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Aftershock of Judge Sparks’ Ruling

As seen in the post immediately preceding this one, Judge Sparks has sided with the plaintiffs, Authentic Beverage, on the 1st Ammendment claims of their lawsuit filed in Federal Court.

To summarize, the ruling has the following effects:

  1. TABC cannot prohibit you from telling customers or advertising where they can buy your products
  2. TABC cannot require you to label your products by their definition of “beer” and “ale”
  3. TABC cannot prohibit you from advertising the strength of your products by prohibiting words like “strong”, “prewar strength”, “full strength”, etc

If you read my blog post on thoughts from the motions hearing in this case, you might remember I raised some questions about point #1, specifically in respect to the potential for brewers or distributors to advertise on behalf of retailers in order to provide a benefit to the retailer. I maintain that it is not far fetched for a Big Distributor or Big Brewer rep to say “hey, carry our beers and we’ll include you in our ad” as an inducement to gain tap space.

In spite of Judge Sparks’ ruling, such behavior remains illegal – but its enforcement may prove difficult. I agree with the general sentiment that brewers should be able to tell you where you can find their products, but I maintain a real danger exists that this may open the door to less than scrupulous activity. If you’re a normal reader of this blog, you know my feelings on ethical behavior and its primacy in the marketplace. I hope this does not open a can of worms that results in the eradication of small, local brands from tap walls and bottle shops as larger brands “buy out” the space with inclusion in ads. I think it is a lot to ask of any enforcement agency to be able to effectively track down, prosecute, and prove guilty violators of this behavior – as we’ve seen it is already difficult for them to enforce the laws restricting other illegal inducements (see the No Label tap targeting case).

The biggest win on these points is for the Texas beer consumer, as it should open to the doors to more brands coming into Texas. This may, in fact, make Texas a more competitive market place and put more strain on start-ups fighting for space in bars, restaurants and other retailers. However, you will not find me arguing against the lifting of restrictions of competition. I don’t believe in laws that reduce competition for wholesale or retail tiers, and I certainly don’t believe in anti-competitive laws so far as they concern the production tier. Quite simply: let the best beer win.

It was not a total victory for the plaintiffs, brewers, and Texas beer consumers, however, as Judge Sparks sided with the state on the claim that the restrictions on permissible activities of breweries and brewpubs. Authentic’s lawyers argued the restriction of breweries from selling to consumers and brewpubs from selling to resellers (wholesalers or retailers) was a violation of the 14th Amendment Equal Protection Clause and the Commerce Clause.

In essence, Judge Sparks did not go so far as to say that the state’s restrictions on breweries and brewpubs were constitutional, just that the plaintiffs did not satisfy the burden of proving they are unconstitutional. As critical as Judge Sparks was of the defense in their arguments in the 1st Amendment issues, he was just as critical of the plaintiffs in their arguments on these claims. To quote Judge Sparks:

Because Authentic has failed to present sufficient evidence in support of its Equal Protection claims, it is clearly not entitled to judgment as a matter of law. It further appears TABC is entitled to such judgment, by reason of its cross-motion, and because of Authentic’s failure to meet its evidentiary burden. Accordingly, the Court grants summary judgment in favor of TABC on Authentic’s Equal Protection claims.

While the illogical restrictions on the activities of breweries and brewpubs in Texas may have withstood legal challenge this time, Judge Sparks has provided a lot of kindling for the fire when the next legislative session rolls around. My fellow Texas Beer Freedom members and I have already begun discussing strategy for the next Legislative Session, and we have the continued support of San Antonio Representative Mike Villarreal, who is steadfast in his commitment to fair, logical beer laws.  In 2013 I think you will find Texas Craft Brewers more united than ever before and our chances of reforming the law and finding an equitable solution are better than ever.

I’d like to give some thanks and credit. First, to Jim Houchins and Rachel Fisher of Authentic Beverage and Pete Kennedy of Graves Dougherty Hearon & Moody for taking on this case. They are deserving of all the endearing credit that I hope you all bestow upon them. They took this lawsuit up not because a brewer asked them to, but because they believed in the cause. Additional thanks to Jester King Craft Brewery and Zax for volunteering to be co-plaintiffs in the suit so that it could have standing.

And finally, in what I think is an overdue thank you, thank you to all the other brewers in Texas who were involved in this effort behind the scenes. There is more than meets the eye in this case, and a lot more Texas breweries were involved than you know about, providing feedback and assistance to Authentic and Mr. Kennedy when asked. They did so without the expectation or desire for credit or applause from the crowd, but rather they did so because of a belief in the cause. You won’t find their names on press releases or blog postings nor will you ever get their names from me even though I know them. The community of Texas Craft Brewers is a tight knit group – perhaps too tight at times and I know newcomers to the scene may at times find themselves “outsiders” to the club – and that tight knitting is what provides the support system for efforts like this one, or HB 660, HB 602, HB 2436, the Texas Craft Brewers Festival, and countless other to be possible. A tip of my hat to all my fellow brewers. I often jokingly brag to folks how I have the coolest job in the world, and a big part of that is because I have the coolest peers in the world.

Cheers!

PS: In a few hours I’ll post “Judge Sparks’ Greatest Hits”. His judgement is a demonstration of some extraordinary wit, and some comments are just too good not to share.

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