Poured Out

With archaic and self-serving laws, reforms don't come easy for the Texas booze industry

A veteran owner of a Houston bar and restaurant thought he had a good grasp of the state laws and the lengthy interpretations of them by the Texas Alcoholic Beverage Commission.

And yet during one inspection, a TABC agent came growling to him about a flagrant violation: On his outdoor tables, he had put up those common umbrellas sporting wine names and the Italian tricolors. In Texas bars, that's forbidden advertising.

For water carafes, the establishment had carefully removed all the labels from used tequila bottles of a particularly classic design. The agent looked all over the seemingly clear, clean containers, until he spotted a tiny etching of the maker's logo in the base of the carafe -- and ordered all of them banished.

Spec's John Rydman doesn't want to see big 
corporations in the Texas package store business.
Daniel Kramer
Spec's John Rydman doesn't want to see big corporations in the Texas package store business.

"He carried on like we'd committed a felony," the restaurant operator says. "You never know what they're going to come up with."

Another bar owner tells of having to call the Texas Parks and Wildlife Department to convince a TABC agent that the fish in his aquarium were just pacus -- not the man-eating piranhas that the agent insisted they were.

And the operator of a Houston drinking establishment displayed a banner proclaiming him winner of the Houston Press Best of Houston category for serving a particular premium beer. That display lasted only until a TABC officer ordered it removed immediately. The apparent violation: The sign mentioned the name of the bar and the beer it served.

"I thought, 'Why don't they just take away my menus, too?' " says the owner, who asked to remain anonymous. "There are bars around here that serve underage drinkers, but they're more worried about my sign."

Allen Shivers, who headed the TABC for six years, hears the stories and shakes his head at Texas's code: "No one understands it. It's at least as complicated as the IRS code.

"Take three experienced TABC agents and give them the same fact situation," Shivers says about TABC's marketing rules. "You'd have at least five different interpretations of the Alcoholic Beverage Code."

The TABC and its onerous operating code seem overdue for reform, and the timing couldn't be better. In 12-year cycles, every state operation gets intense scrutiny under the Texas Sunset Advisory Commission, which can even call for disbanding agencies that can no longer justify their existence.

And 2005 is the year that the TABC is up for review by the state legislature. The agency, with a $25 million budget and about 500 employees, is saddled with enforcing nearly incomprehensible laws that date back to its post-Prohibition beginning in 1935.

Most everyone agrees that the code's mission statement reflects an era long gone: This code is an exercise of the police power of the state for the protection of the welfare, health, peace, temperance and safety of the people of the state.

The beverage code also explains that various provisions are in place to block unfair competition and "unlawful trade practices." In fact, many of those same laws are doing just the opposite: ensuring near-total monopolies, higher prices and taxes for consumers, and even the use of public agencies to enforce the private preferences of the industry.

Other industries might have exclusive wholesaler distribution zones, and their businesses may prefer to get paid on demand; with the TABC code, it's the law of the land for beer retailers, enforced by a state agency.

As an example, a Sunset Commission report cited the impacts of the Texas law that requires that beer be sold in only certain-sized containers. A 12-ounce can is fine; a 345-milliliter can -- common in much of the world -- holds 11.67 ounces, so it is banned by the TABC.

"As a result, [Texas] consumers lack access to a range of products bottled in metric sizes from countries such as Canada, Holland, Belgium, New Zealand and Japan, which can be purchased in almost all other states," the Sunset Commission report said.

So one domestic brewer has to pay $600,000 more to produce a container that conforms to Texas law. And a malt beverage producer estimated additional costs of $200,000 for that, the Sunset report stated.

Why the need for such a law? Because distributors prefer working with standardized containers. Sunset staffers wryly noted that "This does not seem to be a matter of state concern."

When it comes to regulating booze in Texas, however, the state concerns can get even stranger. The foundation for the state code, known as the three-tier system, virtually ensures that.

The TABC mandates absolute separation of the three levels of the booze business in Texas: manufacturers, wholesalers and retailers. The concept's roots go back to efforts to keep organized crime and undue influence from affecting the industry when alcohol was legalized in the '30s.

But critics contend that it has evolved into a rigged game. The big-money players are beer and liquor wholesalers and retail package stores that also double as wholesalers. Texas law says that bars and restaurants can buy wine and liquor from only package stores. And no one on the retail end of the liquor business can deal directly with a manufacturer.

The groups most responsible for those laws -- the Texas Package Store Association, the Wholesale Beer Distributors of Texas and the Licensed Beverage Distributors of Texas -- declined to be interviewed for this story.

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