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Brew Busters
What to make of the government’s antitrust suit against Anheuser-Busch?


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Daniel Foster

Nothing interrupts the verisimilitude of a movie like that inevitable scene in the second act when our down-and-out hero, pondering the challenges he has to overcome in the next 45 minutes, pulls up a stool at a dive and asks the bartender for “a beer.” I’ll admit, I sometimes order “bourbon, cheap,” and about half the time that works without having to answer a follow-up question. I’ve been told that there are parts of Pennsylvania where you can order “a lager” and be confident that you’ll receive a crisp, corn-sweetened Yuengling in return. But I’ve never once been able to ask for “a beer,” anywhere in the world, without facing annoyed, blank, or annoyed blank stares in return.

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In a way, the Justice Department’s case against Anheuser-Busch InBev’s proposed acquisition of the Modelo Group — a Mexican-based brewer of beers of the same name, along with other brands such as Corona — is that it makes our matinee hero’s “beer” order more plausible. DOJ is casting global conglomerate InBev, makers of the stuff your dad drinks, as the big bully, trying to take out a niche competitor and consolidate its stranglehold on the adult beverage market — and its prices. The key is that Modelo brands are priced in a sweet spot between the Budweisers of the world and the Sam Adamses — cheaper than craft brews but of higher quality than the ricey pilsners that dominate down-market. The government intends to use internal corporate documents to show that fear that consumers would “trade up” to Modelo products has kept InBev’s prices down, and motivated it to acquire Modelo in order to free its hand.

Whether the acquisition would be uncompetitive turns on a number of overlapping empirical questions and judgment calls. The government will argue that InBev and its No. 1 competitor, MillerCoors, who together control about 65 percent of U.S. market share, shadow each other like Coke and Pepsi when it comes to pricing, while Modelo acts independently, meaning it could eat up market share if the two behemoths get out of line. The validity of that argument depends in part on whether courts will consider Modelo and InBev to be in the same “market” at all. As law professor D. Daniel Sokol told the Wall Street Journal, in antitrust cases “Defining the market is 90% of the game. . . . If you win that battle, the rest is easy.”

So what is the relevant market here? Is it defined narrowly to include just beer? Domestic beer? Watery, tasteless, straw-colored beer? Or should it be interpreted widely to include all alcoholic beverages? The answer to those questions could help determine whether the deal would result in a company with the kind of arbitrary and capricious power over the market that would run it afoul of a century of antitrust laws.

That’s just one problem with antitrust laws. But they are awkward for some free-market conservatives for other reasons as well. On the one hand, monopolies are bad for consumers in theory, and almost always in fact. On the other, enduring monopolies don’t really exist in free markets unless there are onerous burdens to entry from would-be competitors, and to the extent that such burdens exist, they are usually regulatory burdens. So supporters of free and fair markets are prima facie wary that government is the best solution to problems likely caused by government.

But even if one were to yield that there are still trusts that need busting, the paradigmatic monopolies — the ones that prompted the growth of antitrust law in the first instance — were the railroads. Their unique history and status as a government-subsidized public utility made them uniquely capable of distorting markets, and made it nearly impossible for newcomers to compete. It’s highly unclear that one beer maker, no matter its market share, could ever wield the same power. It isn’t, for instance, as if Anheuser-Busch InBev has a government-protected lease on every tap in the country.

Indeed, the kind of beer Anheuser-Busch InBev has spent decades selling is in decline: the volume of mass-produced beer has fallen every year since the last recession started. This has mirrored the plight of the working-class folks who make up a big part of InBev’s market. As Derek Thompson puts it in The Atlantic, “As Joe Sixpack goes, so go sixpacks.” By contrast, Thompson points out that sales of higher-alcohol beers and microbrews have been growing over the same interval, leading a worried InBev to respond by releasing the higher-alcohol Bud Light Platinum last year and the heavier Black Crown this year. This trend cuts into not only InBev’s and MillerCoors’s potential profits, but also those of big “upmarket” brands like Heineken, and even Modelo itself.

This is hardly what a market one step from monopoly looks like. Indeed, the strongest evidence that the Modelo acquisition wouldn’t make the beer market less competitive is that there has already been a massive amount of consolidation in the beer market, and it hasn’t become less competitive. Even as the big four have snatched up smaller brewers and created portfolios of dozens and dozens of niche brands, independent brewers still control about a quarter of the market, and the share controlled by the smallest, regional craft breweries is growing. This is something most Americans could tell you just by walking down the beer aisle in their local supermarket.

Market forces themselves appear to be doing just fine in keeping consumer choice up and prices competitive. There must thus be better ways to use Justice Department resources than suing Bud. Maybe Eric Holder and I could sit down and discuss a few possibilities over a couple of microbrews.

What do you mean which one? 

— Daniel Foster is news editor of National Review Online.



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