Alcohol Laws Ruled Unconstitutional

In a harsh rebuke of the Texas Alcoholic Beverage Commission, federal judge Sam Sparks ruled several provisions of the Texas Alcoholic Beverage Code (the “Code”) unconstitutional in Authentic Beverages Company, Inc. v. Texas Alcoholic Beverage Commission.The court struck down as unconstitutional and enjoined TABC from enforcing the following statutory provisions and commission rules:

• Rule 45.110(c)(3), which prohibits producers and wholesalers of all alcoholic beverages from providing or purchasing any type of retailer-specific advertising. This means, among other things, that breweries, distilleries, and wholesalers can now list the retailers that carry their products on the companies’ websites.  Wineries already enjoyed this right under specific authority granted in the Code.

• Rules 45.77 and 45.90, which require malt beverage producers to use the words “beer,” “ale” or “malt liquor” on labels as those words are defined in the Code. Because the Code’s definitions of these terms has little in common with the industry’s and the general public’s use of the terms, their use can be misleading and confusing.

• Code § 108.01(a)(4) and Rules 45.79(f) and 45.82(f), which prohibit malt beverage producers from stating  alcohol content or other words that indicate potency of a malt beverage, like “strong” or “full strength” on labels and in advertising.

The court ruled against Authentic Beverage’s Equal Protection and Commerce Clause claims relating to sales to consumers by malt beverage producers at the breweries, brewpubs selling to wholesalers and retailers, and permitting requirements for out-of-state malt beverage producers.It remains to be seen whether TABC will appeal the decision. Unless TABC takes action to stay the effect of the court’s judgment pending appeal, the judgment and its injunction are effective immediately.