Fight over beer distribution rights heads back to court

Canned Live Oak beer (via @liveoakbrewing)
Canned Live Oak beer (via @liveoakbrewing)

AUSTIN (KXAN) — The fight over beer distribution rights in Texas is headed to an appeals court. The Texas Alcoholic Beverage Commission has filed a notice of appeal in the case involving Live Oak Brewing and two other breweries.

In August, a judge ruled in favor of the breweries that teamed up to sue the state over a 2013 law (SB 639) that made it illegal for breweries to sell their distribution rights. For Live Oak Brewing owner Chip McElroy, the legal battle was about keeping what he believed was rightfully his. “This law took part of my business away from me and gave it to big distributors,” said McElroy in a statement after the ruling, “now I’ve got my business back.”

McElroy was able to sell his Houston distribution rights prior to the 2013 law but the other two plaintiffs, Revolver and Peticolas Brewing, had not.

“The trial court correctly saw that this law was written by distributors to do one thing: enrich themselves at the expense of craft brewers,” said attorney Matt Miller, who represents the brewers in the case. “That is unconstitutional, and we are confident the appellate court will agree.”

In Texas, a brewery can self-distribute in Texas as long as they make less than 40,000 barrels a year. If a brewery starts making more than that amount, they must contract with distributors to get their beer into any particular market. That distributor will be the only distributor allowed to sell that beer in Houston. But that distributor can turn around and sell the rights to another distributor.

For many breweries, the problem of selling their rights becomes a bigger factor as the brewery grows. When a brewery is starting out, they will usually self-distribute and grow their clientele. Before SB 639, breweries would be able to sell those rights they developed in other areas to a distributor.

The Third Court of Appeals in Austin will hear TABC’s appeal but a new court date has not been set.

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