Ohio beer wars shows crony capitalism

Doesn’t government have anything better to do with its time than try to regulate your beer? Apparently Ohio legislators have too much time on their hands.

Ohio Senate bill 48 was introduced Feb. 20 of this year and sent to the House on March 21. It received a single hearing by the House, which amended it, it was then approved by the House and Senate and sent to Ohio Governor John Kasich for signature. He signed the bill into law on April 23.

At first glance it appears to be fairly benign, setting up a two-tiered system for licensing which would allow smaller breweries to sell retail directly and bypass wholesale distributors. But digging deeper shows a completely different story. From Thurber’s Thoughts:

It does a number of others things, but one aspect generated some controversy: it prohibits large brewers from owning a distributor.

And that was a problem for many, but especially Anheuser-Busch InBev which has numerous options to purchase, or determine the purchaser, of distributorships throughout the state. So they objected to the terms of the bill – and the rapid process with which it was passed.

Now, the Ohio legislature is trying yet again to unnecessarily intervene in the free market and pick winners and losers in the marketplace.

Anheuser sent this letter to Ohio Speaker Batchelder :

“The buying and selling of distributorships is the natural movement and realignment of a vibrant, competitive marketplace. MillerCoors wants you to abandon a long-held principle that government has no business picking winners and losers in the private marketplace, and instead is asking you to put a heavy thumb on the scale in their favor to compensate for MillerCoors’ own business decisions.”

MillerCoors does not, as a part of its business strategy, purchase distributorships, yet it is asking the government to prohibit other competitors from doing so. From Anheuser’s letter comes more:

“MillerCoors has elected as a part of its business strategy not to purchase and own distributorships in Ohio despite being free to do so. Anheuser Busch has utilized a different strategy…now MillerCoors, presumably because its strategy isn’t working, asks you to change the rules.”

Specifically, MillerCoors wants the government to force Anheuser Busch to divest itself from distributors that it already owns. In a letter from Paul Lucas of MillerCoors to the Ohio Senate president Keith Faber:

“This further expansion represents a major threat to the health of MillerCoors in Ohio and could create a permanent, statutory competitive disadvantage for the company and its independent MillerCoors wholesale distributors.”

In reality, MillerCoors is asking for the Ohio legislature to side with them and intervene in the free marketplace; the government should not be picking sides or winners and losers. See Anheuser’s fears:

“MillerCoors’ adds insult to injury, knowing that if it gets you to side with its business, the two Anheuser Busch distributorships in question will be substantially devalued because the marketplace will know that Anheuser Busch is being forced by law to sell. This kind of intrusion into private business should not be the job of the government.”

So the bottom line is there are two separate issues here. The first one is the original bill, SB 48, which prohibits brewers from buying distributors. Anheuser Busch was against it, since they own distributorships. MillerCoors was for it, since they don’t own any and it’s not part of their business model.

The second issue is the one we’re dealing with now. Distributorships already owned by Anheuser Busch, including one in Canton (the one in question here) were grandfathered in under the bill, and Anheuser Busch is trying to buy more before the legislation takes effect.

MillerCoors is basically asking the government to force Anheuser Busch to sell the distributorships that they already own and prohibit them from buying more before the law takes effect, claiming an unfair competitive advantage.

The irony is that the only reason it’s an “unfair advantage” is because MillerCoors pushed for the law in the first place. They’re essentially using the Ohio legislature as their company’s legal arm, trying to change the rules.

Evidently legislators in Ohio are not in favor of a free market where beer companies are allowed to purchase distributorships if they so please.