Should Obama go after the bloated brewers?

Big Beer looks as if it's testing President Obama's tolerance. Both Anheuser-Busch InBev—purveyor of the president's preferred brew, Bud Light—and MillerCoors, a joint venture between SABMiller and Molson Coors (TAP), are raising prices at the same time, during a recession, and while beer demand is slumping. With an 80 percent market share between them, it almost begs for an antitrust review of the industry.

While the increases are not unusual or unexpected, they still raise a red flag. Both companies typically readjust the price tag on a six-pack every year to reflect changes in the cost of, say, barley or hops. But the ability of the two big brewing groups to do so now, while their customers are hurting most, highlights the tremendous pricing power that has accompanied consolidation in the industry in recent years.

While Anheuser-Busch, acquired last year by Belgium's InBev, has long held a dominant share of the American market, the number of big players in the industry has steadily decreased over the years. From 1947 to 1995, the number of beer companies fell by more than 90 percent. Though a surge in craft brewers like Samuel Adams, Sierra Nevada, and others followed, few of them tried competing directly with mass-market suds like Budweiser and Miller Genuine Draft.

That state of affairs was fine so long as the big three—Anheuser, Miller, and Coors—were still at one another's throats. And boy, were they. After South African Breweries bought Miller from Philip Morris in 2002, it set out to nab market share, primarily from Bud, which years earlier had taken the crown in the light segment that Miller practically invented. Its bigger rival responded by slashing prices aggressively, despite the hit it meant for Anheuser's bottom line.

But Bud's gambit worked—it forced Miller and Coors to match its price cuts or risk losing ground to Bud, which held a nearly 50 percent market share. While a drag for shareholders, this competition fostered a better outcome for consumers—indeed, the summer of 2005 was a beer drinker's dream. Some retailers were offering coupons for as much as $5 off the price of a six-pack.

The trend wasn't sustainable, however. That fall, Anheuser reported lower-than-expected earnings, as the higher volumes failed to compensate for the lower margins. Anheuser shares slid from around $48 at the beginning of the summer to $40. They never fully regained their value until talk of a bid from InBev gave them a lift, and the Belgo-Brazilian group launched an unsolicited takeover bid in 2008.