Fear not, dear consumer of colored water in blue cans, your tax dollars are at work.
The press release manages to divide the industry into for segments, from “sub premium” (i.e. Busch and Keystone) to “high end” which is described as including Corona, Heineken, “and a variety of craft beers.” This brief mention, as just a fraction of a segment of the industry, is the only mention of craft beers in the press release. Justice’s formal complaint mentions craft beers three times, each time more or less as an aside — they missed the real market action.The legal standard for defining a market is "reasonable interchangeability" among products. The working definition I used came from industrial economist Joseph Bain: an industry is those sellers of close-substitute outputs who serve a common group of buyers. At one time, if either the Antitrust Division or the Federal Trade Commission wanted to challenge a merger, their analysts (full employment for Ph.D. economists, forsooth, you can make a good living by means other than riding the tenure track teaching principles to disengaged pre-business majors at Barely Normal) would come up with a hypothetical market within which a dominant firm would be able to make a price increase stick. Now, perhaps, if there are only a few producers of colored water in blue cans, and you can make dumb guys swallow that price increase, that part of beer brewing (which is to say, flavored water on an industrial scale) might be sufficiently concentrated that a merger among industrial scale brewers would lessen competition. That is, unless the supposed common group of buyers found substitutes that were outside the hypothetical relevant market.
In the resulting agreement, the United States federal government sought to promote competition in the beer industry by, among other things, extracting a promise from the company acquiring a few AB-InBev assets that it would expand the capacity of a brewery in Mexico to at least 20 million hectoliters of packaged beer annually.
For this heroic antitrust effort beer consumers in the United States offer a heart-felt yawn. How many of our tax dollars when into deciding whether the Mexican brewery needed a capacity of 20 million hectoliters, rather than 15 million or 23.5 million?
It's more likely, Michael Giberson notes, that the government createth monopoly, and then, dilly-dilly, saith it doth consumers a favor when it preventeth monopoly.
I keep wondering how great the market power can be in a world without barriers to entry? No real secrets in how to brew beer. I suspect the biggest threats to competition emerge because alcohol distribution is highly regulated in the United States — not because one brewery in Mexico has a smaller than desired production capacity — but I suspect the Department of Justice will not be challenging the post-prohibition three-tier system anytime soon.There are no great secrets in brewing beer, although most of the regional and craft brewers have this tendency to proliferate ever more exotic variants of headache in a glass adulterated with ingredients that no proper Braumeister would even consider. But then, I'm an inframarginal consumer, and barkeeps seem to have found a formula that works with three kinds of light beer and a headache in a glass on tap.
Reason's Baylen Linnekin had no objection to the two largest surviving domestic brewers merge, even though that would mean one company providing those three light beers (Bud, Coors, Miller.) Antitrust approval would require the combined company to spin off the Miller and Coors assets. But -- how many times, back when I taught the survey of public policy class, how often did I invoke "legacy of the Great Depression" -- there's still a government beer distribution cartel, and sometimes controlling the distribution is more profitable than controlling the production.
Beer distribution in America is a process that is needlessly archaic and complicated, thanks almost exclusively to the country's so-called three-tier system, a set of lousy post-Prohibition state laws that limit competition. Generally speaking, the three-tier system in place in most states prohibits many direct beer sales from a brewer to a consumer. Instead, the system requires beer first be sold by a brewer to a distributor or retailer before either of the latter can then sell to a consumer. If mandating this approach sounds like a bad idea, that's because it is.One unintended consequence of that law well might have been the emergence of the microbreweries and craft brewers, as an insubstantial amount of commerce is foreclosed in that way. Mr Linnekin notes that the major brewers are entering into partnership agreements with beer distributors, which does give the new labels being acquired by the holding companies access to the entire country, although the start-ups might be foreclosed accordingly. Somewhere there's a Terminal Railroad case for an ambitious litigator. (Come fall, will any capstone course students be further investigating the vertical integration or the legal constraints on brewpubs?)
What's funny about the proposed merger of Miller and Budweiser is that it might be what failing firms do. Reason's Peter Suderman explains.
Anheuser-Busch wants to buy SABMiller because big beer brands are struggling to compete and bring in new, young customers in wonderfully diverse, incredibly competitive market for beer, and figure the only way to hold their ground is to join forces.Apparently, the set of close-substitute outputs is broader than simply types of beer, enough so that the trade association can't get together on a "got beer?" kind of promotion. "Beer sales volume was flat in the year-to-date period ending June 2, while spirits sales grew nearly 5 percent, according to IRI figures recently reported by Evercore ISI, an investment advisory firm." Perhaps that's why Budweiser switched from making fun of wine snobs to attempting to cater to foodies. Until Miller asked for help from King Gambrinus, or perhaps it was a Wisconsin judge. "A Wisconsin judge on Friday ordered Anheuser-Busch to stop suggesting in advertising that MillerCoors' light beers contain corn syrup, wading into a fight between two beer giants that are losing market share to small independent brewers." Apparently there are some tipplers willing to consider wine or spirits, as well.
The Big Two may perform better together, but I suspect that the post-merger landscape would look a lot like the current one, with corporate beer continuing to sell a lot of volume while microbrewers that make a product that actually tastes good continue to eat into their sales. A corporate merger isn't going to make Bud Light taste any better. Either way, there's no reason for regulators to get involved in a market as obviously competitive and innovative (and tasty) as this one.
Now, about that strange man: "If a bunch of inframarginal consumers really like products X and Y but not similar-but-slightly-different-and-cheaper product Z, a merger between X and Y would enable the combined firm to gouge the inframarginal consumers, regardless of the effect on the marginal folks." Apparently, the brewers of Blue Can X and Blue Can Y have fewer inframarginal consumers and more marginal consumers willing to switch to headache in a glass or a proper Dunkel or even, horrible dictu, a chardonnay!