The award-winning series Friday Night Lights is set in the Permian Basin in Texas. Joe McCoy is a football booster whose son plays for the Dillon Panthers. He is the richest man on the show, but he is not an oilman; he’s a beer distributor.

Texas, up until this year, was the only state where visitors to craft brewery tap rooms couldn’t buy cases of beer and take them home. In Texas, craft brewers were forced to give the distribution rights away to local distributors for free. In 2016, a court ruled that it was unconstitutional for the legislature to pass laws that enriched one business at the expense of another.

Texas is not much of an anomaly. Most other states force craft brewers to give up their distribution after exceeding a low level of production. For example, in North Carolina, most craft brewers do not go over 25,000 barrels a year to avoid giving away distribution. Small brewers start small and stay small, while distributors and Big Beer control the market.

The beer industry is a microcosm for the problems of monopoly and competition in the United States. Antitrust was meant to prevent monopolies, yet the U.S. government has allowed two beer companies to lock up the market.

The first consolidation happened in 2008 when the Department of Justice approved the duopoly of a joint venture between Molson Coors and SABMiller, creating MillerCoors, and then a few months later the merger of Anheuser Busch and InBev. Overnight, in some parts of the country, almost 90 percent of domestic beer production and distribution, directly and indirectly, came under the control of this duopoly.

Then came the 2016 merger between SABMiller and AB InBev. At that stage, SABMiller sold back its stake in MillerCoors, creating a new duopoly between Molson Coors and AB InBev. The dizzying deals were approved because the consumer would supposedly benefit, but the result was an increase in beer prices and an iron grip on the industry by two major beer giants.

Americans have the illusion of choice when it comes to beer. Yet many craft beers only appear to be craft. AB InBev has bought over 13 craft brands over the past decade, including the likes of Elysian Brewing and Goose Island Beer. Altogether they own 250 brands, including Stella, Rolling Rock, Corona, and Michelob. You might as well just send part of your paycheck to AB InBev and MolsonCoors whenever you order a beer.

The industry is a Rorschach test for conservatives. Looking at the same data, starry-eyed libertarians who dislike antitrust enforcement argue that the duopoly is irrelevant.

They contend there’s a thriving market for beer. In 1983, there were 49 breweries. Today, there are 7,480 active craft breweries, up from 6,464 last year. The number of breweries is at a 150-year high. The two majors are losing market share. This would appear to be a triumph of competition and consumer choice. They view the explosion of craft breweries as vindication that we live in a golden age of competition and proof that antitrust enforcement is unnecessary.

A little bit of knowledge is a dangerous thing. While the number of breweries has never been higher, the total number of breweries is a completely misleading metric. Consider how irrelevant they are to the average American:

Over half of all breweries brew less than 1,000 barrels and represent less than 1 percent of all volume.

Over 95 percent of all breweries make fewer than 15,000 barrels per year and account for less than 4 percent of total volume.

Almost a quarter of breweries were classified as brewpubs that only brew beer for direct-to-consumer sale on brewery-restaurant premises.

Most craft brews do not get sold or distributed off premises.

Libertarians in Manhattan and D.C. think tanks may have choice, but most people don’t. As of 2018, only 8.4 percent of breweries fell outside of Census Bureau defined urban areas, and the areas that have the most breweries are seeing the most new breweries .

Despite the explosion in craft breweries, Big Beer still rules the game. Bart Watson, chief economist of the Brewers Association, put it succinctly: “The majority of growth continues to come from microbreweries, taprooms, and brewpubs, whereas the distribution landscape remains more challenging for regional craft brewers.”

Ever since the 21st Amendment to the Constitution, the regulation of alcohol has been delegated to the states. This has led to dry counties, as well as states where liquor is only retailed in government-run stores, such as North Carolina, and also to states like Arkansas with drive-through liquor stores.

In practice, all states have organized the beer industry into three “tiers”: 1) brewers and importers, 2) wholesalers, and 3) retailers. Under the three-tier system, brewers and importers sell their products to wholesalers, which in turn sell to the retailers. In theory, the tier system prevents monopolies from vertically integrating the industry. In practice, regulations serve to protect the large at the expense of the small.

Just as insurance companies have used laws such as the McCarran Ferguson Act that devolve control down to the state level, beer companies have used the 21st Amendment to balkanize interstate commerce and create local fiefdoms and monopolies.

Regulation of alcohol creates strange bedfellows. In 2014, the economists Adam Smith and Bruce Yandle published a book with the provocative title, Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics. As they explain in the preface:

Durable social regulation evolves when it is demanded by both of two distinctly different groups. “Baptists” point to the moral high ground and give vital and vocal endorsement of laudable public benefits promised by a desired regulation. …“Bootleggers” are much less visible but no less vital. Bootleggers, who expect to profit from the very regulatory restrictions desired by Baptists, grease the political machinery with some of their expected proceeds. They are simply in it for the money.

De facto local monopolies are created and persist in the U.S. because a patchwork of state and local regulation prevents competition in industries ranging from alcohol to insurance to funeral homes. The examples border on the ridiculous. In the interest of “public health,” local funeral home monopolies and legislators in Louisiana banned monks from selling wooden caskets. Likewise, a profusion of state and county laws, often written by Big Beer, create formidable barriers for craft brewers and prevent competition.

While large companies have armies of lawyers and compliance people to navigate laws they themselves have written, small brewers struggle. A report from the libertarian Mercatus Center notes, “Startups in the craft brewing industry face formidable barriers to entry in the form of federal, state, and local regulations. These barriers limit competition and innovation, reducing consumer welfare.”

States have been preventing competition for a long time. The beer industry in many ways is a throwback to the problems under the Articles of Confederation when states obstructed the interstate shipment of goods. This year, the Supreme Court struck down a law in Tennessee that required applicants for an off-premises retail liquor license to have been residents of the state for at least two years. (Tennessee law also required a 10-year residency requirement for renewal applications. This law was also previously struck down.)

The problem with allowing two beer giants to create a duopoly is that AB InBev is not only a brewer but the largest beer distributor in the U.S. In some states where brewers can distribute their own beer, there are only one or two distributors. Given how significant they are as suppliers for distributors they don’t own, they can incentivize distributors to favor their beer over competitor beer. Most markets are either a “red” distributor affiliated with Anheuser-Busch/InBev or a “blue/silver” for MillerCoors. Their control over the market is direct and indirect. Many brewers are now trapped with distributors owned by their largest competitors.

Not only do the leading brands control distribution, they often control the retail environment as well. One of the two leading beer firms is frequently designated by retail chains as the “category captain,” which gives them the power to design the placement and allotted shelf space for the entire beer section, including direct competitors’ products. Effectively, this is a form of cartel, and weaker brands mysteriously always get shafted.

Beyond distribution and retail space, Big Beer also brews for smaller brewers. Recently, MillerCoors settled a lawsuit after it refused to continue brewing volume for Pabst. A court ordered MillerCoors to honor its contract, but over 4 million barrels of competition would have disappeared.

Craft breweries are pressuring AB InBev and MolsonCoors, which are losing share. As of 2018, the top two had 65 percent market share by volume (even though they indirectly control much more), and their market share was ailing. On the surface, it would appear that competition is working.

Yet while craft brewers are taking on Big Beer, it is worth considering where AB InBev and MolsonCoors would be today if they actually faced real competition that could be distributed beyond the local craft brewery. It is worth considering the case of Schlitz in the days before a national duopoly.

The Joseph Schlitz Brewing Company was once the largest producer of beer in the United States. Yet during the 1970s, the company decided to make its beer more cheaply by using corn syrup to replace some barley and adding a silica gel. Beer drinkers turned on the brand and sales collapsed. Today, young drinkers do not even know about Schlitz.

American tastes have turned against Big Beer, and today’s giants would also likely go the way of Schlitz, as most Americans prefer craft brews. Yet the beer duopoly postpones the day of reckoning. At first we might think all is well because there are more breweries. But then we ask: what would happen without the duopoly? While sales of Big Beer are falling, the big two still control distribution and retail and can prevent the magic of competition.

Starting on September 1, Texans will be able to buy beer on premise. Craft breweries in Texas, though, are limited to selling one case per day per customer directly.

As Michael Graham of Austin Beerworks put it, craft beers are still the rebels facing the Empire: “If every brewery in the state got to the maximum 5,000 barrels of taproom sales, that would still only be about 3.5 percent of all the total beer sales in Texas. It’s a power play from them to tell us they are in control and have been for a long time.”

Jonathan Tepper is a founder of Variant Perception, a macroeconomic research company, and co-author of The Myth of Capitalism: Monopolies and the Death of Competition.

This article was supported by the Ewing Marion Kauffman Foundation.