A Federal Court Just Sided With a Brewery in Its Dispute With a Distributor

Many states have strict laws regulating the relationship between alcohol producers and distributors within the three-tiered system of alcohol distribution. These so-called "Franchise Laws" make it very difficult for breweries to terminate their contracts with distributors, even when its clear that the brewery would be better served by a different distributor.

But a federal court just sided with The Great Lakes Brewing Co. after it tried to end its relationship with its distributor after the distributor changed ownership.

The court held that while contracts between brewers and distributors could not contravene Ohio's state franchise laws, it was still perfectly acceptable for the parties to bargain for certain rights and obligations in addition to those laid out in the Franchise Laws (again, so long as the bargained-for rights did not conflict with those Franchise Laws).

As R Street's Jarrett Dieterle has previously noted, research suggests that state's without restrictive franchise laws generally have more breweries.