Free Beer!

You know what is a somewhat unsettling use of market power in an anti-competitive fashion?  Cable companies moving to a metered billing system with arbitrarily low data caps, exorbitant pricing, and discriminatory network use.  It’s clearly an anti-competitive measure aimed at, well, basically everything using broadband.  And consumers’ power to switch is usually extremely limited if it exists at all.  The Justice department should look into this anti-competitive abuse of an important public utility, and consider a move to treating internet as just that: an important public utility.

You know what is a perfectly fine use of market power in an anti-competitive fashion? Consolidation in the beer market. Apparently Justice is very concerned about the prospect of AB InBev buying Grupo Modelo, which produces Corona.  While in general undue consolidation is a bad thing, and AB InBev is destroying America’s beers and so on, etcetera, beer seems like the perfect market in which there just isn’t that much to fear from consolidation as such.

The reason is simple – beer is pretty easy to produce, on a pretty small scale, at a higher level of quality and lower level of price than AB InBev.  Today, craft beer is priced higher than Bud Light, because that’s what the market can support.  But both are priced way above the marginal price of production – part of that goes to the distributors and retailers, and part of it is imposed by regulatory burdens like taxes.  But the industry value tiers aren’t set in stone – should AB InBev attempt to use market power to raise beer prices, small brewers can beat them on price.  Given that beer is a non-essential good, tastes vary widely and people judge on widely-varying criteria of quality, price, and taste, simple consolidation is exactly the sort of thing that markets should be able to take care of – absent actual abusive anti-competitive behavior.

There’s never been a better time to be a beer-drinker, and AB InBev isn’t really threatening that.  Though if Justice is going to spend its time worrying over anti-competitive and cartelized behavior in the alcohol market, maybe they should look into…everything else about it?

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