The Texas Senate bill that would strip craft breweries of their ability to sell distribution rights passed through the Business and Commerce Committee earlier this week. The word being bandied about is “compromise,” as Senate Bill 639 is now packaged with several bills viewed more favorably by microbrewers. Most opponents of the bill aren't pleased with this development, but they are contented about ways the original bill has been weakened.
As touched on earlier, SB 639’s most controversial article stated that breweries would no longer be able to sell their distribution rights. That aspect of the bill is still in, says Beer Alliance of Texas president Rick Donley.
“That’s the nature of negotiations,” he says. “Is it perfect? No, but then it never is. If we could’ve sat down and said this is what we want, that’d be different. But overall we think it’s a very good deal and helps the craft beer industry in the state.”
“Is the bill perfect? No, but then it never is,” says Rick Donley, president of the Beer Alliance of Texas.
Donley says they were able to remove aspects of the bill like the severability clause, which said that if there were provisions in the Alcoholic Beverage Code that violated the constitution of the state or country, then it would have killed the entire piece of legislation.
A staffer at the Capitol, who asked to remain anonymous, called the section “a poison pill” that would've retroactively repealed bills if any part of them was found unconstitutional.
The other part of 639 that was removed would've set a uniform price for distributors' shipping costs across the entire state. Currently, prices are set within each market to reflect actual costs.
The Capitol staffer said that 639 is "a horrible bill that anchors down the other bills and throws a wrench in the process" but that getting through the committee gave it a lot of momentum.
"Nothing's guaranteed," he says, "but it should get a floor vote, and it should pass. But if something comes out of right field to kill it, it wouldn't be a shock given the legislative history of the issue."
The distribution rights issue is still a major problem for Dallas brewers. Deep Ellum Brewing Company hosted a lengthy discussion on its Facebook page regarding the bill, and nearly all involved not only spoke out against SB 639, but also against the bill’s sponsor, State Sen. John Carona (R-Dallas).
Likewise, Michael Peticolas, owner of Peticolas Brewing Company, has strengthened his stance against the bill.
“639 is terrible,” says Michael Peticolas. “We’re talking about a bill that’s not looking to extend our rights but to take away rights that exist.”
"639 is terrible," he says. "We’re talking about a bill that’s not looking to extend our rights but to take away rights that exist. It’s such an anti-capitalistic and anti-free market approach that it has me involved in the process."
Donley says that a provision was added that, for the first time, would authorize distributors and manufacturers to negotiate on marketing and promotional costs as well as other, less defined costs that were common before but never codified. There is no requirement, however, that any of those kinds of agreements be made.
Deep Ellum Brewing Co. didn’t mince words on Facebook when discussing the compromise in SB 639.
"Now, they can get our brand for free and then sell it between themselves for millions," the post says. "Who's to say they even distribute the product? We got hosed."
Peticolas says that the fact that SB 639 is now part of a package deal with senate bills 515-518 — sponsored by State Sen. Kevin Eltife (R-Tyler) and considered far more beneficial to the craft beer community — is especially concerning.
“Is the positive worth the detriment?” he says. “Are we taking two steps forward and one step back, or are we taking one step forward and two steps back? A lot of people I’ve talked to are saying, ‘Hmm, I don’t know, it might be better if none of it goes through.’”
Donley says that major players in the negotiation signed off on the package, including his Beer Alliance, the Texas Craft Brewers Guild, Open the Taps, Anheuser-Busch and Wholesale Beer Distributors of Texas. All parties agreed that nobody would work for amendments to the package as it moved through the House of Representatives or either directly or indirectly seek a veto on any of the bills.
The next move is to put the bills on a senate calendar agenda and then move it to a house committee meeting, which Donley believes will be Tuesday, March 19.
Peticolas finds the whole thing baffling.
“Everyone said this bill had no momentum. Now it’s going through,” he says. “What happened to those arguments? I’m very much against 639 and very upset that Carona put it in and that it’s tied to the others. I’m against the bill and think people need to decide if the package is worth it.”
Many craft beer industry insiders are upset over recent developments in the Texas Legislature.
