Victory for Texas Craft Breweries

State Judge Strikes Down Law That Enriches Distributors at Brewers’ Expense

Austin, TX.—Raise a glass to freedom: Today, a Texas state judge struck down a 2013 law that made it illegal for brewers to receive compensation from distributors for their territorial distribution rights, declaring that it violated the Texas Constitution. The law has forced brewers to give up millions of dollars of valuable property to politically connected beer distributors. A group of Texas brewers teamed up with the Institute for Justice (IJ) in 2014 to challenge the law in state court.

“The Texas Constitution prohibits the legislature from passing laws that enrich one business at the expense of another,” explained IJ Senior Attorney Matt Miller, who represented the brewers in court. “This ruling is a victory for every Texas craft brewery and the customers who love their beer.”

The right to distribute a popular beer is highly valuable. But politically connected distributors got the law changed in 2013 so that brewers had to give away those rights for free; distributors pay nothing for something potentially worth millions of dollars, creating a windfall for distributors. Even worse, distributors can then sell those rights to another distributor and pocket the money. Brewers should be able to use the value of their company to help expand it, rather than hand over that value to a distributor for nothing in return.

IJ is representing Austin-based Live Oak Brewing; Revolver Brewing, located in Fort Worth; and Peticolas Brewing in Dallas.

“It’s great to have my property back,” said Chip McElroy, owner of Live Oak Brewing. “This law took part of my business away from me and gave it to big distributors. Now I’ve got my business back.”

“I’m thrilled. This has been a long time coming,” said Michael Peticolas, owner of Peticolas Brewing. “I’m proud to have my constitutional rights returned to me. This is a great victory for Texas craft brewers.”

This is the first major decision protecting economic liberty after last summer’s Texas Supreme Court decision in Patel v. Texas Department of Licensing and Regulation, which struck down as unconstitutional the state’s requirement that eyebrow threaders receive 750 hours of unrelated training. IJ also litigated Patel, which protected another economic liberty right under the Texas Constitution for eyebrow threaders.

“Today’s ruling is a resounding victory for the three craft breweries that fought for the economic liberty of every entrepreneur in this state,” said IJ attorney Arif Panju, who served as co-counsel on the case.

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