German Brewers Fined $146 Million for Price Fixing

germanyAs much as we here like to think of craft beer as an artful pursuit of delicious, high quality beer it is at best equal parts a labor of love as it is a business.  In many ways, for many breweries it is big business that deals with big money.  Breweries like the Boston Beer Company or Sierra Nevada make a staggering large quantity of beer that they sell for an even more incomprehensible amount of money.

It is too easy to be lulled into the illusion that every craft brewery is staffed with people more interested in the beer than profits, people who view market competition as a friendly rivalry amongst friends, people who are willing to play fair, settle disagreements amicably and easily, and just focus on what they do best, the beer.  Yet time and time again we have written post after post on the fact that craft brewers can be petty, vindictive, and profit hungry bastards like most any other business.  After all when you are victim to market forces and shifts in tastes or competition can mean your livelihood it makes sense that you might rail against the “invisible hand” with dirty tactics rather than admit defeat or waver in your commitment to your beer, your way.

It should come as no surprise then that brewers, especially on a larger scale can be just as corrupt as any other major business.  If the financial industry can fix inflation rates to maximize profits it should come as no surprise that breweries might attempt the same thing.

Reuters reported yesterday that German antitrust regulators have fined five brewers a total of $146 million for colluding on price increases.  This is the initial consequence of an antitrust probe where more fines may be leveed in weeks to come.  The settlement agreement was between Bitburger, Krombacher, Veltins, Warsteiner, and Privat-Brauerei Ernst Barre GmbH.  It should come as no surprise that the German unit of Anheuser-Busch InBev was also participated in the price fixing but were not fined due to aiding investigators.

The probe looked at price increases in German beer between 2006 and 2008 which saw a suspicious increase in market pricing for the fined breweries.

Cartel Office President Andreas Mundt said, “Our investigation produced evidence of collusion between breweries, which were for the most part based on personal contacts and phone calls.”  Thus showing that the small world of large brewing can lead to the temptation of just such monopolistic practices that antitrust regulators are supposed to prevent.

Several more major brewing groups and breweries in Germany are still under investigation so this scandal may continue to play out for quite a while.

It is important to remember that Germany produces more beer for the European markets than any other country.  Thus German brewers potential made a quiet killing as a result of this cooperative price increase.

In the end I suppose it shouldn’t come as a surprise that large brewing concerns might turn to illegal business practice to secure a higher profit margin than just selling their beer to eager consumers.  In an industry trend of people shying away from large-scale breweries in favor of smaller craft breweries the pressure of decreased sales might motivate one to look for extra-legal ways of insuring a profit.

I want to believe that this sort of shady dealings would only be done by major brewers.  I want to believe that even “larger” craft breweries in America like Sierra Nevada would never dream of making a quick buck in this way.  Though their markets are growing while mass market breweries are losing market share.  If Stone, Sierra Nevada, Dogfish Head, or the Boston Beer company were to feel the pain of a shrinking craft beer market would they turn to extra-legal means to stay profitable?  I want to say absolutely not but history would argue that some might.

We will have to see if craft brewers are saints or sinners.  My feeling is a strong mix of both.