Topline
With the Biden administration looking to fight consolidation in industries from meatpacking to shipping, a new report from the Treasury Department on Wednesday zeroed in on the $250 billion (annual) U.S. alcohol market, outlining a series of reforms to boost competition, combat “exclusionary behavior” by big companies and save consumers money.
The reforms would “level the playing field” for smaller businesses that tend to struggle against big … [+]
Key Facts
The Treasury Department today warned about excess consolidation in the U.S. beer, wine and spirits markets, which is dominated by two major conglomerates, Anheuser Busch InBev and Molson Coors, together accounting for 65% of U.S. beer revenues.
The detailed 63-page Treasury document, first reported by Reuters, comes as part of the Biden administration’s larger regulatory push to promote competitiveness across various U.S. industries.
Though the report commended the thousands of new breweries, wineries and distilleries that have emerged over the past decade, the Treasury Department details the “challenges to the growth of small businesses and new entrants into the marketplace.”
U.S. officials outlined a series of reforms—including stricter merger and acquisition scrutiny from the Department of Justice and Federal Trade Commission—to “better level the playing field” for small businesses and new market entrants, which tend to struggle against bigger companies with pricing power.
The Treasury Department also wants to implement different tax rates for producers and reform “outdated” state and federal regulations—some of which date back to the end of Prohibition in 1933—in order to allow new entrants to grow their business.
By fighting excess consolidation and implementing reforms which promote competition in the industry, that would also make the alcohol market cheaper for consumers, saving them up to hundreds of millions of dollars a year, according to the report.
Surprising Fact:
The top six biggest brewers in the United States (Anheuser-Busch InBev, Molson Coors, Constellation Brands, Mark Anthony Brands, Boston Beer Co. and Heineken USA) accounted for over 80% of overall industry market share in 2020, according to the National Beer Wholesalers Association.
Crucial Quote:
“American consumers, small business owners, entrepreneurs, and workers should not have to suffer under the thumb of a highly concentrated beer industry,” according to a statement from Assistant Attorney General Jonathan Kanter of the Department of Justice’s Antitrust Division. “Enforcement and regulatory authorities should have the courage to learn and the fortitude necessary to enforce the law and protect competition.”
What To Watch For:
The DOJ and FTC should take a closer look at mergers and acquisitions of smaller companies by bigger ones, according to the Treasury Department’s report. Officials pointed to the fact that past claims of lower prices for consumers after such deals often failed to materialize. While much of the local oversight will fall to U.S. states themselves, they should waste no time examining the anticompetitive impact of outdated regulations on smaller producers, Treasury officials said.
Further Reading:
Competition in the Markets for Beer, Wine, and Spirits (U.S. Treasury Department)
Source: https://www.forbes.com/sites/sergeiklebnikov/2022/02/09/alcohol-industry-needs-serious-reform-to-boost-competition-lower-prices-treasury-report/