Like many states, Texas operates under a three-tiered system regulating the alcohol industry. In this system producers, distributors, and retailers must remain separate entities and cannot share ownership or coordinate their activities. The system was enacted with the intent of preventing monopolistic practices, but in reality gives a great deal of power to distributors, the middlemen in this system, and allows them to hold considerable sway in the overall trends in the marketplace.
In 2013 the situation worsened with the passage of Senate Bill 639, which forbids beer brewers from accepting any compensation for the territorial rights to sell their product; discussed in more detail here. The most recent skirmish in this campaign is unfolding now with a new bill that, if passed, will further reduce competition by severely limiting craft brewers’ ability to self-distribute.
Under the current law, brewers producing under 40,000 barrels of beer per year are allowed an exception to the three-tiered system and can get a self-distribution license. Many smaller and local breweries favor this system since it allows them to remain more closely connected to their customers. This local connection is part of the appeal of craft beer and is one of the factors responsible for the incredible growth of the industry over the past several years.
However, self-distribution combined with the rising demand for craft beer threatens the three-tiered system. A new piece of legislation this year, House Bill 3389, responds to this perceived threat by reducing the maximum barrels of beer per year for a self-distribution license from 40,000 to a mere 5,000, effectively forcing many small breweries to rely on a distributor or significantly cut back on production.
Legislation that favors one group at the expense of another, such as House Bill 3389, runs contrary to the culture of liberty and freedom in Texas. In the name of leveling the playing field, these kinds of laws actually serve to stifle the growth of the economy by denying businesses the opportunity to evolve and innovate.
This session, legislators should take a stand against harmful government intrusion in the marketplace and allow consumers to be the judge of which products and businesses to support. When consumers hold ultimate sovereignty in marketplace disputes, and government allows those disputes to be solved with free market principles, the path towards increased prosperity will continue to open up and the Texas model will be preserved for future generations.