Texas craft brewers are raising a glass and toasting “Cheers!” after a state judge granted them victory in a lawsuit over the state’s overly burdensome regulations.
Last week, District Court Judge Karin Crump sided with Live Oak, Revolver, and Peticolas Breweries in their lawsuit against the state over a law that made it illegal for them to receive compensation from part of their business.
The 2013 law made it illegal for breweries to accept payment for “territorial rights,” or the right of a distributor to distribute the brewery’s beer in a given area. Until passage of the law, beer distributors would pay craft breweries to sell their product.
Under the new law, smaller breweries could self-distribute up to a limit. For distribution beyond the limit, the breweries were forced to contract with a distributor and legally barred from receiving monetary compensation from distributors for their distribution rights. The ban on payment for distribution rights was a legislative gift to Texas’ beer distributors, a small group of businesses that use Austin lobbyists to restrict competition and maintain their middleman status.
It was the portion of the law benefiting distributors that was struck down as unconstitutional.
“The Texas Constitution prohibits the legislature from passing laws that enrich one business at the expense of another,” said Institute for Justice 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.”
While Texas breweries have scored a major victory, the state can still appeal the ruling within the next 30 days. If the state doesn’t appeal, the breweries will be able to start selling their distribution rights again.