A Texas court ruled last week that a three-year-old law prohibiting breweries from selling their own distribution rights violates the state’s constitution. As written, the law effectively locks brewers into relationships with distributors, leaving them with little room to separate from under-performing distributor partners—lest they halt distribution altogether. Those same wholesale partners, however, remain free to sell the distribution rights of a given brand to other wholesalers, absent input from the craft brewers themselves.
WHY IT MATTERS
The three-tier system that divides brewers, distributors, and retailers looks different from state to state, but there’s a battle in almost all of them. Sure, it varies in size, and over who gets to sell what to who, not mention where and when. But a piece of local news like this coming out of a district court in Texas reverberates throughout the entire country’s craft beer industry.
In efforts to repeal restrictive laws like this, craft brewers everywhere often invoke states like California, Oregon, and Colorado as examples of how the industry should be regulated. But lawmakers typically prefer compromise to the types of regulatory overhaul necessary to replicate anything like the rules in those states. So when Peticolas Brewing and Live Oak Brewing—of Dallas and Austin respectively—successfully sue to kill a piece of burdensome legislation pertaining to one aspect of a broad system, it’s more than simply regional progress.
Rather, it’s a sign for the industry at large, in that it sets a template of sorts for other craft brewers engaged in similar fights to follow. And not for nothing, it’s always nice to see constitutionality win out over powerful lobbying. (In this case, the law in question is the Wholesale Beer Distributors of Texas’ baby.)
It should be noted, however, that this isn’t a pure win in Texas. Brewers who entered into new contracts with wholesalers after the bill was signed are out of luck, and the state attorney general’s office has about a month to file an appeal. Nevertheless, you can rest assured you’ll see more of this type of thing, in Texas and beyond, for quite some time to come.
Judge Says Banning Brewers From Selling Distribution Rights Violates Texas Constitution [Houston Press]