The Taps of Economic Liberty Are Open in Texas

Beer connoisseurs and fans of liberty will want to say “cheers” to IJ’s latest economic liberty victory. IJ scored a landmark victory on behalf of eyebrow threaders in 2015 at the Texas Supreme Court. Building on that, IJ has delivered another win for economic liberty in the Lone Star State—this time on behalf of craft brewers, who had a valuable part of their businesses taken away by a law that was written by big beer distributors in 2013. Specifically, the law made it illegal for brewers to sell their distribution rights to distributors.

The loss of the value of these distribution rights made it much more difficult for brewers to expand into new markets. Under the three-tier system, brewers are required to give middleman distributors an exclusive and perpetual right to distribute their beer in a given territory. Some distributors were willing to make a lump-sum payment for distribution rights to a given market, like Houston or El Paso, in order to build their portfolio of popular beers. Brewers would take that money and reinvest it in equipment and staff to grow their businesses. This practice was flatly outlawed in 2013 when the Legislature prohibited brewers and distributors from even coming to the table to negotiate for the value of distribution rights. Instead, brewers who wanted to expand had only one option: give their distribution rights away for free.

IJ teamed up with three Texas breweries—Live Oak, Peticolas, and Revolver—to challenge the law in late 2014. Seven months later, the case got a boost when a major new implement for liberty was added to the Texas toolkit. In June 2015, the Texas Supreme Court issued its ruling in IJ’s eyebrow threading case. The Court made it clear that the Texas Constitution provides unique and substantial protection for economic liberty. There must be an identifiable and “real-world” connection between an economic regulation and a legitimate governmental interest and the burden placed on the individual (or business) cannot be oppressive when weighed against the governmental interests being asserted. The threading decision instructs judges to examine the record and the evidence presented and to strike down laws that restrict economic activity with no corresponding public benefit or that are oppressive in light of whatever marginal benefit is being achieved.

IJ’s victory for Texas threaders provides a roadmap for how judges should engage with economic liberty cases. We used the roadmap in this case to show the court that there is no legitimate interest being served when the government forces brewers to give away part of their businesses to distributors. That is just a blatant transfer of wealth, which is not a legitimate purpose for a law. An engaged judge agreed and declared the law unconstitutional. So raise a glass to freedom in Texas, where the taps of economic liberty are primed and where courts now recognize that everybody has the constitutional right to earn an honest living.
