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Eliminating Competition

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Many decades ago, GM eliminated competition by buying up patents and locking them away. Microsoft built a reputation of buying out competitors and closing them down.

But the modern way to eliminate competition appears to be using government. It’s much faster and easier – and probably much cheaper – to get a political body or politician to eliminate your competition that having to go through the whole buyout process.

For example, ThinkProgress Governor Scott Walker (R-WI)reports that quietly inserted into Wisconsin Governor Scott Walker’s lengthy budget bill was a little-noticed provision that could destroy – or severely impact their profitability – Wisconsin’s burgeoning craft breweries. The provision prohibits these small breweries from selling directly to restaurants and liquor stores as well as prohibiting them from selling their brews onsite. Walker provided no public hearing on the provision nor did he make public in advance his intent to add it to his budget bill. The provision slipped silently through the Wisconsin legislature because few even knew it was in the budget.

The new provision treats craft brewers — the 60 of whom make up just 5 percent of the beer market in Wisconsin — like corporate mega-brewers, forcing them to use a wholesale distributor to market their product. Under the provision, it would be illegal, for instance, for a small brewer located near a restaurant to walk next door to deliver a case of beer. They’ll have to hire a middle man to do it instead.

But more noteworthy than the provision itself is how it was enacted. The provision was quietly slipped in the massive budget legislation without any consultation from independent craft brewers, who are justifiably outraged by it. One group that clearly did have input, however, is one of the world’s largest beer makers — MillerCoors. […]

Joining MillerCoors in support of the provision are industry associations that have an interest in preserving the current business of beer distributors, including the industry’s lobby, the Wisconsin Beer Distribution Association. But craft brewers see the provision as “a power grab” by MillerCoors that is targeted at them . OpenMarket.org reports:

Craft brewers say that MillerCoors is pulling a fast-one on the states legislature by selling this as a bill that would protect small beer from the brewing behemoth [Anheuser-Busch] InBev’s plan to monopolize the Wisconsin wholesale market. Craft brewers say that this is clearly not InBev’s intent, as they have passed up opportunities to purchase wholesalers in the state no less than 16 times since 2008. They say the real competition that MillerCoors is trying to protect itself against is the growing craft beer market. The restrictions the measure places on any wholesaler wishing to start-up in Wisconsin seem to support the craft brewers’ claims.

So, why did Governor Walker sneak this provision into the budget, when he’s stated that small businesses are the backbone of the economy? Could it be that Miller Coors, a joint venture with foreign-owned SABMiller, donated $22,675 to his campaign?

I’m a big believer in a free market based economy, but I have a question for those who root for the current form of the free market. Is the free market really free when large political donations can be used to buy favorable legislation that essentially prevents market participation or excludes competition in the marketplace?

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Written by Valerie Curl

June 11, 2011 at 9:42 AM

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