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CASE OVERVIEW

On June 27, 2016, the Texas Association of Business, along with McLane Company, Inc., filed a lawsuit against the Texas Alcoholic Beverage Commission (TABC) in federal court to force the TABC to apply the Texas Alcoholic Beverage Code in a fair, consistent and legal manner.

Citing recent examples of the TABC withholding permits from a convenience store located in South Texas and a Texas-based food and beverage distribution company, the Texas Association of Business was compelled to file the lawsuit based on the TABC’s arbitrary licensing practices. To learn more about the TABC’s arbitrary licensing practices, see One Share Rule Explained.

The Texas Association of Business is taking on this fight because the TABC is applying the Texas Alcoholic Beverage Code in an unfair, inconsistent and illegal manner:

  1. The TABC’s application of Texas alcohol law defies common sense as the majority of alcohol manufacturers, retailers and distributors have some over-lapping ownership with businesses in other tiers.
  2. The TABC only enforces this rule against certain companies while allowing other companies to maintain cross-tier ownership stakes. In the last year, over 40 manufacturers, distributors and retailers with overlapping ownership had over 2,500 permits approved or renewed by the TABC. Because the TABC does not enforce the so-called One Share Rule consistently, it creates an unequal playing field that hampers free market competition. In short, it is arbitrarily picking winners and losers. That is simply not how we operate in Texas.
  3. The TABC is out-of-step with other states that operate under a three-tier system. For example, in New York, Maryland, Arkansas, Kansas, Kentucky and Michigan, companies are prohibited from having interests across more than one tier only if they control or influence the activities of businesses in more than one tier.
  4. The Texas Association of Business opposes regulatory actions—like the TABC’s so-called One Share Rule—that harm the Texas economy and job creation, for no good reason. Texas has succeeded principally because the state makes it easier, not harder, to do business here. Regrettably, the TABC’s policies do not reflect the vision and philosophy of the state, and through its absurd interpretation of the Alcoholic Beverage Code, it is discouraging business expansion.

The Texas Association of Business, along with McLane, filed this lawsuit against the TABC to demand that the Texas government create a level playing field for all business in the state. The Texas Association of Business and McLane believe that the TABC’s erroneous interpretation of the law and inconsistent licensing practices clearly violate the protections afforded to all businesses by the U.S. Constitution. The purpose of the lawsuit is to force the TABC to abandon the so-called One Share Rule, and enforce the three-tier system in a fair, consistent and legal manner, similar to other state alcohol agencies.

THE ONE SHARE RULE EXPLAINED

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Alcoholic Beverage Code
Texas’ Alcoholic Beverage Code regulates the alcoholic beverage industry by establishing a three-tier system where participants in each tier—manufacturers, distributors and retailers—must operate independently. These laws are commonly called “tied-house laws,” and they prohibit control or influence among the tiers.
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The three-tier system
The three-tier system and tied-house provisions are key components regulating the sale and distribution of alcohol across the U.S., yet how they are specifically defined and the exceptions that are made for some degree of vertical integration—i.e., overlap between tiers—vary from state to state.
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The One Share Rule
The TABC, however, has taken the tied-house laws to an absurd extreme by asserting that even one overlapping share of stock ownership across tiers, whether direct or indirect, violates its interpretation of the law. This is the so-called One Share Rule.

The TABC’s application of Texas alcohol law defies common sense as the majority of alcohol manufacturers, retailers and distributors have some over-lapping ownership with businesses in other tiers.

CASE TIMELINE

June 2016

The TAB along with McLane, file a federal lawsuit

June 27th, 2016|

The Texas Association of Business, along with McLane, file a federal lawsuit against the TABC in order to force the TABC to apply the tied-house provisions of the Texas Alcoholic Beverage Code fairly, consistently and legally.

TABC Chairman declines to meet with McLane’s CEO

June 21st, 2016|

TABC Chairman José Cuevas, Jr., through his outside counsel, declines to meet with McLane’s CEO.

McLane sends a letter to TABC Chairman

June 10th, 2016|

McLane sends a letter to TABC Chairman José Cuevas, Jr. regarding the TABC’s inconsistent application of the TABC’s so-called One Share Rule. McLane’s CEO asks to meet with the Chairman to discuss the issue, in the hopes of reaching a solution to this problem.

May 2016

The Texas Supreme Court agrees to hear OXXO’s challenge

May 27th, 2016|

The Texas Supreme Court agrees to hear the challenge from the convenience store chain OXXO against the TABC concerning the TABC’s refusal to grant OXXO a permit to sell alcohol. To read more about this case, see Related Cases.

McLane files a second protest

May 19th, 2016|

McLane files a protest with the TABC concerning a permit and license granted to Core-Mark, a grocery and alcohol wholesaler. To learn more about why McLane filed this protest with the TABC, see the FAQ.

TAB, along with McLane, file an amicus brief

May 9th, 2016|

The Texas Association of Business, along with McLane, file an amicus brief in support of OXXO’s Texas Supreme Court appeal.

March 2016

The TABC responds to McLane’s protest

March 29th, 2016|

The TABC responds to McLane stating it could take up to six months to investigate the World Market protest, despite the fact that information regarding World Market’s cross-tier ownership is publically available online.

McLane meets with staff members from the TABC

March 18th, 2016|

McLane meets with staff members from the TABC to attempt to negotiate a resolution of McLane’s concerns regarding the TABC’s licensing practices.

February 2016

McLane files a protest

February 5th, 2016|

McLane files a protest with the TABC concerning permits granted to World Market. To learn more about why McLane filed this protest with the TABC, see the FAQ.

 

June 2015

The TAB, along with McLane, file an additional letter

June 10th, 2015|

The Texas Association of Business, along with McLane, file an additional letter in further support of OXXO’s Texas Supreme Court appeal.

January 2015

The TAB, along with McLane, file a letter

January 14th, 2015|

The Texas Association of Business, along with McLane, file a letter in support of OXXO’s Texas Supreme Court appeal.

December 2014

Oxxo Files Petition for Review with Supreme Court

December 19th, 2014|

OXXO asks the Texas Supreme Court to review its case challenging the TABC’s refusal to grant OXXO a permit to sell alcohol

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Laws must be applied in a fair, consistent and legal manner.

GET IN TOUCH

For media or other inquiries related to this issue, please contact:

For the Texas Association of Business
Email: tabnews@txbiz.org
Phone: (512) 477-6721

For McLane Company
Email: Texans4Growth@McLaneCo.com
Phone: (254) 771-6165