The Price of Cheap Beer

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By Alexander R. Cohen – America’s top beer-ocrat goes to the Senate today.

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 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.” He has taught constitutional government and bioethics at the City University of New York. Cohen earned his bachelor’s degree in journalism at American University, his law degree at the University of Pennsylvania, and his master’s in philosophy at CUNY; he then continued his study of philosophy at the University of Virginia before moving to Washington to focus on advancing human liberty. 





  1. OP: "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."

    That's highly flawed reasoning because it ignores the elephant in the room. A corporation is not "businesspeople." It is, in the words of the Supreme Court in the case of Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 636 (1819): "… an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it."

    Corporations are market artificialities created by government. They are not human beings, notwithstanding Mitt Romney's famous blooper stating otherwise. Your argument mistakenly assumes that government cannot regulate (or even define) its own legal fictions.

    — Paul E. Merrell, J.D.

  2. " 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." By the same logic, the government infringes on the rights of everyday citizens by prohibiting businesses from engaging in price fixing, fraud and embezzlement.

    "[Antitrust] 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." This misses an important point, which is "the people we want to buy from" should only be free from competition by superior product or business acumen–not anti-competitve acquisitions. Antitrust makes it the governments job to preserve choice through competition on the merits. This allows people can buy from the company that makes the best product instead of the company that wields its size to manage the market.

    "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." This is the choice that antitrust laws are designed to preserve, the opportunity to buy from somebody else. Businesses that buy their competitors don't have to offer consumers a better deal, because consumers will have nowhere else to turn.

    I can assure you that the Senate will consider our freedom when it makes sure that the antitrust agencies are doing their job in protecting consumers from businesses that seek to avoid competition on the merits.

  3. I don't think I've seen anybody claim businesses ought to be able to control the market by buying up their competitors for a long time.

    The law pretty-much gives businesses the right to get as big as they want, through their own talents. But not by buying up the competition.

  4. @ Paul E. Merrel- Please also note that in 1819 the Supremes granted corporations some rights they had not previously recognized or enjoyed.Corporate charters were deemed "inviolable"and not subject to arbitrary amendments or abolition by state governments.The Corporation as a whole was labeled an "artificial person" possessing both individuality and immortality.(also in Trustees of Dartmouth College v. Woodward 17 US 518 1819).and then by the end of 19th century with the Sherman Act modern corporate era had begun.mergers and holding companies,shareholders, a Free Market(we don't have one yet) government interference in business peoples'affairs should be kept to a minimum,including FTC and anti-trust agencies.

    • @ shaftalley: I can agree with most of what you say, i.e., all but your conclusion, as a description of the state of the law (without comment on the correctness of the decisions made by the Court). But we do not arrive at a free market before governments cease creation and recognition of government-created market artificialities such as corporations, patents, copyrights, etc. In my opinion, one cannot sensibly advocate for a free market economy whilst concurrently advocating for the rights of corporations because corporations would not exist in a free market economy.

      However, there is also the fact that state governments still retain the power to inflict "capital punishment" on corporations that exceed the scope and and purpose established in their charters.

      — Paul E. Merrell, J.D.

  5. @ PaulE. Merrel- anti-trust laws may actually protect certain politically favored competitors.I don't know eough about the parent company of Budweiser and Modelo in the above article to draw any conclusions,but it would'nt surprise me.And my feeling is ant attempt for the gov't. to intervene only ends up subsidizing ineffeciencies ,harming consumers,and creating oppurtunities for political exploitation.and to me that is what anti-trust actions are-political and not business.corporations can exist and thrive in a Free Market environment.They can crash when they face competition.corporations in aFreemarket will always face competitionfrom somewhere no matter how many rivals they acquire.some one,some company,somewhere will always startup to face the big bad corporations.there is an enormous gap between what the anti-trust laes state and what they actually can injure the public that it is supposed to protect.

  6. @ shaftalley: In my view, antitrust laws are a sadly necessary band-aid remedy for government's creation of corporations, which is the underlying cause of the economic ills of monopoly and conspiracies in restraint of trade.

    I notice that you envision the co-existence corporations and a free market. Do you not comprehend that corporations are market artificialities created by government? By definition there can be no free market if the government interferes with it by creating artificial beings whose owners have no liability for the acts and omissions of the corporation beyond the price they paid for their stock.

    Consider the BP oil disaster in the Gulf of Mexico. Do you think for a moment that BP's owners would have been so cavalier about the hazards of BP's long-running history of very serious safety violations if each of them were personally liable for the resulting damage, rather than the BP corporation?

    My point is that the liability-limiting aspect of corporate stock ownership results in reckless and harmful behavior. As someone who built his legal career suing major polluters on behalf of their victims, I can tell you to an absolute certainty that the corporate form of business ownership results in grievous human harm at a massive scale. The share owners' lack of accountability for the acts and omissions of the corporation results in a business entity that is devoid of the morality otherwise expected of human beings. A corporation behaves as its managers think they can get away with, not as the law and human morality requires. And because even the managers bear no personal liability, the result is reckless indifference to the rights of human beings and the widespread infliction of physical and economic harm. In any corporate structure, from top to bottom, no one is personally liable for that corporation's acts and omissions.

    All because of government intervention in the free market to enable such imaginary creatures to be legally recognized as real. Yet in my entire life, I have never met a corporation, never kissed one, never changed one's diaper, and I never will. They do not exist any more than the Tooth Fairy does.

    What I have encountered is a seeming unending stream of flesh and blood human beings who fervently believe that they have no personal responsibility for their personal acts and omissions as corporate owners, managers, staff, or agents.

    And if that is your definition of a "free market," you need to study economics. That is a market artificiality created by government, a government *interference* with the free market. It is simply preposterous to suggest the corporations and a free market can simultaneously exist. Like government created patent and copyright monopolies, corporations can not exist in a free market. By definition.

    Paul E. Merrell, J.D.

  7. @Paul E. Merrell-well councilor so you are fighting the good fight.and of course all corporations pay a ton of money for their own legal department.(and legal defense,etc.). Government policies also create alot of moral hazard.but corporations you say would not exist in a free market?then what would stop business men and women,entrepenuers,frompooling resources,capitaland dispersing liability thru private law? corporations might exist in a free market but they wouldn't be granted special priviledges by gov't. in theform of tax loopholes,subsidies,costly regulations and compliances,etc.and it would be alot riskier for them.are there any limits to liabilities in a free market? i wouldn't think so.corporations are the actions and reactions of humans?and shareholders do get punished when their stocks go down.and corporate officers do get terminated,dragged into court and even commit suicide(ENRON).

  8. @ shaftalley: There is no such thing as private law. Corporations do not exist in reality. Neither does a free market. A free market is the imaginary construct of economists. Please read the following pages if you would like to learn a bit about the topic you discuss. I am sorry, but I do not have the time to educate you.

    With that said, you may have the last word. I do not intend to respond further before you exhibit some actual knowledge of the topic of this discussion.

    Best regards,

    Paul E. Merrell, J.D.

  9. @ Paul E. Merrel=private law can be defined as a body of laws governing (no pun intended) private persons,their properties and relations with other private persons that do not directly concern the state.also: " That portion of the law that defines,regulates,enforces,and administers relationships among individuals,associations and CORPORATIONS…" (West's Encyclopedia of American Law,edition 2).Even Harvard Law School has a Project on the Foundations of Private Law at hHarvard's a research program and there are classes on thesubject.

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