Let me try it this

Page 32

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way, sir. In each and every conversation that

you've had with anybody else from ABI on the

business side about the possibility of di vesti tures

in this matter, has a lawyer been present?

A. I don't remember.

Q. Okay. Is it possible for you as you

sit here today to separate conversations that you

had with Mr. Hissnauer, Mr. Fuenmayor, any other

business person on the subj ect of di vesti tures from

those occasions where lawyers were present and

participated?

A. I would tell you for the most part when

we've had discussions related to di vesti tures, we

have had attorneys present. I can't, guarantee

there's not been a situation where that maybe hasn't

happened, but that's generally been our practice for

those specific discussions to have an attorney

present.

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Page 34

1 negotiation of that agrèement?

2 A. I was not involved in the face-to-face

3 negotiation of that agreement, but participated on

4 the negotiation team discussing the strategies and

5 terms that we would request.

6 Q. But you didn't interface directly with

7 the Ardagh team in the negotiations, correct?

A. I did not.

Q. Okay. Who did?

A. To my knowledge, Juan Carlos. At

times, again, through various negotiations it would

have been Juan Carlos Fuenmayor, Marcus Eloi, or

Cassiano Hissnauer, as well as in -- on some ~

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circumstances people from my team, Tim Braden or Sue

Hoskins would also have been involved in some

discussions.

Q. Okay. And do you know if lawyers were

present throughout those negotiations?

A. I know lawyers were not present in

every negotiation.

Q. Okay. Do you recall receiving reports

about the negotiations as they proceeded?

A. I recall various discussions about

25

24 feedback from those negotiations, yes.

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Q. Okay. Fair enough. Has ABI also been

engaged in discussions about a new long-term supply

agreement with VNA?

A. They have.

Q. Okay. Who's responsible for conducting

those discussions?

A. The same team, Juan Carlos, Marcus

Eloi, Cassiano Hissnauer.

Q. Okay. And you're not the direct

interface with VNA on those discussions?

A. I'm not.

Q. Okay. Now, ABI last entered into

long-term supply contracts with Ardagh and VNA in or

about 2009; is that right?

A. That's correct.

Q. Okay. Were you directly involved in

the negotiations at that stage?

A. I was not.

Q. Who conducted those negotiations if you

know?

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1 Q. Okay. So one way or the other you

2 don't know whether that subj ect has been raised?

3

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Q. The FTC asked ABI to produce documents

15 as part of i ts investigation. Were you aware of

16 that?

17

18

19

MR. BASS I: Obj ect to the form.

A. I am.

Q. (By Mr. Goudiss) Okay. Were you

20 involved in gathering up the documents to produce to

21 the FTC in response to its requests?

22

23

24

A. In a very minor sort of way.

Q. Okay. And what was your role, if any?

A. I looked for documents that may have

25 been in my possession.

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break if that's okay?

VIDEOGRAPHER: We're going off the

record at approximately 9: 06 a. m.

(WHEREIN, a recess was taken.)

VIDEOGRAPHER: We're back on the record

on tape two at approximately 9: 16 a.m.

Q. (By Mr. Goudiss) Prior to the break,

sir, you were telling us about ABI' s reaction to

Ardagh's initial response to the RFP. Do you recall

that?

A. Correct.

Q. Okay. You understood that that was

Ardagh's opening response, right?

MR. HASSI: Obj ect to the form.

A. That was their first response to the

RFP, correct.

Q. (By Mr. Goudiss) And it was your

expectation that that was going to form the basis

for further negotiation, right?

MR. HASSI: Object to the form.

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Q. Okay. And that initial response on the

RFP was for Ardagh on a stand-alone basis, right,

not in combination with VNA, right, the initial

response?

A. Yes.

Q. And VNA separately responded to the RFP

with its own initial response, right?

A. That's correct.

Q. Okay. Now, earlier your counsel

obj ected when I used the term "opposition." Your

testimony had been that as far as you know, ABI has

not taken a position one way or the other on the

acquisi tion, correct?

A. Correct.

Q. Okay. Do you know if your lawyers in

communicating with the FTC have expressed opposition

to the --

MR. SEWARD: Obj ection, privilege.

MR. GOUDISS: I guess we'll never know.

Could you mark as Exhibit Number 4 a

mul tipage document bearing the Bates numbers

ABI-LIT-0000318 through -- produced as a native

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A. The left is a map showing

Q. Oh, yeah. I'm sorry. On page 27

there's a map and then there's some historical data

on the right?

A. Okay.

Q. Do you see that?

A. I do.

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Q. Okay. And then there's the brewery

scorecard on page 28. Do you see that?

A. I do.

Q. Okay. That was prepared by Mars?

A. They may have put the information in

the slide, but the scorecard information would have

had to come from an Anheuser-Busch data source.

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2 Q. Okay. Would you turn to -- to page

3 three, that presentation? And it's the, Impact of

4 merger on sourcing options by brewery. Do you see

5 that?

6 A. I do.

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4 Q. Okay. And -- and I think we've

5 established this, but the Anchor facility in

6 Jacksonville is clearly the closest facility for

7 those, correct?

A. For Jacksonville.

Q. Yes.

A. Correct.

Q. And -- and Warner Robins is the closest

13

12 for Cartersville, right?

A. Actually, the 0- I Atlanta facility is

14 closer to Cartersville than the Warner Robins

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16 Q. Uh-huh.

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MR. GOUDISS: Okay. Thank you. I

think we're at the. end of the tape.

VIDEOGRAPHER: We're going off the

record at approximately 11:23 a.m.

(WHEREIN, a recess was taken.)

(WHEREIN, Exhibit 7, FTC-FILE-00024455

through 24461; Exhibit 8, PX5020-001 through 008;

and Exhibi t 9, Blackline comparison of Exhibits 7

and 8, was marked for identification by the court

reporter. )

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1 Exhibi t 9, which is the blackline we did -- and I

2 want you to feel free to refer to Exhibits 7 and 8

3 if you would prefer. We just created Exhibit 9 for

4 convenience, okay.

5

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1 give me a broad overview of how you make those

2 packaging decisions?

3 A. So -- so on a broad basis, generally

4 speaking we want to have a package type and

5 configuration for each brand that -- that allows us

6 to reach the maximum consumer base, thereby

7 maximizing our volume.

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13 So recognizing all consumers don't want

14 the same thing, we try to proj ect as we're

15 introducing a new brand or managing an existing

16 brand what the correct package configurations are

17 that -- that yield the broadest opportunity for

18 our -- for our brands in the marketplace.

19 Q. And how does -- are you comfortable

20 with me calling it ABI? Is that

21

22

A. Sure.

Q. How does ABI determine on the launch of

23 a new brand what consumers want and what package to

24 put things in?

25 A. We typically will do studies, market

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1

2

A. That's correct.

Q. And this second slide, what's the

3 difference between -- between the two?

4 A. So the first slide is percentages. So

5 the second slide is in some type of units. They are

6 not millions or thousands of cans. They could be

7 barrels. I'm not sure exactly what the units are.

8 They're meant to show the change in units. My first

9 guess would be they would be barrels, but I'm not

10 positive.

11 Q. So ABI' s volume is down. The volume of

12 beer that you've sold in total is down since 2008;

13 is that right?

14 A. That's correct.

15 Q. And it sounded like you weren't sure

16 what the units were, but is it correct that --

17 A. I think they're barrels, but I'm not

18 positive.

19 Q. Okay. 20 II

II

IIII _

24 MR. HASSI: I'll show you a document

25 we've marked as PX3530.

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1 to do this study.

2 Q. If you could turn to slide eleven. Is

3 this the underlying analysis that's sort of

4 represented graphically on slide two?

5

6

MR. GOUDISS: I obj ect, but go ahead.

A. Go back to slide two for a second. I'd

7 say that's accurate relative to the package types,

8 yes. This this focuses on the two category,

9 loyalists and experimenter, with -- with data

10 similar to what's on slide two.

11 MR. HASSI: Why don't we go off the

12 record?

13 VIDEOGRAPHER: We're going off the

14 record at approximately 12: 35 p.m.

15 (WHEREIN, a lunch recess was taken from

16 12:35 p.m. start to 1:14 p.m.)

17 VIDEOGRAPHER: We're back on the record

18 on tape five at approximately 1:14 p.m~

19 Q. (By Mr. Hassi) Mr. Keathley, you were

20 asked some questions this morning about a

21 January 17th, 2013 meeting between ABI and Ardagh,

22 and you were shown some notes. They are marked as

23 Exhibi t 3 to this proceeding. Do you recall that?

24

25

A. I do.

--

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Q. Right. If you could look at Exhibit 6,

22 please. Actually, you know what, set that to the

23 side for a minute. Let me ask a couple of questions

24 first.

25 ABI knew that it was going to have ~-

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1 ABI knew that at the end of 2013 it had contracts

2 expiring with each of Ardagh and Verallia; is that

3 right?

4

5

A. Yes, we did.

'Q. And it engaged Mars to assist you in

6 the upcoming negotiations with those two suppliers?

7 A. Given the magnitude of spend for us in

8

9 was appropriate to begin building a strategy around

10 how we would manage those contracts going forward

11 all the way back into 2012. So we considered -- we

12 worked on this strategy for some time.

13 Q. And did the strategy require some

14 adjustment when Ardagh announced it was acquiring

15 Verallia?

16 A. Yes, it did.

17 Q. What was the -- strike that.

18 Why did it require changes as a result

19 of that acquisition?

20

21

MR. GOUDISS: I object. Go ahead.

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really move down to two players.

Q. (By Mr. Hassi) When you say the

industry, what industry are you referring to?

A. The U. S. glass industry that provides

beer bottle, beer containers that would be usable by

Anheuser-Busch.

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Q. (By Mr. Hassi) And you referred to the

glass industry post-merger as being a duopoly. Do

you not consider can manufacturers to be in the same

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1 consumer demand that we've talked about today?

2

3

MR. GOUDISS: I object. Go ahead.

A. That's correct. Essentially we try to

4 provide the consumer again with the brand and

5 package configuration that they want to consume.

6 And some consumers prefer and want glass.

7 Therefore, we need to make that particular package

8 available to that basic consumers.

9 Q. (By Mr. Hassi) Let's go to Exhibit 6

10 now. That's the Mars North American glass strategy

11 responding to Ardagh' s big bang document.

12 (Court reporter interruption.) 13 .

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23 announcement reconsidering how to approach the RFP

24 negotiations; is that right?

25 A. That's correct.

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2 reached heads of terms with Ardagh for supply; is

3 that right?

4

5

A.

Q.

That's correct.

6 mean in terms of sort of enforceability of an

Okay. And what does "heads of terms"

7 agreement to you? I'm not as king for a legal

8 opinion. I'm just asking for you as -- as a head of

9 procurement type.

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8 MR. HASSI: Let me show you a document

9 we've marked as PX4553.

10 (WHEREIN, Exhibit PX4553, Slides, was

11 marked for identification.)

12

13

THE WITNESS: Okay.

Q. (By Mr. Hassi) Are you familiar with

14 this document?

15

16

A. I am.

Q. And can yqu tell us what i t is?

17 A. It's -- it's a deck that was put

18 together as a review of -- of the glass strategy for

19 2013, including an update on where we were with the

20 Ardagh/Saint-Gobain negotiation.

21 Q. Was it prepared by someone in your

22 group?

23 A. I'm sure the deck was -- it could have

24 been prepared by either one, Carlos or Tim Braden or

25 a combination of the two of them. It was prepared

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Q. Are you familiar with a consultant by

the name of Wallace Church or Robert Wallace?

A. I am.

Q. Okay. Have you employed -- has ABI

employed Wallace Church in the past?

A. At one time we did employ them for a

9 short engagement.

Q. And what was the purpose of that

12

11 engagement?

A. So I believe the purpose of that

13 engagement was to provide conceptual views on

14 Budweiser packaging. So very high level conceptual

15 thoughts on primary packaging and secondary

16 packaging for the Budweiser brand. 17 .

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25 secondary. What are the secondary options? What do

Page 250

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1 Q. Okay. Container form, that's

2 self-explanatory, as are size and container type.

3 Volume, is that volume of beer packaged in --

4 measured in barrels?

5

6

A. It is.

Q. Okay. And you mentioned MACO. That's

7 margin contribution?

8

9

A. That's correct.

Q. Can you explain what margin

11

10 contribution means?

A. So margin contribution, if ~ were

12 comparing it to more of an industry standard

13 terminology for margin, it equates most closely to

14

15 variable cost or costs of goods sold would equal

gross profit. So it would be net revenue minus

16 total margin divided by barrels would be margin

18

17 contributions per barrel.

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1 bottle, which 0-1 produced, that has the internal

2 embossing in the neck.

3

4

Q. (By Mr. Hassi) Uh-huh.

A. We evaluated that in the early 2000s

5 before Miller actually adopted it. So that's an

6 example of one. Many different embossing options.

7 Shape options. Color options. Size options.

8 Pretty much the suppliers work with us

9 regularly on package innovation in the glass area,

10 either by our request, or we also have situations

11 where we ask them to come in and present their ideas

12 as well. So it's it's a two-way communication on

13 innovation.

14 Q. Okay. Did they compete for your

15 business on innovation?

16

17

MR. GOUDISS: . I object. Go ahead.

A. We try to get them to compete for our

18 business on innovation. 19 .

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MR. HASSI: Let me show you a document

we've marked as PX4 5 02.

(WHEREIN, Exhibit PX4502, E-mail chain,

was marked for identification.)

Q . ( By Mr. Ha s s i ) And I' m jus t go i n g to

ask you about the you can read whatever you like.

I'm just going to ask you about the topmost e-mail

on the first page.

A. Okay. I've looked at it.

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8 MR. HASSI: Okay. I think we need to

9 take ~ a break and change the tape.

VIDEOGRAPHER: We're going off the

11 record at approximately 3:23 p.m.

12 (WHEREIN, a recess was taken.)

13 VIDEOGRAPHER: We're back on the record

15

14 on tape seven at approximately 3: 35 p.m.

16 document we've marked as PX4512.

MR. HASS I: Sir, let me show you a

17 (WHEREIN, Exhibit PX4512, Glass

19

18 Contract Review, was marked for identification.)

Q. (By Mr. Hassi) It's a thick document.

21

20 My questions are going to -- if -- if you want to

jump there, are going to start on page there's a

22 2010 glass contract review that starts on page 95.

23

24

A. 95.

Q. Dash dash 95. So if you look at the

25 -- the 4512-095, and my questions are going to start

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Page 268

Q. (By Mr. Hassi) Do you know whether

3 Anchor bid on any of that business?

4 A. I do not. I was not in this area at

5 that time. I only know some of the basics of -- ot

6 what happened.

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3 MR. HASSI: Okay. You can set that to

4 the side. Let me show you a document we've marked

5 as PX4513.

6 (WHEREIN, Exhibit PX4513, u.S. glass

7 contracts, was marked for identification.)

8 Q. (By Mr. Hassi) My questions, not

9 surprisingly, are going to center around the -- this

10 page ten has a summary of the U. S. glass contracts.

11

12

A. Okay.

Q. Under -- on the page ten, the s.ummary

13 of U. S. glass contracts, the second bullet says,

14 Volume has decreased dramatically year over year to

15 levels not seen since 1997. Do you see that?

16

17

A. I do.

Q. Do you have an understanding as to why

18 ABI' s beer packaged in glass volume decreased

19 dramatically in the time leading up to 2010?

20 A. I really don't. I'm not aware that

21 we've studied the shift between glass and cans

22 specifically.

23 Q. Do you know whether -- have you looked

24 at whether the recession played a role, specifically

25 for example on premise sales versus retail sales?

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1 questions before about the -- I think I as ked you

2 some questions before about the performance of Bud

3 Light Platinum in cans. Do you recall that?

4 A. I do.

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(WHEREIN, Exhibit PX4525, Summary of

proposed terms with Fevisa, was marked for

identification. )

Q. (By Mr. Hassi) Let me show you a

document we've marked as PX4525.

A. Okay.

Q. This is a summary of the proposed terms

wi th Fevisa that was presented to the -- is this to

the DAG, is that the global board of directors or

who is that?

A. That's -- that's delegation of

authority. That's -- that's the term around

requiring a level of approval that the board would

need to -- to execute for this contract.

--

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11 we've marked as PX4524.

MR. HASSI: I'll show you a document

12 (WHEREIN, Exhibit PX4524, E-mail chain,

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13 was marked for identification.)

Q. (By Mr. Hassi) It's a lengthy

15 document. My question is just going to relate to

17

16 Mike Fair's e-mail at the top of the page.

Okay.

18

19

A.

Q. Do you know who Mike -- Mike Fair is?

A. I think Mike Fair used to be the

20 quality manager for Anchor. I'm assuming he

22

21 continues to reside in that position.

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Q. Okay. And why did you -- if you

recall, why did you remove that sentence?

A. I can't recall why that sentence was

removed in lieu of the way it's been rephrased.

Q. Okay. I f you turn to paragraph 25, the

following sentence was removed from the draft.

While cans -- while the cans are less expensive to

produce, ABI sells a six-pack of Bud Light Platinum

in cans at the same wholesale price as a six-pack of

Bud Light Platinum in bottles. Do you see that?

A. I do.

Q. Why was that removed?

A. My recollection is it was too much

detail for the meaning of the paragraph.

Q. That's your best recollection?

A. That is my best recollection.

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A. So Proj ect Stark is a proj ect to

2 compete against really Miller's Alumi-Tek bottle in

3 the marketplace by introducing our own C to C,

4 that's a coil to can, aluminum bottle with a roll-on

5 closure.

6 Q. Okay. And if you turn to --

7 unfortunately it's not paginated, but if you turn to

8 the seventh slide, the one that starts the Proj ect

9 Stark Executive Summary.

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location.

Q. And does ABI try to determine when

consumers are buying on premise what sort of

packaging they prefer?

A. Yes.

Q. And is there a is there a preference

Page 160

as between bottles and cans in terms of on premise

purchases to your knowledge?

MR. GOUDISS: I obj ect. Go ahead.

A. It depends on which brand we're talking

about.

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Q. How do you -- how do you categorize

your brands? What are the categories that ABI uses?

A. So we would have high-end, premium

plus, premium, and value. And then there can be

varying degrees inside those categories as well, but

those are the primary categories.

Q. Does the mix of cans and bottles differ

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A. That would be your Bud Light Platinums,

3

2 your Black Crowns, those type of brands..

Can you give us an example of a value

4 brand?

5

6

A.

Q.

Q.

A value brand would be Natural Light.

Did there -- you mentioned when you

7 first launched Bud Light Platinum it was launched

8 solely in glass; is that right?

9

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A.

Q.

11 glass?

12 A.

13 Thereabouts.

14 Q.

15 where you launched it in cans?

And did there come a point in time

16 A.

17 Q.

18 Platinum in cans?

That's correct.

And for how long was it solely in

For at least the first year.

There did. Thls year, 2013.

And why did ABI launch Bud Light 19 .

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2 Q. And before launching it in a can, did

3 ABI study what its consumers wanted and how it might

4 achieve that reach?

5 A. We did.

6 (WHEREIN, Exhibit PX4497, Packaging

7 study for the brand Bud Light Platinum, was marked

8 for identification.)

9 Q. (By Mr. Hassi) Okay. Let me show you

10 a document we marked as PX4497. If you could just

11 take a minute to look at it and -- and then tell me

12 if you -- if you know what this document is.

13

14

15

A. I do recognize the document.

Q. Okay. And can you tell us what it is?

A. It's a study for the brand Bud Light

16 Platinum to determine what new packaging should be

17 introduced for the brand.

18 Q. And so is this an example of the kind

19 of study that we've just been discussing for an

20 existing brand how you might extend the reach?

21

22

A. It is.

Q. Okay. If you would turn to slide

23 eight, it' s entitled, Key Learnings. Can you tell

24 us what you understand the first key learning to be

25 here?

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10 Q. Was the -- was the blue bottle an

11 important part of the branding of Bud Light

12 Platinum?

13 A. A critical -- critically important part

15

14 of the brand' s imagery, yes.

Q. Would Bud Light Platinum have been as

16 successful if it were launched in a can instead of a

17 blue bottle?

18

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20

MR. GOUDISS: I object. Go ahead.

A. Not based on the research.

Q. (By Mr. Hassi) That's something that

21 ABI researched before you launched the blue bottle?

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A. That's correct.

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wi th respect to packaging?

A. So the research was looking at what the

correct configuration of packaging would be again to

extend the reach for Bud Light Platinum drinkers,

and what the research suggests is these nine -- nine

SKU's highlighted here create the optimal portfolio

of packaging to extend the reach for the brand.

Q. Could you turn to slide seventeen,

please? And can you tell us what this shows?

A. So this is a basic two-by-two matrix

wi th purchase frequency on the X axis. That's how

many times per month. And reach of buyers on the --

.

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marked as 45 -- PX4531.

(WHEREIN, Exhibit PX4531, Two pages

from fact book, was marked for identification.)

THE WITNESS: Okay.

Q. (By Mr. Hassi) These appear to be two

pages out of something called a fact book. Do I

have that right?

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before, party time, proving myself, outdoor

refreshment. Those are examples of need states that

ABI uses to classify drinkers or consumers?

A. To classify occasions.

Q. Or occasions?

A. I guess is the way I would characterize

it.

Q. And by matching a person and a segment

wi th the occasion, you try to then figure out what

the right packaging is for that consumer?

A. The right packaging, the right

marketing, the right brand. We use it for a number

of what I'll call commercial initiatives and

reviews.

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24 asked. Who is the Cambridge Group?

25 A. They're an outside firm that we engaged

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1 than glass. However, we choose not to do that.

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8 MR. HASSI: Let me show you a document

9 we've marked as PX4554.

10 (WHEREIN, Exhibit PX4554, Glass

11 strategy review, was marked for identification.)

12

13

Q. (By Mr. Hassi) I'm going to -- this

is I'm going to ask you to identify the document,

14 then I'm going to ask you to look specifically at

15 slide six, but feel free to look at whatever you'd

16 like in terms of in the document itself.

17 A. So this document is a glass strategy

18 review. Again, updating our position following the

19 Ardagh/Saint-Gobain negotiations. I'm not sure this

20 isn't already an exhibit somewhere.

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MR. SEWARD: Yeah.

A. It looks familiar.

MR. SEWARD: It looks very similar.

Q. (By Mr. Hassi) It's similar. It's got

25 different--

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DECLARATION OF LEE KEATHLEY

Pursuant to 28 U.S.C. § 1746, I, Lee Keathley, declare and state as follows:

1. I am the Vice President of Procurement for the North American Zone of Anbeuser- Busch

Companies, LLC, a subsidiary of Anheuser-Busch InBev ("ABI"). The North American Zone, as

delineated by ABI, includes the United States and Canada. I am also Vice President of

Procurement for Anheuser-Busch, LLC ("AB"), a subsidíaryof Anheuser-Busch Companies, LLC

and the u.s. beer manufacturer. I have been in my curent position for approximately two years,

and have been with the company for 23 years, during which ti.me I have held a variety of

procurement positions. I am presently responsible for aU Nort American procurement activities,

including the procurement of glass bottles for ABI's beverages brewed and filled in North

America.

2. ABI is the world's.largest brewing company. In 2012, AB produced approximately 119

milion hectoliters of beer, the majority of which was made up of the Budweiser and Bud Light

brands. This beer is produced in AB's 12 U.S. breweries located in S1. Louis, Missouri; Newark,

New Jersey; Los Angeles. Califomia~ Houston, Texas; Columbus, Ohio; Jacksonvile, Floriqa;

Merrimack, New Hampshire; WiliamsbUrg, Virginia; Fairfield, California; Baldwinsvile, New

York; Fort Collns, Colorado; and Cartersvile, Georgia. In addition, in 2012 AB imported

approximately 2.1 milion hectoliters of beers from breweries located abroad. Altogether, AB

sells over 115 brands of beer in the United States.

3, AB spends approximately_annually to purchase roughly_glass

bottles _gross) for our breweI'es iIl the United States. AB's glass bottle demand rose

slightly in 2012 with the introduction ànd success of our Bud Light Platinum brand. Going

forward, AB expects its glass bottle demand to

Indeed, in our glass bottle Request for Proposal ("RFP") issued to our glass bottlesuppliers earlier

this year, AB provided guidance that it ex . ects its bottle volumes to

Ovet"of An's glass contaner demand is for

anbercolored bottles. Our next biggest demand is for flint (Le., clear) bottles, which represent

about ~of our demand. The remainder of out demand is for green bottles, as well as some

specialty colors, such as blue and black. the vast majority of out bottles are 12 ounces in size, but

we also use may other sizes, including, for example, smaller seven-ouncè bottles and larger 18,

32, and 40-ounce bottes.

4. AB presently sources our bottles from five suppliers. Currently, our three main suppliers

are Veralla North America ("VNA"), which supplies approximately_our needs, Ardagh

Group S.A. ("Ardagh"), which supplies~ately_qf our needs, and OwensIlinois ('10-1"), which supplies around__ The remaining_or so is split roughly

evenly between a Mexican supplier, Fevisa,and ABI's own dedicated glass bottle plant,

Longhorn. Other than its present suppliers, ABI is unaware of any other viable options for

sourcing beer bottles that could meet AB's U.S. needs. More distant beer bottle manufacturers

would face significant freight disadvantages in supplying AB's U.S. operations.

5. Longhorn, located in Jacinto City, Texas, is the only glass container plant owned by AB.

AB uses all of Longhorn's glass bottle output internally. For the most par, Longhorn's entire

production is dedicated to serving AB's Houston brewery. Longhorn Is able to meet .

approximately_ofthe.Houstort brewery's annual glass botte needs. While operating

glass bottle plants is not within AB's area of core competency, Longhorn's operation provides AB

Page 11
with insights into glass production costs and potential effciencies that are useful to AB in

negotiating with third-part glass bottle suppliers.

6. Fevisa's glass container plant is located in Mexicali, Mexico. Freight costs are a lar e

fraction of the landed cost (i.e., total cost after delivery to a brewery

7. Although the Mexican supplier, Fevisa, does supply our Los Angeles brewery, I believe all

other Mexican glass bottle suppliers seeking to supply to any of AB's other U.S. breweries would

carry freight costs that would rendertheir delivered beer bottle cost significantly higher than the

delivered costs available from AB's present domestic suppliers. The only other AB brewery close

to Mexico is our Houston brew y but it is 'marl s l d by L hom lass lant _ ~ ~ .

Heineken/FEMSA, a large beer brewer in Mexico, also owns a Mexican glass plant. If

Heineken/FEMSA supplied beer bottles to third-parties, it is highly likely that given its plant's

location inSout1iem Mexico, it would face a large freight dìsadvantage in supplying breweries in

the United States. AB would also be reluctant to source bottles from HeinekenIEMSA because it

is a significant rival in the sale of beer.

8. On June 4, 2013, by purchasing the shares tendered in response to its offer, ABI

successfully completed its combination with Grupo Modelo ("Modelo"). This transaction

included acquiring three existing glass container plants in Mexico owned b DIFA, a Modelo

subsidiary.

DIF A is also currently constructing a

fourth glass contaner plant in Piedras Negras, Mexico, which is on the U.S. border roughly

adjacent to San Antonio, Texas. When completed, the Piedras Negras facilty rl1ay be able to

supply bottles to ABI's Houston'brewery, which is approximately 350 miles away, altl10ugh.

_of that brewery's glass bottle demand is already supplied by the Longhorn plant described.

above.

9. In the past, ADI has occasionally analyzed the viability of potential overseas import of

glass bottles from places like China, Europe, and tlie Middle East. In addition to freight expenses

. that make them uncompetitive compared to domestic supplies, overseas imports have other

drawbacks as well. For example, most of AB's glass is supplied from glass plants that are within

a few hundred miles of a given brewery and delivered within hours of when the bottes are going

to be filled. Foreign supplies would impose significant additional logistical costs in the form of

warehousing and managing a more 'complicated supply stream. In addition, AB requires quality

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1 take before you could actually start producing

2 glass?

3 A. From scoping to the actual start-up,

4 our estimate was 37 months.

5 Q. Okay. And then there's a separate

6 period after that that's called ramp-up. What does

7 that refer to?

8 A. So when a plant generally starts up, it

9 starts up, one, in phases. So you bring one furnace

10 on, you bring one forming line on, and then continue

11 to expand that start-up curve to additional furnaces

12 and additional forming lines as you go.

13 So that's typically considered the

14 ramp-up period. There's also an efficiency period

15 in there where a line starts up, we don't expect it

16 to start up at its standard efficiency. It starts

17 up on a slower basis and generally gets to that

18 expected efficiency over time.

19 Q. Did you like -- did you also estimate

20 the cost of building a glass plant, greenfield?

21

22

A. We did.

Q. And do you recall at least by order of

23 magnitude what those costs were? 24 II

II

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2 (WHEREIN, Exhibit PX4576, Different

3 scenarios for glass plants in three locations, was

4 marked for identification.)

5 Q. (By Mr. Hassi) Let me show you a

6 document that we marked as document PX4576. I'm

7 just going to refer to one page. I've got a copy of

8 the full document if you want to look at it for the

9 record, but for our purposes

10

11

12

13

A. This page?

Q. I'm going to, yeah, refer to the --

A. Oh.

Q. -- the second page, but if you want to

14 look at any of the backup. Looking at PX4576, can

15 you identify this?

16 A. These are different scenarios for glass

17 plants in three different locations, varying

18 volumes, and the associated capital costs and

19 returns.

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7 now, I'm sorry, to Exhibit 4, which was the

8 PowerPoint.

A. Okay.

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1 Q. (By Mr. Hassi) Okay. Can you explain

2 what a freight lane is?

3 A. So a freight lane would be a normal

4 pattern between a supplier's location and a brewery

5 location.

6 Q. And can the availability of freight

7 lanes sometimes make shipping something farther less

8 expensive because there are regular shipments going

9 down -- going up and back that lane if you will?

10

11

A. Tha t 's correct.

MR. HASSI: Let me show you a document

12 we've marked as PX4510.

13 (WHEREIN, Exhibit PX4510, Modelo DIFA

14 Analysis, was marked for identification.)

15

16

THE WITNESS: Okay.

Q. (By Mr. Hassi) Is this an analysis of

17 how AB InBev might use the DIFA plants that it

18 recently acquired in the Modelo deal?

19 A. It is. 20 .

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24 bottom of your pile, but look at Exhibit 11, please?

25 It's an e-mail. It's a one-page. c

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