Texas craft brewers raise their pints after judge rules distribution rights law unconstitutional

By Mary Ellen Shoup contact

- Last updated on GMT

A judge has ruled in favor of three Texas brewers wanting to eliminate a law that required them to give away their distribution rights for free.
A judge has ruled in favor of three Texas brewers wanting to eliminate a law that required them to give away their distribution rights for free.

Related tags: Law

A Texas federal judge has sided with three Texas-based craft brewers, striking down a 2013 law that required breweries to give up their distribution and territorial rights. 

District Court Judge Karin Crump declared on Thursday in a final judgment that Section 102.75(a)(7) of the Texas Alcoholic Beverage Code “violates the due course of law”​ guaranteed under the Texas constitution.

“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.”

In a social media post on Live Oak Brewings Facebook page, the company said:

“We do not hate distributors, nor do we believe they provide no value.

”It is important to state that value does not exist in a vacuum; we must acknowledge that before every distributor, there is a brewery that has sacrificed like every other small business owner to create value and that value is what is often leveraged for further growth,”​ the post continued.

The breweries' mission: background

Live Oak, Peticolas Brewing Co., and Revolver Brewing sued the Texas Alcoholic Beverage Commission​ to overturn a state law that prohibiting breweries from receiving compensation from distributors to sell their beer.

On its Facebook page, Live Oak Brewing Company said that the law "unfairly hinders [the brewers'] ability to grow their businesses. At issue is the constitutionality of the law that restricts brewers from selling distribution rights."

The breweries wanted to restore things to the way they were prior to 2013 when the law was enacted and craft breweries were able to benefit from the money received from selling their territorial rights to distributors.

It was a viable way for small craft breweries to grow their businesses and market reach, the three breweries argued.

A victory for Texas craft beer industry

“The Texas Constitution prohibits the legislature from passing laws that enrich one business at the expense of another,”​ Institute for Justice senior attorney Matt Miller, who represented the brewers, said in a statement after Thursday's ruling.

“This ruling is a victory for every Texas craft brewery and the customers who love their beer.”

The state now has 30 days to appeal the ruling.

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