A trio of Texas craft breweries has filed suit against the state over one of the beer-related laws enacted last year that benefits distributors.

The breweries – Live Oak in Austin, Revolver in Granbury and Peticolas in Dallas – are fighting the law that prohibits distributors from paying for the exclusive territorial distribution rights. They plaintiffs say in the lawsuit that it’s unfair that they can build up their businesses and then have to turn over distribution rights without being compensated for it.

The brewers are represented by The Institute for Justice, which explains in a news release today:

Before 2013, distributors would pay brewers for the right to sell their beer in markets like Houston or Austin. But Texas has 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, on the other hand, have traditionally reinvested this money to grow their breweries. “This law is like the government forcing authors to give the rights to their books to publishers for free,” explained Matt Miller, managing attorney of the IJ’s Texas office. “It is unconstitutional for Texas to force brewers to give distributors property that they never earned and don’t deserve.” “For the last 18 years, I’ve poured my life into this business,” said Chip McElroy, president of Live Oak Brewing. “I’m proud to have been part of the Texas craft beer Renaissance. When Texas passed this law, not only did it give away part of what my employees and I built—it took my beer off the shelves in Dallas-Fort Worth, San Antonio and other parts of Texas where Live Oak beer would otherwise be available.”

The law in question was filed as SB639, and it was a late addition to the bipartisan effort in the last legislative session to loosen restrictions on how and where craft breweries can sell their products. In a spirited committee hearing on the bills, SB639 was roundly blasted before author and committee chairman ordered that the opposing sides reach a compromise or risk having all the bills thrown out.

This excerpt from my piece on that hearing reflects the majority of opinion during the hearing:

A bill that Texas craft brewers say would threaten their business drew sharp criticism Tuesday from business and consumer groups, a conservative public policy organization and even global beer giant Anheuser-Busch InBev. “That is very simply a government-sponsored price-fixing cartel,” Mario Loyola of the Texas Public Policy Foundation said in testimony before the Senate Business and Commerce Committee in Austin.

Last May, that chairman who ordered the bill to be included, John Carona, was defeated in his re-election bid.

Here is today’s Texas Tribune story on the lawsuit.

The Virginia-based Institute for Justice says its work on the case is part of a broader effort regarding food:

Today’s case is part of IJ’s National Food Freedom Initiative. This nationwide campaign brings property rights, economic liberty and free speech challenges to laws that interfere with the ability of Americans to produce, market, procure and consume the foods of their choice. IJ has won a free speech challenge to Oregon’s raw milk advertising ban and is currently litigating cases challenging restrictions on the right to grow front-yard vegetable gardens in Miami Shores, Fla., the right to sell home-baked goods in Minnesota and the right to call skim milk “skim milk” in Florida.

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