For years, the Supreme Court has invalidated state laws that interfere with interstate commerce, saying it violates the commerce clause. This occurs even though the commerce clause is only a regulation on Congress’s authority and is silent about the states. This article focuses on the why and the how courts invalidate these laws.
Traditionally, the courts determined that commerce was not to be regulated by states for the following reasons:
- To protect against the vices of “protectionism” (economic efficiency)
- Protectionism is the state’s desire to create interstate barriers so they can protect local development. This is a vice because it may not allow for produced goods to be used where they are most valued. Additionally, if protectionism were to be protected, who would uphold the law and how do you determine what is protected and what is not?
- National unity
- Because Gibbons v. Ogden says that Congress has the sole power to regulate commerce. Congress has the means to meet commercial ends while states may not. Traditionally, courts determined if the state law had a “direct” effect on interstate commerce, then it was not allowed. (political reasoning)
This area of law is called the “dormant commerce clause.”
Protection against Discrimination
The following quote is the rule to note:
“Where a measure imposes a burden mostly, although not exclusively, on out-of-state interests, the State has the burden of justifying that measure is likely to achieve its legitimate purpose; the challenger then has the burden of either rebutting the State’s justification or of showing that the purpose can be served as well by available nondiscriminatory [alternatives]. Where the measure imposes a burden exclusively on out-of-state interests, the State has the burden of proving that the measure is highly likely to achieve its legitimate purpose and that the purpose cannot be served as well by available nondiscriminatory alternatives.”
Lawrence, Toward a More Coherent Dormant Commerce Clause: A Proposed Unitary Framework, 21 Harv. J.L. & Pub. Poly. 395, 416-417 (1998).
City of Philadelphia v. New Jersey
437 U.S. 617 (1978).
Does New Jersey’s statute violate the commerce clause?
All interstate commerce is protected by the commerce clause. There is a strong interest in holding protection based statutes as unconstitutional. However, the statute can be permissible under the following conditions:
- If the law is facially discriminatory:
- First, there must be a compelling legitimate purpose.
- Second, the purpose must be carried out in the least possible discriminatory means.
- If the law is not discriminatory on its face but may have a discriminatory effect:
- First, the law focuses on a legitimate local concern.
- Second, the law has only incidental effects on interstate commerce.
The statute is unconstitutional. Reversed.
New Jersey passed a statute that allowed the state to restrict other states from bringing solid or liquid waste (collected outside of New Jersey) into New Jersey. Congress had not passed a law against this practice. In fact, Congress had passed a law saying that States can manage their waste.
Here, the statute is discriminatory on its face, refusing other states to use New Jersey’s landfill space. The purpose from New Jersey was to preserve the landfill space for their use and to protect the health of their citizens. However, that interest is not compelling. New York and Pennsylvania have the need for additional space now. New Jersey may have the need to export their waste in the future. Thus, the invalidation of the statute protects Pennsylvania’s present interest and New Jersey’s future interest.
Following the analysis:
- This is a facially discriminatory statute. As such, the reason must be compelling in the least restrictive means.
- New Jersey argues:
- The compelling reason is that they are running out of space and need to preserve their space for local use.
- The court disagrees:
- The statute is protective which is not favored constitutionally. Additionally, this is completely against the idea of national unity.
- Finally, this is not the least restrictive means of meeting the reason. Instead, the only way to restrict entry is to quarantine the waste coming in.
Facially discriminatory statutes require evaluation with strict scrutiny. The only two cases to meet scrutiny include quarantines or livelihood protection. See Maine v. Taylor, 477 U.S. 131 (1986) (holding that the fishing industry could be completely undermined if the importation of baitfish and as such the restriction passed strict scrutiny).
West Lynn Creamery, Inc. v. Healy
512 U.S. 186 (1994).
Is the act unconstitutional?
A statute that has a discriminatory effect on interstate commerce is unconstitutional.
The act is unconstitutional.
Massachusetts taxed all milk sales within the state. This included both in-state and out-of-state producers. However, in-state milk producers were subsidized by the government. As a result, out-of-state milk producers were taxed in Massachusetts and in-state producers did not feel the effect of the tax. Consequently, in-state producers had a competitive edge over out-of-state producers by decreasing the cost of their milk.
The defendant tries to argue that subsidiaries are constitutional under the state powers and the tax is constitutional because it affects both in-state and out-of-state producers equally. As such, the argument is that because each power is individually constitutional, then the whole act combined must also be constitutional.
Instead, the court argues that there is a discriminatory intent in the passing of the statute. “By conjoining a tax and a subsidy, Massachusetts has created a program more dangerous to interstate commerce than either part alone.” The effect, Massachusetts farmers had developed a edge because it made out of state milk more expensive.
Note, states have the authority to tax people inside and outside alike. Additionally, states have the authority to subsidize industries within the states. However, combining the two together becomes unconstitutional because then it nullifies or cancels out the tax to in-state producers.
Also note that the theory of subsidization can become more difficult if the money comes from a general fund.
This case is an example of the court applying a balancing test, evaluating the state interests and the costs of that interest. This is applied in more tricky cases.
The market-participant doctrine
A state may discriminate against out-of-state producers when the State is an active participant in the market. In other words, the market-participant doctrine is the exception to the dormant commerce clause. See Reeves v. Stake, 447 U.S. 429 (1980).
A good example of this doctrine are public universities where there is a different cost for in-state tuition and out-of-state tuition. The reason why it is allowed is because the state is a market participant in education and thus the dormant commerce clause does not apply.
Privileges and Immunities Clause of Article IV
See United Building & Construction Trades Council v. Mayor of Camden, 465 U.S. 208 (1984). The privileges and immunities clause sounds like you are not able to discriminate against out-of-state citizens. Although this is a violation, the court says that there is a test to apply. There must be a “substantial reason” to justify the out-of-state discrimination. Notice that this is not strict scrutiny. So, although the clause is more broad, there are more limits. The limits include:
- The statute must be facially discriminatory
- Second, the statute must discriminate against citizens (not corporations)
- The discrimination must be against certain fundamental rights:
- Right to pursue your occupation
- Access to the courts
- No change in property prices for in-state v. out-of-state
- Finally, there is no “market participant” exception (see above)
Our takeaway: Don’t mix this test up with the dormant commerce clause test.
Facially Neutral Statutes with Effects on Interstate Commerce
Hunt v. Washington State Apple Advertising Commission
432 U.S. 333 (1977).
Is the statute unconstitutional because of discriminatory intent?
A statute is unconstitutional if it was passed with the purpose of targeting out-of-state suppliers.
Here, the statute is unconstitutional.
North Carolina passed a statute saying that incoming apples needed to be labeled in accordance with the U.S. grade or standard. However, Washington, one of the largest apple producers, uses their own standard which is recognized nationally as being an extremely high standard.
Thus, the purpose of the North Carolina statute was to lower the standard for apple producers in North Carolina and require out of state producers to incur costs to adjust their advertising on the label.
Although the statute is facially neutral, there are three forms of discrimination taking place:
- The statute raises costs for out-of-state producers while leaving in-state producers unaffected.
- The statute diminishes the competitive advantage Washington worked diligently to obtain.
- Finally, the statute levels the grades to a lesser standard which ultimately benefits only local producers.
Although the statute is not discriminatory on its face, it is discriminatory in effect because North Carolina is engaging in protectionism. So, there is a balancing test here. What is the interest that North Carolina has (avoiding fraud in advertising) v. what is the effect of the statute? In other words, what are the balance of harms?
- Facially discriminatory statutes face strict scrutiny
- Facially neutral statutes use a balancing test
Kassel v. Consolidated Freightways Corp.
450 U.S. 662 (1981).
Does the truck-length limitation unconstitutionally burden interstate commerce?
When the statute is facially neutral, then the court determines:
- Whether there is a legitimate local concern (rational basis)
- Whether the law only has minimal impact on interstate commerce.
The limitation is unconstitutional.
Iowa passed a statute that limited the size of trucks passing into and through Iowa. The restriction allowed “semis” at 55′ long but disallowed “doubles” at 65′ long. The reason provided by the legislature was for safety. There were exceptions to this rule to allow important border cities to adopt the legislation of the neighboring state. Additionally, exceptions were permitted for larger if the purpose was to deliver a trailer or large cargo from Iowa or to an Iowa resident.
The majority argues that the statute engages in protectionism by utilizing only a minimal safety concern which has a substantial effect on instate commerce. Specifically, Iowa was protecting themselves from accidents occurring in Iowa by diverting those accidents to other states that did not adopt the shorter restrictions. As such, because there was not a sufficient safety reason, the statute is unconstitutional. (Middle ground).
Although the concurrence agreed with the judgment, they would push it further to state that no safety concern would be allowed to validate the statute. (Restrictive ground).
However, the dissent argued that there could be a legitimate safety concern and the courts are not asked to compare the safety concerns. Instead, they should defer to the legislature. Additionally, disallowing the statute means that Iowa is subject to the legislation of neighboring states. Because Congress is the only party that can unify the states with interstate commerce, the idea to compel Iowa to follow neighbor’s restrictions would be unprecedented. (Broad ground).
This is a neutral law, so we apply the balancing test. So, we are balancing the state’s interest with the cost to the out-of-state users. Here, Iowa’s interest was in safety and the cost was millions to out-of-state trucking companies. Because the safety does not make much difference for the size, the reason is insufficient compared with the costs.
In summary, the balance violates the dormant commerce clause.
Notice also that this law may not be entirely neutral because there were several exceptions that benefited Iowa.
However, the dissent provides two main reasons why Iowa should win:
- Safety is within the state powers. Thus, the state has the ability to determine what is safe and what is not.
- By making Iowa follow the standards of other states, the majority is practically keeping Iowa from enacting their own legislation.
Here’s how the balancing works. There are four steps:
- If there is protectionist interest, the state loses. What is the motive?
- What is the burden on the out-of-state participants? Burden?
- Calculate the benefit on in-state participates. Benefit?
- Balance the burden v. the benefit to come to a conclusion.
Less Restrictive Alternative Analysis
Sometimes, the court conducts their analysis by determining evaluating alternatives. If there is a less restrictive alternative, then the court will strike the more restrictive statute.
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.