Finally, Regulators Looking Closely at Big Beer

Regular readers may recall a fine feature article at Washington Monthly in 2012 by Tim Heffernan about the rapidly developing horizontal and vertical integration of the beer industry in the US and its unsettling implications for recreating the pre-Prohibition (and in the UK, contemporary) incentives for heavy drinking. Heffernan particularly pointed to the likelihood that horizontal integration through a rapid series of mergers among large brewing companies might make the even more dangerous vertical integration–acquisition by brewers of distribution and eventually retail outlets–the only avenue for increased profits.

Well, we’re a lot closer to that beer-soaked possibility, but the good news is that federal and state regulators are beginning to take the problem seriously, as Heffernan suggested. This is from a Reuters report by Diane Bartz:

The U.S. Justice Department is probing allegations that Anheuser-Busch InBev is seeking to curb competition in the beer market by buying distributors, making it harder for fast-growing craft brewers to get their products on store shelves, according to three people familiar with the matter.

In the past few months, the world’s largest brewer has rattled the craft beer world by striking deals for five distributors in three states. Many states require brewers to use distributors to sell their product, and once AB InBev buys a distributor, craft companies say they find that they can’t distribute their beer as easily, and sales growth stalls.

Antitrust regulators are also reviewing craft brewers’ claims that AB InBev pushes some independent distributors to carry only the company’s products and end their ties with the craft industry, two of the sources said, noting that the investigation was in its early stages. AB InBev’s purchase of several craft beermakers in recent years means that it is in a position to offer a greater variety of products itself.

State regulators in California, where AB InBev announced wholesaler purchases in Oakland and San Jose last month, are also looking into the matter, the people familiar with the matter said.

And as Heffernan warned, this sudden lurch towards vertical integration is in synch with another push for horizontal integration:

The Justice Department review comes at an awkward time for AB InBev as it seeks to buy No.2 SABMiller for more than $100 billion in what would be the biggest-ever merger of brewers.

Yeah, it might be time for a serious look at Big Beer, and another reading of Heffernan’s “Last Call.”

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.