The Beer Alliance of Texas Supports our state's long-standing Three-tier System
The three-tier system has served Texas very well for decades. The Beer Alliance of Texas believes that by expanding the definition of a controlling interest in affiliate ownership across the three tiers of the code it will weaken and disrupt the orderly alcoholic beverage marketplace in Texas.
Cross Tier Ownership Prohibition
The Texas Alcoholic Beverage Commission has heretofore strictly enforced De Minimis investment holdings when evaluating market control, adhering to the strict prohibition of cross tier ownership.
Research indicates that a five percent hurdle, while appearing reasonable, is much too expansive based on the scale of larger corporate and individual investments held by parties in the state. The whole concept of cross tier ownership being a prohibited activity rests at the cornerstone of the three-tier regulatory system that has been in place since the repeal of the 18th Amendment (Prohibition). There were a number of causes that inspired the "great experiment" including virtually unregulated consumption and the undesirable promotions that grew from interests owning the manufacturing, distribution, and retailing of alcoholic beverages. That is why the system that is in place today precludes cross tier ownership.
By way of example, five percent ownership in several example companies in different TABC tiers is shown below. Large investors or individuals could greatly influence market conditions across all three tiers with mega-sized holdings.
Rationale for "Tied House Law":
The term "tied house law" refers to the broad statutory scheme regulating the marketing of alcoholic beverages and the cross ownership of licensed operations.
Policy rationale for this law:
- to promote the state's interest in an orderly market.
- to prohibit vertical integration and dominance by a single producer in the marketplace.
- to prohibit commercial bribery and predatory marketing practices.
Magnitude of 5% Ownership
|Entity||5% of Entity's Market Capitalization (as of March 16, 2015)||# of Shares Comprising 5% of Issued & Outstanding Shares||Top Holders (Percentage of Ownership)|
|Wal-Mart Stores, Inc.||$13,422,974,318||161,159,495||
|The Kroger Co.||$1,892,827,236||24,566,220||
|Anheuser-Busch InBev SA/NV||$9,832,773,590||80,392,230||
|Darden Restaurants, Inc.||$402,591,189||6,202,298||
|Murphy Oil Corp.||$422,098,648||8,875,077||
|Fromento Economico Mexicano, S.A.B. de C.V||$1,614,126,020||17,891,000||