Last week the U.S. Justice Department filed a suit against A-B InBev in response to their move to purchase the 50% of Grupo Modelo that they do not already own. The suit is filed under the U.S. Antitrust Laws claiming that the merger would negatively impact the free market. Among other things, the Justice Department stated that they are concerned that the merger will result in a reduction in competition, higher prices, and compromise the company’s incentive to innovate.
These allegations will give everyone cause to think. Well, all but the justice department’s allegation about InBev’s incentive to innovate, which has been a problem for a while. I’m sure everyone remembers the big crown tab launch…
The rest of the concerns seem a little ill founded.
Sure, if the merger went through, A-B InBev would acquire a larger share of the Macro Beer Market which would put them in a better leveraging position for price. However, competition in the beer market is better today than it was before Prohibition; back when almost every town had a local brewery. There is a counter balance to the large beer market and it is from small breweries all across the country. A beer powerhouse like A-B InBev could never acquire the entire craft beer market because in doing so they would end up destroying whatever they grabbed. It would fall through their hands like trying to pick up a sand castle. This counter balance is always going to play a role in the pricing game and always provide competition.
Doesn’t the position the government is in seem a bit odd? They are trying to control a beer giant that they helped create by over regulation of the beer market. This same beer giant that has control over a large portion of the distribution channels that most state laws still require the smaller beer brewers to use. And, at the same time, the government hinders the growth of a natural counter balance to the market through special excess taxes. All in the name of “Free Trade”?!!
Get off it,
Eventide
