The Price of Cheap Beer

The Price of Cheap Beer
April 15, 2013

America's top beer-ocrat goes to the Senate tomorrow.

Bill Baer, the head of the Department of Justice's Antitrust Division, is forcing Budweiser's corporate owner AB InBev to give up a big piece of the value of its purchase of the half of Corona brewer Grupo Modelo it didn't already own. Today, Baer will join FTC chair Edith Ramirez in testifying before the antitrust subcommittee. The two agencies share the power to review corporate mergers before they're completed.

The Modelo merger offered InBev two big prizes. One, it's still getting: Modelo's Mexican business, which includes a network that can be used to sell InBev's existing brands. The other was Corona's thriving American business. But in order to get Baer's Antitrust Division to stop trying to block the merger, InBev had to commit to selling off the right to sell Corona in the United States, along with a plant just south of the border where Corona is brewed. That, at least, is the "agreement in principle" InBev says it has reached with the government.

The Justice Department argued that Corona was doing a lot to keep beer prices down. InBev owns many brands and sells nearly half the beer in America, and its price increases were typically followed by its leading competitor. But Modelo wasn't following, and the government said the price competition from Corona was an important reason InBev couldn't raise its prices even more. If InBev owned Corona, that limiting factor would be gone.

If that makes you glad InBev will still face Corona's competition, I can appreciate where you're coming from: I like a good beer myself from time to time, and like most people I prefer lower prices to higher ones.

Still, I want to ask you a question: Is InBev in business for your (and my) convenience? Are we morally entitled to have the men and women who run InBev, work for it, and invest in it structure their business plans for our benefit instead of theirs?  Or do they have the right to pursue their own happiness?

This is the price of antitrust law. It's based on the principle that the government should organize the market so as to promote the goals it has chosen-and,  where no more specific law applies, the goal the government has chosen is consumer welfare. That is, antitrust embodies the principle that the men and women of InBev-and of Google, and of Microsoft, and of every other business-must forgo their own opportunities in order to serve us, their customers, because the federal government said so and the federal government runs the economy.

In one respect, of course, businesses do serve their customers: If we don't think their products and services are worth the price, we don't buy them, and the businesses either offer us a better deal or go out of business. But antitrust goes beyond that. It makes it the government's job to interfere in business arrangements so as to get consumers a better deal than the people we want to buy from would freely offer us.

Antitrust thus combines the moral code of a command economy-a system where the government orchestrates the production and distribution of goods according to its notion of the public interest-with at least some capitalist economics. The government doesn't pretend to know how much Corona or Budweiser beer should be brewed, but it does claim the right to shape the beer industry in the ways it thinks will be best for the consumer. Businesspeople have no right to produce and trade, except to serve the consumer.

But if businesspeople don't have the right to buy and sell beer and breweries-or anything else they produce-according to their own judgment of what's best for them, then you and I don't have the right to buy and sell things according to our own judgment of what's best for us. Either individuals have the right to buy and sell in the pursuit of their own happiness, or the government has the right to organize the market in pursuit of whatever goals it chooses. In the InBev case, the latter principle might get us cheaper beer. But the Senate should consider the cost to our freedom.

Alexander R. Cohen (acohen@atlassociety.org) is managing editor of the Business Rights Center and associate scholar at The Atlas Society. He writes and lectures on moral and political issues, and he recently edited "Myths about Ayn Rand."