Bill of Rights Day: Craft Brewer’s Suit in Texas Exemplifies Business Civil Liberty of Free Speech

Cross-posted by Forbes.com on WLF’s Contributor Site

Today is the 220th birthday of the Constitution’s Bill of Rights. As an organization that focuses on free enterprise, Washington Legal Foundation consistently advances the idea of business civil liberties. That is, despite what those whose camps occupy public parks think, the Bill of Rights protects businesses and the people who create, run, and work in them. For 34 years, WLF has advocated for First Amendment protection of commercial speech – information about products and services.

 A simmering legal dispute in Texas regarding a business’s right to tell consumers where to find its product, advertise a key attribute of that product, and accurately label its product – Authentic Beverages Company v. Texas Alcohol Beverage Commission (TABC) – provides a perfect platform to explain the value of commercial speech.

In Texas, alcohol laws and regulations: 1) prohibit brewers and distributors from telling customers where their products can be purchased (but allows wineries, and of course retailers, to do so); 2) mandates that beer products of 4% alcohol content or less be called “beer,” and those above 4% be called “ale” or “malt liquor;”; and 3) prohibit advertising of beers’ alcohol content (something wine and distilled spirits can do).

Distributor Authentic Beverages, craft brewer Jester King, and pub Zax challenged these and other rules as violations of the First Amendment, the Fourteenth Amendment, and the Commerce Clause. Texas Lawyer reported on the suit; a local news report on it can be watched here. Links to documents in the suit can be found here. The plaintiffs survived a motion to dismiss last December in a Western District of Texas federal court, and each party has now filed motions for summary judgment, and arguments have been held on the motions.

It’s hard to imagine how any of these archaic rules can survive First Amendment challenge. The ban on advertising alcohol content is so unsupportable that in its summary judgment motion, the TABC cites no case law or evidence that justifies the ban. In 1995, the U.S. Supreme Court found a similar federal restriction unconstitutional in Rubin v. Coors. The Texas ban survived only because no one had stepped forward to challenge it.

The gag rule on information about retail locations for brewers’ products is also constitutionally infirm. The rule is so extreme that if you visit any Texas brewery  and ask where you can buy their beer, the brewers can’t tell you. TABC again offered no case law to support its argument for this provision in its summary judgment motion. The rule advances no substantial government interest. If anything, it undermines the state’s interest in ensuring fair competition in the market. Craft brewers are at the mercy of retailers when it comes to informing consumers. As the plaintiffs relate in their response to TABC’s motion, “The evidence shows that retailers can, and do, favor some brewers over others in their advertisements.” That’s a polite way of saying the big national brewers have far more sway over retailers than local craft brewers.

Finally, the beer/ale/malt liquor labeling requirement should also be struck down. It requires that brewers and distributors provide consumers with demonstrably misleading information. “Ale” is one broad category of malt beverage; the other is not “beer.” The second category is “lager,” and the categories are distinguished not by alcohol content, but by the brewing process, mainly fermentation. In Texas (and only in Texas, as no other state has such a rule) if a malt beverage is made using an ale process, but is 4% alcohol or less, it must be labeled as “beer.”

So if an ale maker wants to make sure their product can be labeled “ale,” they must increase the alcohol content, which doesn’t exactly advance the state’s interests in promoting temperance or making sure consumers know how strong the beer/ale/malt liquor is. In his December 2010 denial of TABC’s motion to dismiss, the judge expressed considerable skepticism over this provision; no doubt, that skepticism will be codified into a firm ruling of “unconstitutional” soon enough.

Many of America’s Founding Fathers were brewers themselves. Ben Franklin reportedly once said, “Beer is living proof that God loves us and wants us to be happy.” It’s fair to believe that at a minimum, Franklin and his colleagues would want today’s brewers to have the right to speak about such basic facts as where their product can be found, and how much alcohol each product contains.

3 thoughts on “Bill of Rights Day: Craft Brewer’s Suit in Texas Exemplifies Business Civil Liberty of Free Speech

  1. Al Nagler

    The state and local laws regulating alcohol are certainly archaic and need to be reexamined. I’m surprised that Texas is a state with such restrictive laws.

  2. Pingback: Update: Judge Strikes Down Texas’ Irrational Speech Limits on Beer Promotion « The Legal Pulse

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