Texas and Beer: Not As Great a Combination As You Think It Would Be

Everyone loves Texas. In fact, if there was a state in the union that most people who didn’t even live there would consider themselves a fan of, it would probably be Texas. It’s everything that’s great about America: wide open frontier, simple people who live off the land, a cowboy attitude and the potential to legally own an entire arsenal of weaponry.

Which is why it’s surprising that Texas lawmakers are looking to – potentially – infringe on another, corresponding God-given American right: the right to cheap, regulation free beer.

“Anti-competitive” – “tantamount to price controls” – “a government-sponsored price-fixing cartel.”

These were among the descriptions offered in the Texas Capitol during this morning’s public hearing regarding SB 639, the proposal supported by the Wholesale Beer Distributors of Texas over the objections of the state’s craft brewers and its other large distributor group, the Beer Alliance of Texas.

Listening in on the hearing, the rhetoric from two state business leaders and a conservative-leaning public policy expert was striking.

“That is very simply a government-sponsored price-fixing cartel,” said Mario Loyola of the Texas Public Policy Foundation.

SB 639’s target isn’t necessarily the beer industry itself, but a concept called “reach-back pricing,” which lets beer manufacturers set different prices for their product depending on where the product is being sold. What that means is, if a product is moving faster in Dallas and other beers cost more, they can charge more. If it moves slower in Austin and has less competition, they can adjust accordingly. But some legislators would like to see the price of beer “normalize,” so their best solution – because it is unlike legislators to think too critically – is to force beer manufacturers to sell the product to distributors at one, single set price. Which, of course, means that the dynamics of the free market will no longer apply to alcohol sales in the state of Texas. Because free markets don’t matter when you know what to expect to pay for a Lone Star across an entire state.

The bill is also a potential blow to craft beer manufacturers, enthusiasts and drinkers across the state, as it prohibits manufacturers from selling their distribution rights to wholesalers. That means a craft beer brewed in one part of the state can’t distribute in another part of the state unless they can afford to do so themselves. For small companies, this is patently unfair, especially when those small companies help to contribute nearly half a billion dollars to the Texas economy.

It seems kind of weird that while Rick Perry is off in California touting how awesome Texas is for business – and for the most part it is – while the legislature at home seems to be trying to kneecap a growing outlet. Especially in a state that knows how to appreciate a cold one.

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