A Federal Court ruling could allow Walmart and other publicly-owned companies to sell hard liquor in separately-operated stores across the Lone Star State, and that could mean the end of the existing liquor store cartel in Texas.
In a lawsuit against the Texas Alcoholic Beverage Commission that began three years ago, Walmart challenged state regulations preventing the retail giant from selling liquor, not inside the store as is allowed in many other states, but even in liquor stores attached to or near existing retail stores.
The TABC, while positioned ostensibly as a neutral regulator of alcohol sales in Texas, has for decades been heavily influenced by protectionists from beer distributors and liquor store lobbyists who have sought to prevent competition in alcohol sales.
When the TABC went under sunset review in 2007, Howard Wolfe, the Senate-appointed public member of the commission wrote a position paper entitled “Lions of the Serengeti” detailing the corruption and protectionism that constitute the system.
Under current Texas law, a number of provisions prohibit Walmart from owning and operating liquor stores. The first and primary issue is that, under the Texas Alcoholic Beverage Code, public corporations are forbidden from holding “package store permits” (the state’s term for liquor stores) enabling liquor sales in their establishments. This means companies like Walmart cannot sell liquor, or even own a stake in a separate entity that does. Indeed, Walmart would be violating the law even if the sales happened at a separate location from its retail stores under a different brand name.
Additionally, package store permits are restricted to five permits per person, but with a crazy exception. The exception to this rule is known as the “consanguinity exception,” which means that if two family members pool their permits they are no longer subject to the limit. This is the loophole that has allowed stores like Spec’s and Twin Liquors to become major chains with hundreds of locations across Texas.
Finally, the law doesn’t allow for those with a “wine and beer retailer’s off-premise permit”—the most common license for grocery stores to sell wine and beer—to also obtain a “package store permit” necessary for selling liquor.
Last week, U.S. District Judge Robert Pitman ruled in favor of Walmart, stating that the convoluted TABC prohibition violated the US Constitution’s commerce clause and the 14th Amendment right to equal protection.
Following the ruling, Walmart celebrated the loosening of the TABC rules:
Texas is the only state in the nation that issues package store permits to privately owned corporations but refuses to let publicly owned corporations participate in the retail liquor market. Walmart filed suit because these laws are unfair and hurt our customers. We are grateful for Judge Pitman’s thoughtful opinion, finding that these laws violate the U.S. Constitution.
The ruling, should it stand, would open the doors for more freedom in alcohol sales across Texas, allowing public corporations to own liquor stores, ultimately offering more choice for consumers.
The Texas Package Store Association, the state’s private liquor store lobby and an intervenor in the case, criticized the judge’s ruling and promised to appeal the court’s decision.
