Walmart Files Lawsuit to Sell Hard Liquor in Texas

dram-shopWalmart Stores Inc. is a force to be reckoned with in the boardroom or the courtroom. Their most recent legal obstacle involves various Texas liquor license laws that prevent the company from selling hard liquor in addition to the wine and beer that its stores already stock throughout the state. On February 12, 2015, Walmart and Sam’s Club sued the Texas Alcoholic Beverage Commission (TABC) in federal court. The lawsuit challenges the constitutionality of rules that regulate package store permits.

As plaintiff, Walmart alleges that the rules violate sections of the Constitution that relate to commerce, equal protection and comity, a legal principle that requires Texas to uphold federal laws. Although Walmart would not agree to interviews with an Austin TV station, company spokesman Lorenzo Lopez did provide a written statement. He said that current laws are “counter to Texas’ belief in free enterprise and fair competition.” He added that it “limits our customer’s choice and keeps the price of spirits artificially high.” In the lawsuit, Walmart expressed similar issues by saying that the laws are “irrational, unnecessary and unfair” and “harmful to Walmart’s profits.”

To win the right to sell hard liquor in the state, Walmart must successfully change multiple aspects of the law. First, the TABC does not allow publicly traded corporations with more than 35 shareholders to sell alcoholic spirits. Second, a single company is limited to five package store permits. Walmart currently has 543 wine and beer retailer’s off-premise permits in Texas. Third, rules prevent companies from holding wine and beer permits together with package store permits. If parts of the law change, Walmart could abandon its current permits and apply for 543 new BF beer licenses and 543 new Q permits for selling wine. This option would cost the company an additional $1.3 million. If Walmart were granted package store permits, it would need to build free-standing package store outlets as well.

Walmart has also questioned long-standing loopholes that allow immediate relatives of permit holders to secure an unlimited number of additional permits. This unlimited consolidation loophole can be used legally by any Houston liquor license service. In many ways, current laws support family-owned businesses and protect small companies from competition against national retailers and big box stores. Independent liquor store owners are concerned about what will happen if these laws fall. Sam Issa, who owns a liquor store in Austin’s Allandale neighborhood, said that many family-owned businesses will shut their doors forever. He added that if business slowed, he would not be able to support the same number of employees. His workers would be forced to give up the higher pay offered by independent stores and accept minimum wage if they went to work for Walmart. Issa is also concerned that the state might open the door for everyone to sell liquor, including Walmart, Target and CVS.

This groundbreaking lawsuit is just part of Walmart’s campaign to change laws that regulate the distribution of liquor licenses. The company is also lobbying members of the legislature in a major push to secure an additional Texas alcoholic beverage license for each superstore in the state. Whether or not the suit is successful, this is a big move for the nation’s largest retail chain. Walmart currently has licenses to sell hard liquor in 25 states. However, more Walmart stores and affiliates are located in Texas than in any other part of the country. Walmart’s quest to increase profits at such a large number of stores could open new sales avenues for other national chains while forcing smaller stores to close or keep up with a level of competition that the Texas liquor industry has never seen.

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