Federal Judge in Texas Lets Beer Be Beer

Yesterday a federal judge ruled that several restrictions on beer marketing enforced by the Texas Alcoholic Beverage Commission (TABC) violate the First Amendment. In response to a lawsuit by three Austin-based businesses—Authentic Beverages, which distributes craft beer; Jester King Craft Brewery, which makes it; and Zax Restaurant and Bar, which serves it—U.S. District Judge Sam Sparks overturned the state's arbitrary distinction between malt beverages containing up to 4 percent alcohol by volume, which are legally defined as "beer," and malt beverages stronger than that, which are called "ale" or "malt liquor." Those definitions do not conform to common usage, according to which all these beverages are beer, a category that is subdivided, based on fermentation method, into ales and lagers. Sparks did not buy the TABC's argument that the state's idiosyncratic terminology renders everyday usage inherently misleading:

In a remarkable (though logically dubious) demonstration of circular reasoning—a tactic it repeats throughout its briefing, and which it echoed in open court—TABC attempts to defend the constitutional legitimacy of the Code through an appeal to the statutory authority of the Code itself…

TABC's argument, combined with artful legislative drafting, could be used to justify any restriction on commercial speech. For instance, Texas would likely face no (legal) obstacle if it wished to pass a law defining the word "milk" to mean "a nocturnal flying mammal that eats insects and employs echolocation." Under TABC's logic, Texas would then be authorized not only to prohibit use of the word "milk" by producers of a certain liquid dairy product, but also to require Austin promoters to advertise the famous annual "Milk Festival" on the Congress Avenue bridge [a reference to the Austin Bat Festival]. Regardless of one's feelings about milk or bats, this result is inconsistent with the guarantees of the First Amendment.

The TABC also tried to justify the state's inaccurate beer/ale distinction by arguing that it provides a rough guide to alcohol content. Meanwhile, however, state law restricts more precise information about alcohol content, banning such numbers from ads for all brewery products, prohibiting them on labels for "beer," allowing them on labels for "ale," and requiring them on labels for distilled spirits. It also bans descriptions that allude to alcoholic strength (such as "strong" or "high proof") from ads and labels for all brewery products. Sparks overturned these rules as well.

Finally, Sparks rejected a regulation, ostensibly aimed at preventing vertical integration, that prohibits a brewery from telling its customers where they can buy its products. Among other things, that rule required brewers to disable the retailer location functions on their websites for customers in Texas. As with the other regulations, Sparks concluded that the state had failed to show the ban on publicizing retailers directly advanced a substantial government interest, let alone that it did so in a way that was no more extensive than necessary—the test the Supreme Court has established for restrictions on nonmisleading commercial speech related to legal activitity.

The state's burden was much lighter in defending the regulations that Authentic Beverages et al. challenged on equal protection grounds, such as the distinction between brewpubs (which are allowed to sell their products at the point of production but may not sell through distributors or retailers) and breweries (vice versa). The state needed only "a rational basis" to justify such disparate treatment, Sparks said, and Authentic "made no attempt" to anticipate and rebut plausible rationales. But Sparks reserved most of his criticism for the state:

Whether the challenged provisions of the Alcoholic Beverage Code could have withstood Authentic's First Amendment challenges under any circumstances is questionable, but under the circumstances of this case—most notably, defense counsel's candid admission in open court that the State submitted virtually no summary judgment evidence regarding some of Authentic's claims—there is no question the Texas Alcoholic Beverage Commission (TABC) has failed to meet its summary judgment burden as to these challenges….

Whether this failure reflects a tactical error, laziness, an implicit concession that the Code cannot withstand constitutional scrutiny, an erroneous assumption that TABC is entitled to special treatment, or a mere oversight, the Court cannot say….

The Court is shocked and dismayed at the Texas Attorney General's halfhearted conduct in this case. The very purpose of having the Attorney General's Office defend suits like this, is so the State of Texas can vigorously defend its duly enacted legislative mandates. Here, however, when TABC responded to Authentic's challenges at all, it responded with little in the way of argument, and even less in the way of relevant evidence. The State of Texas is lucky the burden of proof was on Authentic for many of its claims, or else the Alcoholic Beverage Code might have fared even worse than it has.

Lift a glass of beer to Greg Abbott's laziness!

Sparks' decision is here. I discuss some of the challenged regulations here and here. The Supreme Court overturned a federal rule banning alcohol content information from beer labels in 1995.

[Thanks to lunchstealer for the tip.]