DOJ Requires Brewery Expansion in InBev Antitrust Case

The U.S. Department of Justice has agreed to stop trying to prevent beer makers AB InBev and Grupo Modelo from merging.

The settlement is largely as described in my recent column : on the theory that an independently priced Corona limits the price of InBev products such as Bud Light, DOJ is requiring the merged companies to give up control of Corona in the U.S. market. As part of that arrangement, a brewery just south of the border will be sold to Corona’s new maker, Constellation.

But the settlement also includes one surprising requirement: Constellation must not only buy the brewery, it must expand it , in order to be able to meet the market demand DOJ expects will exist for Corona. Rather than relying on the market to drive any expansion of the brewery’s capacity—which would be in keeping with antitrust’s usual approach of decentralized planning —in this case, DOJ has used its power to interfere with mergers to dictate a specific increase in production capacity. Admittedly, the company that will have to increase capacity is a company that’s probably only able to buy the Corona business because of DOJ’s intervention: if Constellation’s regulatory windfall comes with an extra regulatory requirement, it’s hard to feel sorry for Constellation—especially considering that if the requirement were too costly, Constellation could have abandoned the “transformational” windfall and gone back about its own business. Nevertheless, for the government to dictate a plant’s production capacity is an act of central planning, strikingly inconsistent with the oft-repeated claim that antitrust law protects free enterprise .

Related Reading:

• Alexander R. Cohen, How Antitrust Competes against Freedom
• Alexander R. Cohen, The InBev Merger, the Price of Corona, and the Cost of Antitrust

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