Texas Supreme Court Upholds Prohibition on Cross Ownership in Texas

The Texas Supreme Court ruled in favor of the Texas ABC decision not to grant an alcohol retailer permit to an entity owned by in part by an entity that owns 20% of Heineken.  The 6-2 decision affirming the Texas ABC decision follows similar affirmance from the court of appeals, a district judge and a country judge in an administrative hearing.

Parties that filed amicus briefs in support of Cadena were the Texas Association of Business and McLane Company which has a similar problem with ownership in retailer and wholesaler tier.  The Texas Public Policy Foundation  and Murphy Oil, USA likewise supported Cadena.   Amicus briefs filed in support of the state included briefs from the Center for Alcohol Policy, the Beer Alliance of Texas and the Wholesale Beer Distributors of Texas.

The Texas Supreme Court painfully went through the statute on prohibited interests to compare to the facts of this case and the purpose of these laws noting, “From all of this, the Legislature clearly was concerned no only with preventing paradigmatic, pre-Prohibition tied houses, but also with “related practices” that might negatively affect public health and safety.”

Noting the problems of judgement calls by government agency the Court notes “Experience teaches us that no regulatory or police agency  has the resources to enforce every statute against every violation.  But laws against speeding, jaywalking, even murder are not invalid because they are not perfectly enforceable.”

(Previous Post) Interesting Texas Decision On Cross-Ownership Prohibition Between Manufacturer and Retailer

Interesting case from the end of last year in Texas regarding the attempts of a brewery affiliated retailer trying to secure a license in Texas.

Cadena Commercial USA Corp. is ultimately owned by FEMSA (makers of Dos Equis among other beers).  Cadena applied for a Texas wine and beer retailers off premise license.  The Texas ABC rejected the application because it found that FEMSA had a sufficient interest in Heineken’s brewing subsidiary to be considered a manufacturer, which prohibited it from having an interest in a retailer under Texas law.    On December 20, 2012, the Court agreed with the Texas ABC  in this order.

A big thanks to Evan Lawson of Lawson and Weitzen in Boston for the heads up and background on this case.  Evan served as an expert witness for the state of Texas on this case on the three tiered system and what constitutes a prohibited interest.

Comments

  1. Also interesting to note that SCOTX did not rule on Cadena’s “one share rule” argument, with respect to how much cross tier ownership is too much. But sort of indicated there is some de minimis ownership, where surely TABC will not bother to litigate it.

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