Dormant Commerce Clause

Dormant Commerce Clause - Market Participant example (1)

A state constructs a cement plant to produce and sell cement to in-state and out-of-state buyers. When the state implements a policy that prefers in-state buyers, a plaintiff challenges the policy as discriminating against out-of-state buyers. However, the state is a participant in the market for the sale of cement. The preferential treatment of in-state buyers is constitutional. [See Reeves, Inc. v. Stake,

Dormant Commerce Clause - Congressional Approval

A state may burden or discriminate against interstate commerce where Congress has expressly authorized such regulation.

Dormant Commerce Clause - The Market-Participant Doctrine

A state may discriminate against out-of-state commerce in any market where the state itself is a participant. However, the state may only regulate direct transactions in the immediate market and cannot attempt to regulate indirect transactions in downstream markets.

Step 4

Exception: congress may authorize state laws that would otherwise violate the dormant commerce clause. When a state acts as a market participant that state can impose discriminatory burdens on interstate commerce. A state is a market participant when they are buying, selling, involved in the trade, or involved in the market.

Step 2

If a law is found to be facially discriminatory or facially neutral with a discriminatory effect or purpose the strict scrutiny test is applied. Under the strict scrutiny test the law must have a legitimate non-protectionist purpose and it must use the least restrictive means possible.

Step 3

If a law is found to be non-discriminatory but incidentally burdensome it is analyzed under a balancing test. When the regulation of matters of local concern is local in character and effect, its impact on the national commerce does not seriously interfere with its operation, and the consequent incentive to deal with them nationally is slight, such regulation has been generally held to be within state authority.

Step 1

The dormant commerce clause first looks to whether the law it issue is facially discriminatory or facially neutral with a discriminatory purpose or impact. A law is facially discriminatory when it clearly draws a distinction between in-state and out-state citizens and how it will regulate them. A law is facially neutral with a discriminatory purpose when the burden imposed on out-of-state citizens is greater than that imposed on in-state citizens.

Dormant Commerce Clause Example (1)

1) A state denies an out-of-state corporation's application for a license to construct a new milk plant within the state. However, the purpose of the denial is to promote the sale of milk by in-state producers. Because the protection of local economic interests is not a legitimate objective that justifies discrimination against interstate commerce, the denial is unconstitutional. [See H.P. Hood & Sons, Inc. v. Du Mond,

Dormant Commerce Clause - Discriminatory Laws (Facially Discriminatory)

1. State or local regulations that discriminate against interstate commerce to protect local economic interest are almost always invalid a. Ex. A state cannot place a surcharge on out-of-state milk to make that milk as expensive as (or more expensive than) milk produced in the state. Dean Milk Co v. Madison

Dormant Commerce Clause Example (2)

2) A state enacts legislation prohibiting the operation of trains of a certain length within the state as a safety measure. However, the regulation severely burdens interstate commerce by forcing railroad companies to temporarily shorten their trains before passing through the state. Although the state has the legitimate objective of public safety, there is no evidence that the regulation actually lessens the danger of an accident. The state interest does not outweigh the burden placed on interstate commerce, and the regulation is unconstitutional. [See S. Pac. Co. v. Ariz.,

Dormant Commerce Clause Example (3)

3) A city enacts legislation prohibiting the sale of pasteurized milk that has not been processed and bottled at an approved pasteurization plant within five miles of the center of the city. However, the regulation discriminates against out-of-state commerce by favoring milk that has been pasteurized at an in-state facility. Additionally, any state interest furthered by the regulation (such as ensuring that all pasteurized milk is inspected in the interest of public health) could be achieved by a reasonable and adequate alternative (such as charging out-of-state producers for the cost of hiring city officials to inspect the pasteurized milk). The regulation is unconstitutional. [See Dean Milk Co. v. City of Madison, Wis.,

Dormant Commerce Clause - Market Participant example (2)

A state offers a contract for the sale of timber to any buyers who agree to process the timber within the state before shipping the timber out of state. Subsequently, a plaintiff challenges the in-state processing requirement on the ground that it discriminates against out-of-state commerce. Although the state is a participant in the market for the sale of timber, the state is not a participant in the downstream market for the processing of timber. The in-state processing requirement is unconstitutional. [See South-Central Timber Dev., Inc. v. Wunnicke,

Dormant Commerce Clause

The Commerce Clause provides that the federal government has the power to regulate interstate commerce, which has the negative implication that the states do not have unlimited freedom to regulate interstate commerce. Under the "Dormant," or "Negative," Commerce Clause, a state government may not unjustifiably burden or discriminate against interstate commerce. This generally means that a state cannot impede or interfere with interstate commerce (burden) or favor local, in-state commerce over out-of-state commerce (discriminate). [See U.S. Const. art. I, § 8, cl. 3]

Dormant Commerce Clause - Discriminatory Laws - Necessary to Important State Interest

a. (1) Compelling state interest (2) narrowly tailored to serve that interest b. A discriminatory state or local law may be valid if it furthers an important, noneconomic legitimate state purpose and there are no reasonable alternatives available. i. State being challenged has burden to show that no alternatives exists that would be as effective in achieving the state interest c. States can regulate police powers to regulate and tax for the health, safety, and general welfare of the public i. Ex. A state could prohibit the importation of live baitfish (such as minnows) into the state because the state could demonstrate that it had no other way of effectively avoiding the possibility that such baitfish might bring certain parasites into the state or, in other ways, have a detrimental effect on the state's wild fish population. Maine v. Taylor 1. IF purposes was to shield local baitfish sellers then it would be deemed invalid

Dormant Commerce Clause - EXCEPTIONS to the dormant commerce clause

i. Congressional Approval: Congress may confer upon the States and ability to restrict the flow of interstate commerce (congress approves the state law) ii. Market Participant Exception: A state may favor its own citizens in dealing with government owned businesses and in receiving benefits from government programs 1. Ex. Reeves: SD acting as a market participant by SD having a business that produces concrete, may favor its own citizens 2. Ex. colleges can have higher tuition for out of staters 3. Limitation a market participant cannot impose any conditions that have an effect downstream the market they are in, then they are acting as a regulator

Dormant Commerce Clause - Non-Discriminatory Laws (Incidentally Burdens Interstate Commerce)

i. Where a nondiscriminatory law effectuates a legitimate local interest and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on interstate commerce is clearly excessive in relation to the local benefits ii. Balancing Test: Burden on interstate commerce v. Legitimate Local Interest iii. Ex. Southern Pacific Co v. Arizona: AZ law limited the length of trains operated, placed heavy burden on trains to be broken up into shorter, and caused more accidents. Burden outweighed state interest