Indiana Beverage Bill Helps [Some] Businesses by Harming Consumers
Businesses are still reeling from the combined effects of the COVID-19 pandemic and supply chain problems. Luckily, legislatures across the country have recognized that the best way government could help businesses during these challenging times is to get out of their way. Doing so has allowed many businesses to survive and continue supplying consumers with much-needed goods, largely by giving businesses the flexibility needed to respond to rapidly shifting market conditions. Unfortunately, a new proposal in Indiana would take the opposite approach.
Earlier this month, Republican state representative Edmond Soliday introduced HB 1109, which would, among other things, require wholesalers of nonalcoholic beverages to offer the same prices and promotions to all retailers. It would fix prices and prevent wholesalers from offering bulk discounts to larger retailers, and instead charge the same, higher rates to everyone. That might help some smaller retailers struggling to compete with prices offered by Costco, for example, but consumers will ultimately pay the cost. That should make one wonder what exactly is the purpose of this bill.
Based on its supporters’ statements, the measure is intended to give smaller retailers a leg up in negotiations with the handful of powerful wholesalers operating in the state. Larger retailers do a higher volume of business, so they get better deals with wholesalers. Some smaller retailers find this sort of “price discrimination” unfair, but such volume-based deals save both wholesalers and retailers money, thereby allowing larger retailers to charge consumers less. If the Indiana legislature decides to interject itself in these private agreements, wholesalers will not—as Soliday seems to hope—offer the same deals to all retailers. Instead, they will eliminate such pricing deals for everyone, with both wholesalers and retailers forced to recoup their losses by charging higher prices.
If the Indiana legislature truly wants help create a vibrant and competitive beverage market for the benefit of consumers, they ought to examine existing regulations that might be hampering small retailers instead of adding new ones. By removing regulations that raise operating costs for small retailers and create barriers for new wholesalers to enter the market, the legislature could—as in many other states throughout the pandemic—help these businesses save money, give them better options, and improve their power in contract negotiations. And this approach wouldn’t have the unintended effect of raising consumer prices or restricting the flexibility that businesses need to respond to shifting conditions. Soliday’s proposal, instead, lends a helping hand to one subset of the market at the expense of other businesses, consumers, and potentially the long-term stability of the entire market.