Beer industry under investigation for anti-competitive behaviour

The competition watchdog has launched an inquiry into Australia’s beer industry, focusing on whether or not anti-competitive practices are taking place, as smaller breweries struggle to compete.

The Australian Competition and Consumer Commission has sent a letter to major beer businesses and craft breweries asking about the practices occurring in the market.

The letter was obtained by Fairfax and explained the ACCC was interested in “understanding how certain conduct may be affecting competition”.

Beer companies were asked to identify whether they had “an exclusive distribution arrangement with any customers for the supply of draught beer”, whether the “price paid by venues allow your business to earn a competitive margin” and to identify if an offer to supply beer to a venue had been declined.

In a statement the competition watchdog told SmartCompany it is making market enquiries to “better understand aspects of the supply conditions within the wholesale beer market(s)”.

“These enquiries are not being conducted due to the ACCC being notified of a merger in the market(s),” the ACCC says.

“The ACCC does not have further comment on these enquiries as they are underway.”

The biggest players in the Australian beer market are Japanese-owned Lion and SABMiller, while Coles and Woolworths control more than 60% of the packaged liquor retailers including Dan Murphys, First Choice and BWS.

Tasmania craft beer brewery Moo Brew told SmartCompany it received the letter from the ACCC.

“It’s a really competitive market at the moment due to a number of factors. There is a serious craft beer movement, but there are also lots of bigger breweries with lots of diversification and they have a greater ability to reach all corners of the market,” Moo Brew head brewer David MacGill says.

“It makes it difficult for smaller brewers in the craft sector to compete on price with the bigger brewers. This is a common theme amongst smaller brewers.”

MacGill says it can be difficult to determine what constitutes anti-competitive behaviour, but he suspects it’s occurring in the sector.

“It’s being tested now and I’d say there is a level of anti-competitive practices as far as our market is concerned,” he says.

Despite this, MacGill says he’s optimistic for the year ahead.

“We’re in a good period at the moment. Craft beer still only makes up about 2% of the national market, so there’s great growth potential,” he says.

TressCox lawyers partner Alistair Little told SmartCompany there are six main categories which the ACCC focus on which constitute anti-competitive behaviour: Anti-competitive agreements, misuse of market power, exclusive dealing, cartel conduct, predatory pricing and resale price maintenance.

“Anti-competitive agreements are those which exclude someone from being able to compete. For example, where two players lock out a third party by entering into restrictive agreements,” he says.

“Exclusive dealing occurs when there is an arrangement where a supplier says to a retailer they’ll give you the goods so long as it agrees not to buy anyone else’s beer. This lessens competition and is anti-competitive. Alternatively there will be agreements where a supplier will offer to give you three free fridges as long as you just sell its beer.”

Resale price maintenance occurs when a distributor says not to sell a product under a certain price or it’ll stop supplying the retailer with the product, while cartel conduct happens when major players agree to engage in certain conditions to stop another player competing in the market.

Little says there have been many cases of the ACCC pursuing anti-competitive behaviour and these investigations have the capacity to result in multi-million dollar penalties.