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DOJ sues to block Anheuser-Busch's takeover of Grupo Modelo

The Department of Justice has filed a lawsuit to block Anheuser-Busch InBev's proposed purchase of the rest of the Mexican brewer Grupo Modelo it doesn't already own in a move that jeopardizes Constellation Brands' plans to fully acquire Crown Imports. 

Such a merger, the government contends, would substantially reduce competition in the U.S. beer market, resulting in higher prices and less selection.

Anheuser's Bud Light is the best-selling choice in the $80 billion a year beer market.  "Even a small increase in the price of beer could result in billions of dollars of harm to American consumers," the Justice Department said

With no apparent intent to commit a pun, the government said it seeks "to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate."

Constellation shares plummeted about 20 percent Thursday, triggering several trading halts, after news of the development broke. Crown Imports brings brands owned by Grupo Modelo into the United States. 

Anheuser-Busch InBev, the world's largest brewer, said it would contest the lawsuit, adding in a statement that it is "inconsistent with the law, the facts and the reality of the marketplace."

"We remain confident in our position, and we intend to vigorously contest the DOJ's action in federal court," the company said.

Grupo Modelo said it now doesn't expect the deal to go through in the first quarter. 

In a statement, Constellation Brands expressed disappointment with the Justice Department's decision. 

"The proposed transaction would further establish Crown Imports as a more independent and competitive entity and solidify is position as a major player in the U.S. beer industry," Constellation said, in a press release. 

CNBC and Reuters contributed to this report.