Craft beer has become quite a popular thing in America. Unfortunately, when consumers demonstrate their preferences, oftentimes government shows up in an attempt to reverse those preferences.
While there is a lot of cronyism coming out of Washington DC in terms of the government teaming up with big business, it also happens at the state and local levels just as much.
Big businesses don’t like competition, so some of them turn to the government for special favors. In the case of distributing beer, this is exactly what is happening in Texas.
Three craft breweries are challenging a 2013 Texas law that essentially forces breweries to surrender their ability to sell their distribution rights. Instead, they are forced to surrender their rights to distributors without compensation.
It used to be the case that beer distributors would compensate the brewers in exchange for the right to sell their beer to the marketplace. With the new law in effect, the distributors get those rights for free and are then able to sell those rights to other distributors. You can’t make this stuff up.
Of course, this is already hurting consumers, as some small breweries in Texas are putting plans on hold to expand. There will be fewer options for consumers around the state. Unfortunately, these laws are spreading, as Kentucky recently passed something similar.
Three craft breweries are challenging this law in court based on the Texas Constitution, with the help of the Institute for Justice.
No Free Market for Beer
As with so many bad government laws, this stems from previous bad laws. When alcohol Prohibition ended nationally in 1933 (thankfully), some state governments took control of the distribution of alcohol and even the retailing.
However, most states have what is called a three-tier system, which means that there have to be three independent parties in the process of selling alcohol. Producers have to sell their product to wholesale distributors and distributors then sell to retailers. It is then the retailers that may only sell to consumers. As with everything, there are exceptions.
This actually boggles the mind. These laws were ridiculous when passed in the 1930s and they are still ridiculous today. Why can’t a brewery distribute their own beer or sell their beer directly? Why do there have to be independent parties doing this?
(As a side note, the state of Washington repealed its three-tier system in 2011, but it also boasts of having the highest liquor tax in the nation.)
The problem is that we don’t know what would be most efficient in a free market system because it currently doesn’t exist.
If you like to knit blankets and sell them on your own website, should that be illegal? Should you be forced to take your product to an independent distributor who then sells it to an independent retailer?
The problem isn’t just this recent Texas law, but also the laws already on the books. The state legislature should be repealing these archaic laws that were ridiculous and harmful to begin with.
Again, this is just another example of one bad law leading to another. And, of course, we shouldn’t be surprised it is being done as a form of corporate welfare.
This is nothing more than beer fascism, where the government is seeking to control an industry to benefit some at the expense of others. They can’t let consumer demand decide what products are best and how they can be produced and distributed most efficiently.
I’m glad these three breweries are fighting back and that the Institute for Justice is helping. If they succeed, maybe they should go after the silly 1930s era law too.