A Beer Monopoly? The Horror!

No, not an actual board game (that’s Brew-opoly). In this case, it’s brewing behemoth Anheuser-Busch InBev, which owns pretty much every beer brand you’re likely to encounter in a faux upscale hotel bar. (You thought Stella Artois was classy? You dope.) According to Adam Davidson in the New York Times, the Justice Department is casting a keen eye thataway.

In January, the department sued AB InBev to prevent it from buying the rest of Mexico’s Grupo Modelo, a company in which it already carries a 50 percent stake. The case is not built on any leaked documents about some secret plan to abuse market power and raise prices. Instead, it’s based on the work of Justice Department economists who, using game theory and complex forecasting models, are able to predict what an even bigger AB InBev will do. Their analysis suggests that the firm, regardless of who is running it, will inevitably break the law.

For decades, they argue, Anheuser-Busch has been employing what game theorists call a “trigger strategy,” something like the beer equivalent of the Mutually Assured Destruction Doctrine. Anheuser-Busch signals to its competitors that if they lower their prices, it will start a vicious retail war. In 1988, Miller and Coors lowered prices on their flagship beers, which led Anheuser-Busch to slash the price of Bud and its other brands in key markets. At the time, August Busch III told Fortune, “We don’t want to start a blood bath, but whatever the competition wants to do, we’ll do.” Miller and Coors promptly abandoned their price cutting.

This is legal, but it doesn’t work if there’s, say, a certain brand of Mexican beer that doesn’t want to play along. So the Justice Department thinks that AB InBev wants Grupo Modelo not because it thinks Corona is a damn fine beer that helps support the lime-wedge industry, but rather to gouge the crap beer consumer.

[O]wning Corona would allow AB InBev to raise prices across all of its brands. And if the company could raise prices by, say, 3 percent, it would earn around $1 billion more in profit every year.

The whole article is worth a read, if only because pretending that I understand economics makes me feel like a brilliant investor while I sip my cognac and light cigars with $100 bills. [Dramatically lights a Swisher Sweet. OH DAMMIT THAT WAS A REAL DOLLAR I NEED THAT FOR RAMEN]