Yesterday on Beervana, Jeff commented on a Washington Post article about Ebay's black market for beers. He really got it stirred up, 31 comments and counting. Jeff thinks the brewers shouldn't be whining about the black market, they should raise their prices to eliminate it.
I'll go into why I disagree with Jeff below, but first some facts about beer sales on Ebay:
- Ebay doesn't allow the sale of alcoholic beverages.
- There is a loophole for collectible bottles, if the seller posts a disclaimer that it is the bottle that is valuable, not the beer inside.
- For rare beers of recent vintage, that disclaimer is obviously a lie.
- If the seller is willing to lie about the value of the beer to make a few dollars, how can you trust them to treat you honestly in the sale?
- If you don't like to see beer scalping on Ebay, you can report beer auctions by clicking on the "Report Item" link on the page. They usually take reported auctions down.
- Just for fun, check out the time I auctioned an empty Abyss bottle on Ebay.
Part of the controversy would disappear if Ebay would simply drop their restriction on beer auctions. Brewers couldn't complain about profiteering -- they would be free to participate in it if they wanted to make more money off of their products, or distribute to a wider audience. It would also open the door for honest resellers to develop a reputation for properly handling a somewhat delicate product. Of course, Ebay doesn't drop their beer prohibition because they are constrained by a fractured regulatory system in the U.S., where every state has different restrictions on sale and delivery of alcohol.
Jeff's idea that raising prices will eliminate the black market is ridiculous. This faith in a magical Market that can correctly determine the price of goods is part of the insanity of our times. At best, it works in a circular definition sort of way: the market determines the correct price at any given second because the correct price is what someone will pay. But it doesn't work in any sort of predictive way: based on this level of supply, and this level of demand, and this attribute of the product, the price will be such-and-such. Since it can't predict anything, but can only rationalize what happened, this efficient-market model that modern Americans apply to everything has much more in common with religion than with science.
Given the fact that no one can predict ahead of time the market price of something traded in billions of units -- say, common stock of the Intel Corporation -- how is a small brewery supposed to calculate ahead of time the market price of a beer they made 5,000 bottles of? Simply put, they can't calculate that. So they set a reasonable price based on their costs, prices of similar products, and their past experience of what their customers will pay. Of course they want to make a good profit, but there is also value to them in selling out fast -- they don't have to sit on an inventory, and they can devote more space in their operation to the next production run.