Texas court invalidates restrictions on craft brewers
Texas law requires craft brewers to distribute their beer through territorially exclusive distributor agreements. Traditionally, distributors paid for these exclusive distribution rights. But in 2013, the state passed a major overhaul of how craft breweries were regulated in Texas.
The new law was positive overall, removing regulations that were outdated or that simply didn’t make sense. But one provision stuck in the new law prohibited brewers from “accept[ing] payment in exchange for an agreement setting forth territorial rights.” Adding insult to injury, the distributors themselves remained free to sell the distribution rights they had gotten for free to another distributor if they wished. Brewers also were limited in their ability to revoke distribution rights once they were granted.
The law was soon challenged by three breweries, represented by the libertarian Institute for Justice. The group quite sensibly argued that the law amount to a takings of the brewers’ property without compensation, which is a big constitutional no-no.
Texas isn’t alone in requiring what is effectively a giveaway to distributors. A similar law was enacted in Kentucky in 2014, and efforts in this direction are underway in other states. One hopes decisions like this one will stop such efforts in their tracks.