UPDATED: Live Oak, Peticolas & Revolver to Announce Distribution Lawsuit

Chip McElroy speaking at a press conference at Live Oak Brewing in Austin, TX on an upcoming lawsuit concerning distributor rights.

Chip McElroy speaking at a press conference at Live Oak Brewing in Austin, TX on an upcoming lawsuit concerning distributor rights.

Three Texas brewers have teamed up to challenge restrictions on craft beer distribution.

Chip McElroy, owner of Live Oak Brewing in Austin, Michael Peticolas, owner of Peticolas Brewing Company in Dallas, and Rhett Keisler, owner of Revolver Brewing in Granbury, TX, held press conferences on Dec. 10 to say that they would be filing a major property rights lawsuit against the state concerning compensation for distribution rights.

You can read the full complaint on the Institute of Justice’s website here.

A brief summary on the reasoning behind the suit has also been released by the Institute:

“Before 2013, distributors would pay brewers for the right to sell their beer in markets like Houston or Austin. But Texas 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 have traditionally reinvested this money to grow their breweries.

This law has nothing to do with protecting consumers. It is a transfer of wealth from brewers to distributors. But the Texas Constitution protects the property rights and economic liberty of entrepreneurs. Brewers should get to keep the value of the businesses they built.” – Institute for Justice

Keisler, in an email to Bitch Beer, talked about his reaction to the passing of the 2013 beer laws and his decision to file this suit.

“Our reaction was utter dismay and a feeling of helplessness.  It is well documented that almost everyone testified against Senate Bill 639, but that didn’t stop it.  We felt the bill would never pass, but we were wrong,” said Keisler. 

“We believe the current law, which prohibits Texas craft brewers from selling their own territorial rights, is unconstitutional and has no place in a State that traditionally prides itself on open and free markets. It should say something about this case that the Institute for Justice, a champion of economic liberty, has taken up our cause.”

Fellow DFW brewer Peticolas spoke on how his brewery came together with Live Oak and Revolver to challenge the law.

“The genesis of this was in the last legislative session,” said Peticolas in a phone interview. “When the laws were passed, it really ignited a spark in a lot of Texas brewers. These three brewers [Live Oak, Revolver and Peticolas] took more offense than others.”

Peticolas, an attorney turned brewer, also expressed his frustrations with the restrictions in the 2013 beer laws passed in the Texas Legislature.

“When I talk to people about the laws, they’re as dumbfounded as I am. They ask,’how is it that the brewer has to give away their rights, but the distributor can sell theirs?” said Peticolas.

When asked how much money was potentially lost during the time after the laws were passed to prevent the selling of distribution rights, Peticolas said that much of that information would be difficult to find and ultimately confidential, but that it would likely be significant.

However, Peticolas isn’t looking for financial damages.

“We’re not seeking money, it’s not about that. I’m just seeking out the rights that I lost.” he said.

Keisler also stated that he is not looking for compensation, focusing instead on getting the restrictions lifted.

“We want this law declared unconstitutional.  If the law is struck down, then we can have normal, free-market negotiations with distributors.  Let the market decide if our territorial rights have value.  We want to get our beer to craft beer drinkers in other Texas towns and this law hinders our ability to do so by forcing us to give away something for free in order to expand.  This law limits the craft beer consumers’ choice and is not pro-business,” said Keisler.

You can see Bitch Beer’s posts from the passing of the 2013 Texas beer laws here and here.

-Wendy

3 Comments on UPDATED: Live Oak, Peticolas & Revolver to Announce Distribution Lawsuit

  1. Marijan Veselinovic // December 9, 2014 at 7:07 pm // Reply

    I may be looking at it oversimply, but if a distributor can still sell the rights to another distributor, why not create a dummy distributing firm and give them the rights, then sell it through them. I’m probably missing a lot of details, oil companies and car manufacturers do that.

  2. John Rasmussen // December 9, 2014 at 7:25 pm // Reply

    This lawsuit is a long time coming. While the efforts of the Texas Craft Brewers Guild with Scott Metzger and the Houston based grass roots organization OpenTheTaps.org have made significant improvements for craft brewers, they have yet to succeed in abolishing our pre-prohibition three-tier system. With Anheuser-Busch InBev ties to Ben E Keith Distributors, the Texas Wholesale Beer Distributors of Texas (wbdt.com) lobbyist have a large bankroll to support them. AB-InBev and MillerCoors know that by keeping tight regulations they keep higher market shares and larger profits. I wish Chip, Mike and Rhett the best in this endeavor, their success will only create higher growth for the Texas Craft Beer industry.

  3. John Harrison // December 11, 2014 at 8:33 am // Reply

    John Rasmussen, if you want to help our cause, please educate yourself as to when the three tier system was created. Pre-prohibition days did not have any system and was kind of a free-for-all thus creating prohibition, among other things…Also, please ease up with the odd conspiracy type issues. We have a large mountain to climb and gibberish only clouds the issue.

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