Control of beer prices

Press, 24 June 1981, Page 20

Control of beer prices

Seeking an end to control of beer prices, the brewing industry is .arguing that competition in the industry will prevent undue increases in the price of beer once controls are lifted. Under the present System, the brewers are allowed to recover increased costs, but are prevented, by the Department of Trade and Industry, from exploiting their commanding position to make unfairly large profits — profits greater, that is, than are needed for reinvestment or for a reasonable return on existing investment.

Three companies own all but one of the country’s breweries outright and .own or control a significant number of retail outlets. This concentration makes it difficult to sustain a claim that competition within the industry is enough on its own to prevent unwarranted increases in the price of beer. The brewers have acknowledged this by claiming that they face competition from imports and from other alcoholic drinks such as wine. Their dominance of their particular part of the market is not much affected by such competition, though wine consumption in

recent years may have dented the trade in beer; and imports of Australian canned beer have caused the local industry some concern. Whether the brewers would yield to the temptation to increase prices at will is uncertain.

The best course might be simply to put the industry to the test by lifting price control, with the proviso that the Commerce ... Commission continue to monitor prices and retain the right to reimpose controls. Such a policy is being applied to bread prices.

The Government is committed by its 1978 election manifesto to reviewing price control; the stated aim is to promote the interests of the consumer. The Government’s election manifesto said that monopoly and near-monopoly goods would remain under price control. The brewing industry is almost a monopoly and the degree of competition at retail level varies from place to place. Putting complete faith in competition alone to discourage increases in prices would be unwise. If the breweries are to be given any rein it must be a short rein and one on which the Commerce Commission keeps its hand.