In Letter to the Treasury, the Brewers Association Highlights Competitive Challenges Facing Small Brewers

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Today, the Brewers Association filed its second set of comments with the Department of the Treasury in response to the President’s July 2021 Executive Order on Promoting Competition in the American Economy. The Brewers Association also filed a letter signed by 48 guilds representing 46 states and the District of Columbia in support of the Brewers Association’s two submissions.

The President’s Executive Order seeks to reinvigorate healthy market competition in an economy increasingly dominated by multinationals and companies shielded from competition by exclusionary practices and protectionist laws. The Executive Order contains two specific provisions related to the alcohol beverage industry, and the Brewers Association wants to make sure that small and independent brewers] voices are heard by the federal agencies examining competition in the beer market. Our comments aim to elicit more stringent antitrust enforcement by federal competition authorities, enlist federal help in shining a spotlight on unfair and protectionist state laws, and secure more rigorous and effective enforcement of federal trade practice laws.

The Brewers Association’s latest comments highlight the competitive challenges facing small brewers:

  • In spite of large numbers of small brewers, brewing remains a highly concentrated industry.
  • Wholesaler consolidation has resulted in a situation where most markets are effectively duopolies, with only two wholesalers capable of meaningfully serving a single geographic territory. What’s more, today wholesaler consolidation into new territories is giving expanding large wholesalers unprecedented leverage over small suppliers and retailers, and if left unchecked will eventually give a few companies virtually total control of beer distribution.
  • State laws, including unfair franchise laws, bans or restrictions on small brewer self-distribution, restrictions on direct-to-consumer options, and mandatory exclusive territory requirements, foreclose many competitive market responses to wholesaler consolidation.
  • The competitive constraints outlined above make big beer supplier acquisitions of even small brands more competitively relevant because the distribution choke point allows big suppliers to starve competing brands of wholesaler attention.

In its earlier comments to Treasury, filed on August 18, 2021, the Brewers Association urged the Alcohol and Tobacco Tax and Trade Bureau (TTB) to:

  • Ramp-up trade practice enforcement by increasing the settlement amounts or other penalties imposed on large companies found violating federal tied-house and other trade practice laws.
  • Focus enforcement activity on competitively relevant conduct such as exclusionary deals with sports stadiums and other large venues, the abuse of category management practices by “category captains,” and quid pro quo demands by retailers for coupon programs in exchange for shelf space.
  • Work with the Federal Trade Commission to create an effective federal remedy against retailers found violating federal trade practice laws.

Our comments also renewed our longstanding call for TTB to streamline and modernize its regulations, as the current complexity and lack of clarity favors big companies who can afford expensive legal and compliance advice.

The Executive Order calls on the Department of the Treasury to publish a report no later than November 3, 2021, and to consider regulatory changes no later than March 3, 2022. The Brewers Association will monitor developments carefully and keep our members informed of new developments.