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Three Texas Craft Breweries Are Suing the State Over Distribution Laws

Live Oak, Peticolas, and Revolver claim the state's laws on compensation for distribution rights are unconstitutional.

Live Oak Brewing is fighting for its right to distribution compensation.
Live Oak Brewing is fighting for its right to distribution compensation.
Live Oak Brewing Company

Three Texas craft breweries including Austin's beloved Live Oak Brewing Company are gearing up to sue the state over what they deem unconstitutional laws regarding compensation for distribution rights.

Jester King Brewery's Ron Extract summed up the laws (which were introduced in 2013) in an acceptance speech at the 2014 Craft Brewers Conference, saying, "Thanks to the efforts of a powerful distributors lobby, we also lost the legal right to receive compensation for one of our most valuable business assets, our territorial distribution rights — an asset that distributors routinely and legally sell to one another for millions of dollars."

Per a media advisory issued earlier today by public interest law firm the Institute for Justice, Live Oak has joined forces with two Dallas-area breweries, Revolver and Peticolas, to file "a major property rights lawsuit" against the state of Texas. Below, an excerpt from the advisory with more details:

Tomorrow at 10:00 a.m., the owners of two Dallas-area breweries and the Institute for Justice will announce the filing of a major property rights lawsuit that asks an important question: Can the government force Texas brewers to give up millions of dollars of valuable property to politically connected beer distributors?

Before 2013, distributors would pay brewers for the right to sell their beer in markets like Houston or Austin. But Texas 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 have traditionally reinvested this money to grow their breweries.

This law has nothing to do with protecting consumers. It is a transfer of wealth from brewers to distributors. But the Texas Constitution protects the property rights and economic liberty of entrepreneurs. Brewers should get to keep the value of the businesses they built.

It is unconstitutional for the government to force people to give away part of their business for free. That is why Peticolas Brewing Company and Revolver Brewing will join an Austin-based brewery and the Institute for Justice to challenge the law in state court.

An official press release will be issued tomorrow at 10 a.m. at Peticolas Brewing Company in Dallas.

(H/T Bitch Beer)

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