Competition Bureau chasing Labatt / InBev

When the announcement was made, many rolled their eyes that discount brewer Lakeport (TFR.UN:TSX) had agreed to be acquired by Labatt Breweries (a subsidiary of InBev). After all, most Lakeport radio ads had a common theme: don’t buy beer from the big guys. (But you can take their money).

So, once Lakeport’s CEO decided that the federal government wouldn’t reverse the decision to end the income trust party, she sought out a big guy herself and announced that she was selling to the arch enemy, Labatt.

So, being Canada, who will stick up for the little guy if not a Hamilton CEO? The Competition Bureau, of course. The news that the Bureau wants to delay the merger while it does further analysis won’t come as a surprise, and I doubt that the Competition Tribunal will allow a quick close.

While some observers claim this deal would be the end of the Ontario discount beer market, I disagree; they just need to rely on a fellow like Doug Berchtold at Brick Brewing (BRB:TSX) to pick-up whatever slack is available in the “Buck a Beer” market once the Lakeport/Labatt deal closes. Market forces won’t allow the discount category to go away. The Brewers Retail sells about 76 discount brands (only 10 of which are Lakeport products).

Perhaps the issue at the Competition Bureau is more about Labatt than it is the Lakeport deal. Here’s an excerpt from a 2005 settlement with the Attorney General of Canada involving “price maintenance” at 9 retail outlets. Is “price maintenance” the same as keeping them high? Labatt had to send a letter to every retail outlet in Quebec, plead guilty and pay a $250,000 fine (where’s the dead tree media with this stuff?):

Under the prohibition order, Labatt will have to inform all of its Quebec independent convenience/grocery retailers in writing that under section 61 of the Act, the company or its representatives cannot by agreement, threat, promise or similar means, attempt to influence upward, or discourage the reduction of the price of alcoholic beverages.

Perhaps the Bureau saw the Quebec experience as a bad omen, and didn’t settle that infraction by its own volition but at the encourgement of their lawyers at the Department of Justice. So Lakeport perhaps presents itself as the opportunity to even the score.

What the Competition Bureau should investigate is why the LCBO is paying Toronto homeowners to divert their wine bottles away from the City’s blue box program for 20 cents a bottle. Even our broke, left wing City Hall just can’t compete with that!

MRM