Big brewers for price floors

There is a common myth that big business supports free market policies and that proponents of the free market support big business. This is true in some cases, but big business typically supports policies that help themselves out, regardless if it means markets are more or less free. This article in the National Post shows a case where the two biggest breweries in the world, Molson Coors Brewing Co. and AB Inbev unit Labatt, are trying to get government to make the industry less free by raising the price floor on beer in Quebec. Read the article here: Quebec brewers in froth over cheap beer.

Of course Molson and Labatt (the Canadian divisions of the foreign owned brewing giants) are arguing for this based on the hard to define concept of "social responsibility":

“The reason why we have a minimum price at all is for social reasons,” said Molson spokesperson Marie-Hélène Lagacé. “And we fear that if the price of beer as an industry rises lower than the price of milk or butter, we have a social issue,” namely irresponsible consumption.

In reality, Molson and Labatt have a huge financial incentive for government mandated price floors for two reasons:

1) The price floor helps prevent competition from discount brewers that make similar adjunct lagers. This hurts the smaller business because they are unable to compete on price. When you have similar products and a lower marketing budget, how can a discount brewery possibly compete and try to gain any market share?

2) The bigger reason is that the price floor essentially means Molson and Labatt do not have to get into price wars with each other. They can both price their products well above the market price, knowing their main competitor won't be able to undercut them. If they were to come to this agreement themselves, it would be collusion.

So why wouldn't Molson and Labatt want the price floor? They have less competition and the government allows them to legally collude with their only major competitor. This hurts the consumer because we have to pay more, while getting less selection. Hopefully Jean Charest sides with the people of Quebec over big business and rejects this request.