The Electric Commentary

Thursday, October 06, 2005

It's back...

The Madison tavern antitrust suit has been filed again. From Althouse:

The lawsuit filed Tuesday in federal court reiterates claims that the voluntary ban on specials was meant to maximize bars' profits but alleges the violation of federal antitrust laws goes back even farther.

For 15 years, drinkers "were charged supra-competitive, excessive and fixed prices for alcohol" at the taverns, the lawsuit claims. Through private conversations and secret deals, the bars agreed when to increase prices and offer drink specials, it claims.

The conspiracy allegedly started after Wisconsin increased its drinking age from 18 to 21 in 1987. Despite reduced demand, drink prices increased faster than inflation in the 1990s "and the timing and sequence of those increases were agreed upon" by bar owners during monthly meetings of the Madison Tavern League, the lawsuit claims.

2 Comments:

  • I had an econ class once where the teacher suggested that there was a lot of implicit price fixing going on. For instance, it was suggested that places that promise to beat their competitor's best offer are often times just checking up to make sure their competitor doesn't cheat on their agreed upon price. Apparently, prices were lower where there was no "beat our competitor offer."

    The evidence seems pretty damning here, but but here are some of my thoughts: just because drink prices went up above inflation is no conclusive proof that there was price fixing. Madison inflation is probably higher than overall inflation. But my main concern is whether the price of drinks really effects customer's choice that much. Customer demand may be pretty inealstic. Sure, some people will go where it is cheaper, but the people who don't notice might more than make up for it. Once a bar has a reputation for having cheap drinks, it can probably raise the prices a little bit and enjoy the profits for a while before people catch on. Also, a bar that is more lenient of fake IDs can probably get away with higher prices, while a bar that is tough on fake IDs can get away with higher prices, because it draws a crowd that doesn't want to go to a bar that is filled with underage drinkers. Add to that the fact that some bars alomst always have a line at some point in the week, that is an indication that their prices could still go higher.

    By Anonymous Phil, at 12:01 PM  

  • When I was a student journalist at the Univeresity of Illinois, the bar owners in Champaign were hailed as heroes by the City Council for agreeing to raise the prices at their bars. The City Council said it would do a wonderful job of cutting down on binge drinking. We wrote editorials pointing out that no evidence existed that higher prices meant less binge drinking, bars could simply refuse to serve people who were already intoxicated, and price fixing is illegal. The state's attorney responded to us with, "Well, sure, price fixing is illegal. But we wouldn't want anyone to binge drink."

    By Blogger MDS, at 2:35 PM  

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