American Brewer 2012v1 Winter 2012 : Page 5
Messing With Texas Jester King Craft Brewery in Austin, Texas channels the ghosts of the Alamo in challenging oppressive state beer laws. By Greg Kitsock PHOTOS BY HANS GRANHEIM T he latest challenge to state-based alcohol regulation, which overturned several Texas statutes on labeling and advertis-ing, came not from a small winery or big box chain store, but from a Texas microbrewery. -HVWHU.LQJ&UDIW%UHZHU\RQWKHRXWVNLUWVRI$XVWLQ¿ OHG suit in October against the Texas Alcoholic Beverage Com-mission (TABC), charging violation of its rights under the First and Fourteenth Amendments to the U.S. Constitution. Joining Jester King were two co-plaintiffs, also Austin based, Authentic Beverages Co. (a distributor) and Zax Restaurant & Bar. Ron Extract, Jester King’s co-founder, listed six points of contention: 1. The TABC prohibits breweries and beer distributors from telling consumers where their brands can be bought. 2. The TABC requires breweries to slap the terms “ale” or “malt liquor” on beers above 4% alcohol by weight, and forbids those terms for beverages under 4%. Extract contends he had to increase the alcohol of a “farmhouse pale ale” to label it accu-rately, which, he maintains, didn’t serve the TABC’s professed purpose of promoting temperance. 3. The TABC doesn’t allow breweries to ad-vertise the alcoholic content of their beers, or use words that suggest strength. 4. Texas forbids production breweries from selling beer to the public at the point of production, while allowing brewpubs and wineries to do so. 5. Conversely, Texas allows breweries and wineries to sell their products through distributors, but denies this right to brewpubs. 6. To do business in the state, Texas requires every foreign brewer to apply for a license that (according to Extract) can cost $6,000 for two years. This is not the case for foreign wineries and distilleries. On Dec. 19, Judge Sam Sparks of United States District Court for :HVWHUQ7H[DVUXOHGLQ-HVWHU.LQJ¶VIDYRURQWKH¿ UVWWKUHHSRLQWV�f; Winter 2012 The Business of Beer 5
Messing With Texas
Greg Kitsock
<br /> “We’re essentially in the same business as wineries, and nothing justifies a separate set of laws.”<br /> <br /> The latest challenge to state-based alcohol regulation, which overturned several Texas statutes on labeling and advertising, came not from a small winery or big box chain store, but from a Texas microbrewery. <br /> <br /> Jester King Craft Brewery on the outskirts of Austin filed suit in October against the Texas Alcoholic Beverage Commission (TABC), charging violation of its rights under the First and Fourteenth Amendments to the U.S. Constitution. Joining Jester King were two coplaintiffs, also Austin based, Authentic Beverages Co. (a distributor) and Zax Restaurant & Bar.<br /> <br /> Ron Extract, Jester King’s co-founder, listed six points of contention:<br /> 1. The TABC prohibits breweries and beer distributors from telling consumers where their brands can be bought.<br /> 2. The TABC requires breweries to slap the terms “ale” or “malt liquor” on beers above 4% alcohol by weight, and forbids those terms for beverages under 4%. Extract contends he had to increase the alcohol of a “farmhouse pale ale” to label it accurately, which, he maintains, didn’t serve the TABC’s professed purpose of promoting temperance.<br /> 3. The TABC doesn’t allow breweries to advertise the alcoholic content of their beers, or use words that suggest strength.<br /> 4. Texas forbids production breweries from selling beer to the public at the point of production, while allowing brewpubs and wineries to do so.<br /> 5. Conversely, Texas allows breweries and wineries to sell their products through distributors, but denies this right to brewpubs.<br /> 6. To do business in the state, Texas requires every foreign brewer to apply for a license that (according to Extract) can cost $6,000 for two years. This is not the case for foreign wineries and distilleries.<br /> <br /> On Dec. 19, Judge Sam Sparks of United States District Court for Western Texas ruled in Jester King's favor on the first three points,declaring the laws in question “an unconstitutional restriction of free speech.” The ruling became effective immediately, allowing Texas breweries to relabel their beers and post “where to buy” pages on the Internet. The TABC reportedly will not appeal the verdict.<br /> <br /> Judge Sparks, however, ruled against the plaintiffs on points four through six, allowing the state to enforce different rules for breweries and other alcohol producers. Extract had maintained that these were violations of the 14th Amendment, “which forbids discrimination against a particular subset of people for arbitrary reasons.”<br /> <br /> “We’re essentially in the same business as wineries, and nothing justifies a separate set of laws," he claimed. But he conceded that the burden of proof was higher under the Equal Protection Clause, and wasn’t surprised by the court’s decision. Extract was unsure whether he would appeal that part of the verdict or seek to amend existing state laws.<br /> <br /> He did charge, however, that the Texas legislature has been unresponsive to the needs of craft brewers. Extract says that three measures were introduced in the last session that would have given small breweries some of the rights now enjoyed by wineries. Two died in committee, and the third never came to a floor vote. "The beer distributors have a lot of power, they contribute a lot of money. Some of them are quite happy with things the way they are, and are reluctant to change anything.”<br /> <br /> Extract admits that some of his fellow brewers are not happy about the suit. They worry that relaxing labeling restrictions could "open the floodgates to more products coming into Texas,” he elaborated. And now that it’s permissible to list which beers can be bought where, “there’s a fear that bigger breweries could strong-arm distributors into granting them more prominent positions on their ads.”<br /> <br /> But he believed that the verdict would benefit consumers, “and we feel their interests and our interests are the same.”<br /> <br /> Had he won his 14th Amendment challenge, Extract might have opened another can of worms. What if Anheuser-Busch InBev argued that since it’s in the same business as brewpubs, it should be able to sell ' beer directly to the public at its Houston branch? (Indeed, AB-InBev last spring helped shoot down H.B. 602 - a bill to allow small Texas breweries to provide small amounts of beer to visitors following tours - on the grounds that it was discriminatory.)<br /> <br /> “Honestly, I wouldn’t care if Anheuser-Busch wants to operate a bar on-site,” answers Extract. “I don’t think them serving a few pints would cost Jester King any business.”<br /> <br /> Would the outcome in the case been any different if the CARE Act were in effect? The National Beer Wholesalers Association has declined to comment, noting that the CARE Act addresses Dormant Commerce Clause but not First or Fourteenth Amendment issues.