Cheap beer. It is the lifeblood of the American college student. Without it, you would all whither away. Or be more prepared for class.
Well, the Department of Justice has your back. The Antitrust Division has sued the maker of Budweiser to block its acquisition of the Mexican company that sells Corona. The DoJ argues that if the merger were to occur, the company would control too much of the American market, thus giving it the ability to drive up prices. The merger would mean the end of cheap beer.
If combined, the company would control 46% of the beer market in the United States. Although they argue there are plenty of other beer brands on the shelf, the reality is that most are owned by just a few companies.
The lawsuit is one of many recent aggressive moves by regulators here and in Europe to enforce antitrust laws. The Department of Justice blocked AT&T’s purchase of T-Mobile in 2011. In Europe, UPS abandoned its plan to buy another delivery company after regulators there expressed concerns.
Should Anheuser-Busch and Modelo be able to combine if they want to? Is this too much government regulation? Or is the government just protecting our right to drink cheap beer?
5 Comments
Andie Firestone posted on February 9, 2013 at 4:15 pm
I think that the government should not have the right to regulate businesses at such a high degree. I think they should have the the right to intervene if the company begins to control over 50% of the industry. This is because although monopolies have some advantages, such a high control would hinder the ability for people with less money (like college students) to be able to purchase affordable products. It would also be bad for all of the smaller competitors because they would no longer be able to be successful. Overall, if the combination of companies gets too out of hand, I think the government should have the right to intervene, but in the meantime, they should let normal business activities occur.
Sara Naouai posted on February 14, 2013 at 10:35 am
I agree with the DoJ here. In some areas of business I think the government over-regulates, but mergers of large corporations such as this really harm American consumers. The industry is continuously consolidating with Anheuser-Busch and MIllerCoors buying out smaller competitors globally, I think that craft breweries are really good for local economies and would not be able to thrive is these two organizations control the industry even further. This makes me think of the America Airlines/US Airways merger which is likely to be approved since the companies are in bankruptcy, but its already clear that the merge of the two airlines will raise fairs at the expense of consumers.
Pooja posted on February 16, 2013 at 1:22 pm
I think the merger is obviously not in the favor to consumers because the company will have way too much control over prices. They’ll have a lot of control in the beer market, but I don’t think they’re going to lose a lot of customers. Granted, they may lose some college students, but college students aren’t the only people who buy their products. Young adults, older couples, and families will probably still buy their beer. Plus, I don’t think companies would partake is such a major merger if they think they’re going to lose sales.
Yujing Cai posted on February 20, 2013 at 7:06 pm
I think the government will be controlling too much if is bans this merger. As a believer of free market, I believe that no matter this merger occurs or not, costumers can be fine. This company will not easily raise the price of the beer, or the costumers will just buy beer from other companies. Even if all companies raise their prices, people can choose other cheap alcohol to drink, or just give up drinking and live more healthily.
Also, beer is different from the case of AT&T’s merger, as communication is a much more important aspect of people’s lives quality. Therefore, I really don’t see the point of stopping this merger.
Shree C. posted on February 26, 2013 at 7:35 am
Antitrust laws were made to keep huge corporations from controlling the whole market, so it seems the DoJ’s actions are completely legitimate in this case. The only thing that strikes me as odd is the huge 50% stake Anheuser-Busch already has in Modelo. It seems the threshold between regular market activities and the point in which monopolization occurs is not well defined (but this is definitely something I need to do more research on); a 50% stake seems like attempted monopolization. While I understand Mr. Cai’s point above, I think the notion of them raising their prices isn’t as likely as them lowering their prices to keep and draw their customer base in. And as such, if merged, they’d more easily be able to control the prices of their already popular brands and perhaps take over the market of cheap beer (good-bye PBR and Dos Equis). And lastly, I just don’t want Clydesdales in Mexico. By combining the two, you’re potentially combing two a different organizational cultures that stand to gain more from their differences than similarities.
On a semi-related note, if research continues, these companies may get additional regulation put on them since they’re so seemingly youth friendly: http://www.bu.edu/today/2013/new-study-reveals-alcohol-brands-underage-drinkers-prefer/. There’s always so much going on in the world of cheap beer.