Beer battle brewing over distribution rights

AUSTIN (KXAN ) — A battle over beer is brewing in Texas. Three small breweries announced they will sue the state because of what they say is an unconstitutional law on the books that favors big beer distributors over the “little guys.”

Chip McElroy sold his first beer in 1997. Slowly, he put his Live Oak Brewing Company beers in pub after pub, building up his business by charging companies to distribute his beer. His book of distribution rights is worth a few million. Then came 2013.

“Somebody decided, well, we just don’t want to pay for it. We want to get it for free,” said McElroy.

Lawmakers in the last session made a law forbidding people like McElroy from selling their distribution rights. So when they’ve reached their geographical limit in Austin, he has to give them to big distributors to get his beer in other cities.

“This is something that they’ve built. These are things that are worth a lot of money,” said Arif Panju from the Institute for Justice. He says that law is unconstitutional. He will file a suit Wednesday in Travis County on behalf of three breweries to get the law off the books.

“Doing your own distribution, you sell off that book of business to a distributor. Then you use that money to grow your business and make more beer to distribute — which is what they want,” said McElroy.

They’re prepared to take this all the way to the Texas Supreme Court. Meanwhile, Wholesale Beer Distributors of Texas did not respond to our requests seeking a comment.

Beer Laws In Texas

Texas’ beer laws evolved over the last few years. Last year, lawmakers passed five craft beer bills. The package of laws helped small brewers expand with less regulation and also allowed breweries to sell beer to visitors. The Institute for Justice says only one of those bills is unconstitutional.

Before that, in 2012, Jester King Brewery in Dripping Springs won a suit against the Texas Alcoholic Beverage Commission allowing breweries to display where their beers are sold and to accurately label their products.

This, no matter how the lawsuit plays out, is a big deal. Last year, Texas brewers made around 833,000 barrels of beer. That’s up 17 percent from the year before.

KXAN.com provides commenting to allow for constructive discussion on the stories we cover. In order to comment here, you acknowledge you have read and agreed to our Terms of Service. Users who violate these terms, including use of vulgar language or racial slurs, will be banned. If you see an inappropriate comment, please flag it for our moderators to review.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s