Texas Breweries Sue State Over Alcohol Regulation

J. Justin Wilson
J. Justin Wilson · December 10, 2014
  • Texas is forcing brewers to give up millions of dollars of valuable property to distributors.
  • In 2013, the state made it illegal for brewers to accept compensation for their distribution rights.
  • It is unconstitutional for government to force people to give away part of their business for free.
  • Law limits the variety of craft beer available around the state.

Austin, Texas—The craft beer scene is thriving. But Texas beer drinkers are about to find that many of the state’s small breweries have put expansion plans on hold. Why? Because a new law is forcing brewers to give up millions of dollars of valuable property to politically connected beer distributors.

Today, three Texas craft breweries joined with the Institute for Justice to file a major lawsuit challenging the 2013 law. The owners of Live Oak Brewing, Peticolas Brewing Company and Revolver Brewing simply want to defend the businesses they built.

For more on the lawsuit, visit www.ij.org/texas-craft-beer

Before 2013, distributors would pay brewers for the right to sell their beer in markets like Houston or Austin. But Texas has made it illegal for brewers to accept compensation for their distribution rights. Distributors pay nothing for something potentially worth millions—creating a windfall for distributors. Even worse, distributors can then sell those rights to other distributors and pocket the money. Brewers, on the other hand, have traditionally reinvested this money to grow their breweries.

“This law is like the government forcing authors to give the rights to their books to publishers for free,” explained Matt Miller, managing attorney of the IJ’s Texas office. “It is unconstitutional for Texas to force brewers to give distributors property that they never earned and don’t deserve.”

“For the last 18 years, I’ve poured my life into this business,” said Chip McElroy, president of Live Oak Brewing. “I’m proud to have been part of the Texas craft beer Renaissance. When Texas passed this law, not only did it give away part of what my employees and I built—it took my beer off the shelves in Dallas-Fort Worth, San Antonio and other parts of Texas where Live Oak beer would otherwise be available.”

IJ is representing Austin-based Live Oak Brewing; Revolver Brewing, located in Fort Worth; and Peticolas Brewing in Dallas. Unfortunately, thanks to the new law, their future growth is uncertain. But the Texas Constitution protects the property rights and economic liberty of entrepreneurs. This case aims to overturn the 2013 law and allow brewers to keep all of the businesses they’ve built.

Today’s case is part of IJ’s National Food Freedom Initiative. This nationwide campaign brings property rights, economic liberty and free speech challenges to laws that interfere with the ability of Americans to produce, market, procure and consume the foods of their choice. IJ has won a free speech challenge to Oregon’s raw milk advertising ban and is currently litigating cases challenging restrictions on the right to grow front-yard vegetable gardens in Miami Shores, Fla., the right to sell home-baked goods in Minnesota and the right to call skim milk “skim milk” in Florida.