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Anheuser-Busch Files Suit Against M.L.B.

New York Times, November 12, 2010

By Richard Sandomir

Budweiser’s decades-long connection to Major League Baseball frayed Friday when the giant brewer’s parent company, Anheuser-Busch, alleged in a federal lawsuit that baseball reneged on an agreement reached earlier this year to extend the beer maker’s sponsorship.

With Budweiser’s sponsorship set to expire this year, the company said that it negotiated the terms of a multiyear renewal last April. The sides even exchanged congratulatory messages.

One baseball executive, John Brody, then the head of corporate sales and marketing, sent an e-mail to Budweiser that read, “We are excited about the extension of this amazing partnership.”

But within a month, the deal began to unravel when Anheuser-Busch became the official beer sponsor of the National Football League, according to the lawsuit filed in Manhattan federal court against Major League Baseball Properties.

At that point, the suit said, Tim Brosnan, an executive vice president in charge of business, “began to complain that the economic terms of the April renewal agreement were no longer satisfactory and that the market had changed,” according to the court papers.

The lawsuit did not cite financial terms of any of the deals, but the lawsuit said that Brosnan demanded Anheuser-Busch pay “several times” more than had been negotiated. In September, Brosnan informed the brewer that baseball was going to try to sell the beer sponsorship to other brewers. On Oct. 1, Brosnan informed David Peacock, the president of Anheuser-Busch, that baseball was “going to disavow” the April deal.

A week later, Anheuser-Busch sent letters to some of its domestic competitors informing them that it would defend its rights should any of them negotiate a deal with Major League Baseball.

In response to the lawsuit, M.L.B. issued a statement saying: “Major League Baseball Properties hasn’t been served with the complaint and our lawyers have yet to review it. We don’t normally discuss active litigation; however, we have a different view of what has been reported.”

Keith Levy, the vice president for marketing for Anheuser-Busch, said in a statement, “As our renewal with M.L.B. begins with the 2011 season, a timely resolution is important, and we hope to resolve this issue as quickly as possible.”

Anheuser-Busch is asking the court to declare the April agreement valid and enforceable, and to prohibit baseball from negotiating with another brewer.

The lawsuit does not involve Budweiser’s sponsorship of 26 major league teams.

Jim Andrews, the editorial director of IEG, a sponsorship consulting and valuation firm, said that Anheuser-Busch had paid baseball an annual sponsorship fee of about $10 million, while its fee to the N.F.L. for its Bud Light sponsorship starts at a reported $43 million a year and rises to $50 million in the sixth and final year.

In both cases, there are additional expenses like buying advertising on national broadcasts.

Andrews said that if baseball could find other suitors, one option could be MillerCoors, whose Coors Light brand was replaced as the N.F.L.’s official beer by Anheuser Busch’s Bud Light.

“You’re talking beer and baseball,” he said. “It’s such a natural category.”

He said he could remember only one case like the one between M.L.B. and Anheuser-Busch: In 2006, MasterCard sued FIFA for entering a deal to make Visa the credit-card sponsors of the 2010 and 2014 World Cups in violation of its contractual right to renew. A district court ruling that favored MasterCard was reversed by an appeals court; eventually, FIFA paid MasterCard a $90 million settlement.