Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Archive for December 11th, 2012

On Beer and Competition

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orval33

There’s competition policy everywhere (Alfonso was there before BTW).

Last Saturday, at the Grain d’Orge – in passing, the best blues music bar of Brussels – I was confronted with a real-life example of a deadweight loss.

Orval, the famous brewery that produces the eponym Trappist beer is currently reducing, and in some cases has stopped, supplying  domestic Belgian retailers (i.e. bars and other retail channels).

The explainer: Trappist beers are a very trendy export product. They now sell at comparatively higher prices in big metropolis like New York, Hong Kong, etc. Orval, which is reported to have fixed short-term capacity, has therefore decided to prioritize supplies towards high price, export markets, and to limit quantities sold in Belgium. Belgian bars and restaurants, whose reservation price still remains superior to Orval’s costs, are thus excluded from consumption as in the textbook model of monopoly pricing.

Interestingly, it seems that some quantities of Orval can be sourced on a secondary market, where bars with surplus resell to other bars.

Is this refusal to supply akin to unlawful abuse? Undeniably, a funny question, which could be an exam topic for my LL.M students. Market definition on such a highly differentiated product market is not straigthforward. And whilst this type of refusal to supply does not seem to fall within the good old ‘essential facilities‘ doctrine, it has exploitative effects which in theory are caught under Article 102 TFEU.

Written by Nicolas Petit

11 December 2012 at 7:00 am