An alert FBvian points out that a former head of the TABC thinks the thing needs to be scrapped. But we’ll have to wait till 2011 for any reform. I give you the pertinent articles from The Lone Star Report:
TABC Sunset report reveals antiquated alcohol laws
by William Lutz Volume 9, Issue 15
It’s not every day that the former chairman of an agency board tells a legislative committee, “If I could make one recommendation to you I would amend the alcoholic beverage code by attaching an amendment that abolishes the current code and rewrites it in its entirety so that it is clear, and understandable, and simple.”
So said Allan “Bud” Shivers, Jr., former chairman of the Texas Alcoholic Beverage Commission (TABC).
Shivers told the Sunset Advisory Commission Nov. 16 the Alcoholic Beverage Code is “at least as complicated as the Internal Revenue Code” and as antiquated. Shivers’ statements are all the more remarkable given that his father, the late former Gov. Allan Shivers, wrote the alcoholic beverage code when he was a state senator.
The Sunset staff and the younger Shivers gave several examples to lawmakers of antiquated laws the agency enforces
Eight employees of the State of Texas do nothing but police bounced checks between segments of the beverage industry. Members commented that this is the only example they know where the state serves as a collection agency for bounced checks.
The state also prohibits selling beer in 11.5 ounce cans. (They have to be 12 ounces.) The state even regulates the number of coasters that can be given to retailers.
The Sunset Advisory Commission staff report included one item with the title “TABC Lacks the Clear Focus and Strategic Direction Needed in Today’s Alcoholic Beverage Regulatory Environment.” The commission is proposing refocusing the agency’s mission toward law enforcement and public safety.
Staff recommendations got a sympathetic ear from Mothers Against Drunk Driving. “We think the code needs to be completely rewritten,” said spokesman Kirk Brown. “Alcohol is freely available to minors.”
Brown called for increasing the TABC staff and budget, noting that Texas has the highest traffic fatality rate in the nation. He advocated better enforcement of existing Texas laws preventing underage drinking and service of additional alcohol to intoxicated people.
The commission also considered at length how the TABC assesses penalties for violations. It recommended mandating the agency to develop a consistent schedule of penalties.
It recommended allowing the agency to set penalties so that businesses lose any proceeds that they gained through illegal behavior. SB 1273 from 2003 prohibits TABC from considering the size of a business or the economic impact of a fine when assessing penalties. In other words, a big business gets the same fine as a small one does. The commission did not propose repealing SB 1273, but it did propose modifying it. Some of the witnesses and representatives of TABC agents did propose repeal.
Another topic much discussed before the commission is the “three-tier” system for selling beer. In the 1930s, the Legislature was concerned about beer brewers’ owning retailers because of organized crime concerns, the report notes. As a result, beer must be sold to retailers
through a distributors or wholesaler who signs an exclusive territorial agreement with the brewer. Texas statutes regulate the nature of thE relationship between all three parts of this system.
Commission member Howard Wolf questioned just about every witness, asking why the state needed to have such a strict regulation of the operation of these businesses – a structure he called an “Iron Triangle.” An appendix to the commission staff report recommends the Legislature examine this issue.
Another part of the code that could become a significant issue in the upcoming legislative session is the marketing practices section. Texas strictly regulates alcohol marketing.
The sunset staff suggested relaxing some of those rules, including the state mandates on the size of beer cans. Many foreign breweries supported eliminating the size restrictions to make it easier for countries using the metric system to sell in Texas. The commission staff also proposed eliminating state approval of labels and chemical testing for new alcoholic beverage products.
Sweepstakes regulations could also become an issue next session. State law only allows participation in a sweepstakes run by a beer company if the sweepstakes accepts entries in at least 30 states. Many people from industry testified in favor of eliminating this restriction.
One other interesting note from the hearing: TABC has homeland security responsibilities. A representative of TABC agents told the commission that the alcoholic beverage code is often used to prosecute terrorist organizations or organized crime organizations who finance their operations or launder money though a business selling alcohol.
Will the Legislature modernize Texas alcohol laws?
Clearly, the hearing showed substantial support for doing so. But when asked why the current code has remained in place for so long, Shivers replied, “I think the industry’s honest opinion about this is, ‘We know it’s complicated. We know it’s contradictory, but we’ve figured out how to work to make a living at it the way we’ve got it screwed up now, so don’t mess with it any more.”
TABC reform postponed – Lone Star Report, 12/17/2004
The Sunset Commission report on the Texas Alcoholic Beverage Commission depicted an agency that had not changed much over time, with Prohibition-era rules still in effect. (See LSR, Nov. 19, 2004)
While the report recommended a major overhaul of the agency, and most legislators agreed, the commission decided in the end not to pull the trigger. Instead it followed the recommendation of commission member Howard Wolf to establish a joint interim study committee.
The commission chose to extend the TABC sunset date to 2011, shortening the expected review by six years, to ensure that the issue is reviewed in that period.
The committee would have several charges, among them reviewing the options of placing all responsibility for assessing and collecting alcohol taxes with the State Comptroller, placing the responsibility for renewal of licenses with the Texas Department of Licensing and Regulation, and abolishing provisions of the code related to marketing practices and retailer independence.
The latter issue was contentious, as the commission had previously looked at the possibility of abolishing a rule to require retail sellers of alcohol to purchase from a wholesaler. Wolf argued for a free market approach, while Sen. John Whitmire (D-Houston) gave the example of a wholesale company in Brenham, noting that the business would have to lay off employees if the rule were passed.
The commission, Whitmire said, should “go slow when it comes to consolidating liquor sales into too few hands.”
Another issue that divided the commission was the idea of differential fines based on the amount that a company benefits from a violation. Although there was some confusion among members and lobbyists that the fines were based on the size of the company, Sunset Director Joey Longley explained that the proposal was actually based on the amount of money the company made by violating the laws. Regardless of a company’s size, for example, if it broke a law about marketing to teenagers and made $10,000 off a marketing campaign, it could be fined $10,000 under the proposal.
Nonetheless, commission members, led by public member John Shields, had concerns with the proposal. Instead, they chose an alternative, which would encourage TABC to use higher fines that they already have statutory authority for in those cases. Current TABC fines range from $150 – $25,000, but Longley said TABC almost exclusively uses the minimum $150 fines.