§5.01   The Purpose of the Dormant Commerce Clause [117-119]

 

The Dormant Commerce Clause seeks to achieve two purposes.  First, it seeks to create a national economic market by preventing states from imposing barriers to trade.  Second, it seeks to foster political cohesion by inhibiting states from imposing reciprocal barriers. The Dormant Commerce Clause addresses the situation in which Congress has not regulated some area which is within the Commerce power.  Where Congress is silent, what, if any, barriers are there to state regulation?

 

The Dormant Commerce Clause is not really a separate clause in the Constitution.  It simply refers to a body of constitutional jurisprudence which sets parameters for state regulation when Congress has not regulated an area within the Commerce power. The Dormant Commerce Clause is somewhat controversial and constitutional arguments can be invoked to oppose or defend it. Some form of Dormant Commerce Clause has existed for most of American history.

 

§5.02   Historical Evolution [120-123]

           

            [1]  Justice Marshall’s Views

 

In Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824), Chief Justice Marshall indicated some sympathy for the view that the Commerce Clause conferred an exclusive power on Congress such that states could not regulate within the Commerce power even with Congress was dormant.  He did not, however need to resolve the issue in Gibbons.  Subsequently, he upheld state police power legislation in instances when it came within the Commerce power.

 

            [2]  Local Pilot Case

 

Cooley v. Board of Wardens, 53 U.S. 299 (1851), upheld a Pennsylvania statute requiring vessels to use a local pilot.  Cooley took an intermediate course between those who argued that the Commerce Clause precluded any state action within its bounds and those who argued that absent congressional action, states could regulate without restraint within areas covered by the Commerce power.  Cooley held that states could not regulate matters needing a uniform national approach but could regulate local matters.

 

            [3]  Railroad Regulation

 

Although Cooley was followed for a time, other approaches emerged to address railroad cases.  The Court distinguished between legislation which affected commerce directly (which only the federal government could regulate) and that which affected commerce indirectly (which states could regulate).

 

            [4] Towards a Balancing Test

 

Ultimately, in 1945, the Court used a balancing test to determine whether state safety legislation violated the Dormant Commerce Clause.

 

§5.03   The Modern Approach [123]

 

Like Cooley, the Court has continued to adopt an intermediate approach which sometimes allows and sometimes prohibits state regulation.  In general, if a state statute discriminates against commerce on its face, purpose or effect, it is subjected to strict scrutiny and is found unconstitutional unless the state can justify it as serving a compelling state purpose in the least restrictive way.  If the state statute does not discriminate, it is measured against a more lenient balancing test which asks whether the state’s health or safety interest is clearly outweighed by the burden on commerce.

 

§5.04   Discriminatory Laws [123-126]

 

Strict scrutiny is applied where the state seeks simply to protect the economic interests of its citizens at the expense of outsiders.  When the Court detects such economic protectionism, the state statute is deemed per se invalid.

 

States generally do not articulate such a protectionist purpose on the face of a statute or in legislative history. Where, however, a state cannot point to a legitimate state purpose for the statute or cannot show the absence of a nondiscriminatory alternative way to achieve its purpose, the Court infers that the true purpose was protectionist.

 

Although the impact of state legislation on instaters and out-of-staters may be relevant to the analysis, it is not dispositive.  The fact that there are out-of-state losers or instate beneficiaries does not mean the state statute necessarily fails.  The Dormant Commerce Clause serves to protect the interstate market, not particular entrepreneurs.  See Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978).

 

Statutes subject to strict scrutiny are almost invariably invalidated.

 

§5.05   Pike Balancing Test [126-127]

 

The Pike balancing test takes its name from Pike v. Bruce Church, Inc., 397 U.S. 137 (1970).  It provides: “Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.”

 

Under the Pike balancing test, the burden is on the party challenging the statute to show that it imposes too great a burden on commerce.

 

§5.06   The Political Process Rationale [127]

 

The Dormant Commerce Clause responds in part to concern that state legislatures will favor their instate constituents over out-of-staters. Where the Court identifies sufficient instate losers it may conclude that they served as surrogates for out-of-staters and accordingly that the political process need not be scrutinized.

 

§5.07   Appropriate State Measures [128]

                            

The Dormant Commerce Clause does not prohibit all state regulation.  Thus states may impose a variety of license fees, reasonable quarantine laws to protect against disease, and some embargo measures forbidding exports when backed by sound health or safety concerns.

 

§5.08. Prohibitory Laws [128-130]

 

§5.09   Exceptions to the Dormant Commerce Clause [131-134]

 

            [1]  Market Participant Exception

                            

When the state acts as a market participant, i.e. a buyer or seller of goods or services, rather than as a market regulator, the Dormant Commerce Clause does not apply.  In other words, the state, as a market participant, may choose to favor its own citizens.  See e.g. Reeves v. Stake, 447 U.S. 429 (1980).

 

But the state can only favor its own citizens in the market in which it participates.  Thus, in South-Central Timber Development, Inc. v. Wunnicke, 467 U.S. 82 (1984), the Court struck down an Alaska law that required all who bought timber from the state to process it in state.  Alaska could favor its own in selling the timber but could not impose regulations which discriminated in favor of its own citizens regarding conduct in a downstream market.

 

The rationales for this exception include the fact that the Commerce Clause addresses regulation of, not participation in, markets, the argument that when the state acts as a proprietor it should be treated like other proprietors, and the argument that where states decide to favor their own as buyers or sellers they are in effect deciding to subsidize some part of their population at the expense of the general state treasury, a decision that arguably should be within the power of people of a state.  On the other hand, a state is not like other entrepreneurs–it can tax, for instance.

 

            [2]  Additional Exceptions

           

Litigants have pressed the Court to create other exceptions in recent years including a public utilities exception and a domestic charities exception.  The Court arguably created the former in General Motors Corp. v. Tracy, 519 U.S. 278 (1997), but only four justices endorsed the latter.  Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564 (1997).

 

            [3]  Congressional Consent

 

The Dormant Commerce Clause does not apply when Congress authorizes state action which would otherwise be invalid under the strict scrutiny or Pike balancing tests.  The Commerce Clause is primarily a grant of power to Congress to regulate commerce.  The Dormant Commerce Clause reflects an inference that so long as Congress is silent it will only allow states to regulate consistent with those two tests.  But Congress may rebut that inference by authorizing the states to regulate in a manner that would otherwise be forbidden.  Of course, Congress cannot authorize state action which would violate some other part of the Constitution.

 

§5.10   Congressional Conflict: Preemption [134-135]

 

Congress can also exclude state regulation in a particular area.  When it does so, the Dormant Commerce Clause does not apply since Congress has regulated pursuant to its Commerce power.

 

When federal and state legislation conflict, the Supremacy Clause of course holds that the federal law prevails.

Congress can also preempt an entire field of regulation by displaying an intent that federal law occupy a field to the exclusion of state law.

 

§5.11 Camps Newfound/Owatonna [520 U.S. 564]: A Recent Application [135-136]

 

§5.12   Privileges and Immunities [136-138]

 

Article IV provides in part that “[t]he citizens of each state shall be entitled to all Privileges and Immunities of citizens in the several states.” The Clause basically precludes a state from treating out-of-staters worse than instaters with respect to privileges and immunities.

 

The Privileges and Immunities Clause accordingly resembles the Dormant Commerce Clause.  There are, however, important differences including the following:

                       

a. The Privileges and Immunities Clause applies only to individual citizens, not to corporations, for instance.

                 

b. The Privileges and Immunities Clause only addresses discriminatory measures; it does not have a test parallel to the Pike balancing test.

 

c. The Privileges and Immunities Clause only protects privileges and immunities.

                                                            

d. The market participant exception does not apply.

 

The threshold issue is whether an activity is a Privilege and Immunity. These relate to activities which are “sufficiently basic to the livelihood of the Nation.” These would include the right to police and fire protection when out of state, the right to medical care, the right to pursue a trade and the right to engage in political speech and religious worship.

 

A state may only discriminate against out-of-staters regarding a Privilege and Immunity if it has a substantial reason for the difference in treatment and discrimination against nonresidents bears a substantial relationship to the state’s objectives.