Homer Simpson just growled. Instead of tackling record gas prices and skyrocketing inflation, the White House wants to bring its best-known government approach to the beer market, even as the beer and beer markets other spirits are exploding with competition and new competitors. Let’s hope policy makers dismiss these ideas faster than Homer spits out a piece of broccoli.
As part of its goal to remake the economy, the Biden administration issued a Executive Decree which requires agencies to examine the competitive landscape in many markets, including the alcohol market. The order is based on the premise that “over the past few decades, as industries have consolidated, competition has weakened in too many markets.”
In response, and not surprisingly given the White House directive, the Treasury Department concluded that consolidation had increased “particularly at the distribution and/or retail level for beer, wine and spirits and at the production level for beer”. That of the Department report recommends tighter antitrust scrutiny, skepticism of efficacy claims, and a variety of potential regulations.
Unfortunately, forced to comply with the White House, the report is the kind of essay Bart Simpson might turn in for homework, filled with faulty assumptions and misleading data.
In fact, competition and innovation thrive in the beer, wine and spirits industries. Today, the beer industry has five times more microbreweries and brewpubs/taprooms like ten years ago. Indeed, the beer industry supports more than 2 million jobs in the United States across a number of industries, including more than 200,000 people working in breweries and distributors. The last ten years have also seen the number of cellars increase by more than 50% and the number of craft distilleries jump exponentially.
Additionally, and contrary to White House belief, levels of industry concentration among the four largest players within the respective liquor categories have declined significantly over the past two decades.
Source: US Industrial Concentration: 2002-2017
Microbrewers and craft distillers have been very disruptive competitive forces. Even local winegrowers have played a role in the trend towards deconcentration in these sectors, as consumers have favored a diversity of offers on the market.
But it’s not just economists and business groups – even unions agree that these markets are competitive. According to the Teamsters, “Despite being one of the most regulated industries in the United States, the past decade has seen a significant growth of new beer makers, providing consumers with more choice than ever before. ….The beer industry is extremely competitive.
Will the White House allow consumers to continue to pick winners and losers in the marketplace?
Tim Wu, the White House special assistant to the president for technology and competition policy, questioned the continued usefulness of mass production in alcohol and other markets. In extolling the virtues of craft beer, Wu noted that small breweries represent “a throwback to American tradition before mass production” and that “these are things we want the rest of the world to do.” economy looks like”.
As Homer might say, “Can you repeat that?” Does Mr. Wu question the value of large-scale production for consumers and for the economy? Does it offer homemade cars and custom planes? There is no doubt that consumers benefit from a variety of choices and price points, but consumers also benefit from the kinds of low prices and national consistency that come from large-scale production.
In the same series of comments, Mr. Wu then appeared to excuse certain violations of federal law in order to target certain companies:
“We don’t want our federal law enforcement” to tackle “small technical violations,” he said. significant anti-competitive effects. Particularly good stadium deals, he suggested… But along the way, he suggested small-scale pay-per-play – like a craft brewer buying a handful of tap at the local bar – wouldn’t trigger the app of the law.
What the hell is the White House talking about? Is he ordering federal law enforcement to help his favorite companies by turning a blind eye to obvious violations of the law? Considered in the most charitable way, one might agree that regulators should use their limited resources to tackle the most serious violations of the law, but it is truly bizarre that a senior White House official would suggest that certain violations of the law should not be enforced. The law should apply to all players, regardless of size.
Instead of taking inspiration from the White House, policymakers should promote competition by reducing regulatory costs. Putting aside the rhetoric of overconcentration, the Treasury Department report highlighted several potential barriers to competition, including overly onerous labeling requirements and some state regulations, such as post-and-hold laws. Although trying is the first step to failure (to quote Homer), by addressing these real issues, policymakers could help consumers and competitors of all sizes.
About the authors
Senior Vice President, International Regulatory Affairs and Antitrust, U.S. Chamber of Commerce
Sean Heather is senior vice president of international regulatory and antitrust affairs.