Cheers: Texas Craft Beer Distribution Law Struck Down

| by Robert Fowler
A line of craft beersA line of craft beers

A Texas judge has struck down a state law that had restricted craft beer producers from profiting from their distribution rights. The law was ruled to serve no legitimate purpose for the public interest.

On Aug. 25, State District Judge Karin Crump of Austin ruled that a 2013 law that forbade craft beer brewers from selling their distribution rights to be unconstitutional, The Dallas Morning News reports.

In 2013, the Texas legislature passed the law as part of a package of bills related to craft brewing. The specific bill stated that Texas distributors did not have to pay craft beer producers for the rights to their product. It also enabled distributors to sell off that brewery’s territorial rights as they pleased.

“We were devastated, because obviously, that takes a lot of our value in our businesses and awards it to someone else,” owner Chip McElroy of Live Oak Brewing told KXAN.

Texas breweries that produce fewer than 125,000 barrels annually are allowed to self-distribute their craft beer. Breweries that had gained popularity and exceeded that output would have to essentially give away those distribution rights for free.

McElroy estimated that this law cost his business millions of dollars in revenue.

In December 2014, three breweries, Live Oak, Peticolas and Revolver, jointly challenged the Texas law, charging it was unconstitutional. They filed a suit against the Texas Alcoholic Beverage Commission, which enforced the law.

Assistant Attorney General Karen Watkins represented TABC in court. During the hearings, Watkins stated that the craft beer producers had no explicit right to their distribution sales.

“Everything that these brewers are allowed to do is the result of having obtained a privilege from the state,” Watkins said.

While Judge Crump offered no explanation for her ruling, her decision declared that the 2013 law was unconstitutional, meaning that craft brewers can now profit from their distribution rights.

“This has been a long coming,” said owner Michael Peticolas of Austin-based Peticolas Brewery. “I’m proud to have my constitutional rights returned to me.”

Senior attorney Matt Miller of the Austin Institute for Justice, who represented the breweries in court, praised the judge’s decision.

“Our hope and the hope of our clients is that this will increase access to craft beer across the state,” Miller told the Houston Chronicle.

Sources: The Dallas Morning NewsHouston Chronicle, KXAN / Photo credit: Traveljunction/Flickr

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