Dormant Commerce Clause

This page provides a high-level introduction to the dormant Commerce Clause, and is not intended to be a thorough legal review of the doctrine’s history.

Article I, Section 8 of the Constitution, known as the Commerce Clause, provides Congress with the power to “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”  From this authorization of Congressional power, Courts have inferred a restriction on State power known as the “dormant Commerce Clause.” This doctrine prohibits a State from discriminating against or unduly burdening interstate commerce.  According to the Supreme Court, this prohibition on interfering with interstate commerce was rooted in the Framers’ concern that economic Balkanization had the potential to doom the new union between the States.[1]

Under dormant Commerce Clause precedent, courts will typically strike down a State law if it expressly mandates differential treatment of in-state and out-of-state competing economic interests in a way that benefits the former and burdens the latter.[2]  Such laws are considered facially discriminatory, and courts subject them to strict scrutiny review.  This exacting standard requires a State to demonstrate that the law has a non-protectionist purpose and that there is no less discriminatory means for achieving that purpose.

Applying strict scrutiny, the Supreme Court has struck down an Oklahoma law that required ten percent of electric utilities’ coal purchases to be from in-state suppliers,[3] an Ohio law that offered a tax credit to fuel sellers for selling ethanol produced in Ohio,[4] and a New Hampshire law that prohibited a utility from exporting hydropower generated in New Hampshire to another state.[5]

Courts will also apply strict scrutiny if a law controls commerce occurring wholly outside the boundaries of the State. Courts look at whether the statute controls conduct in another State,[6] which could give rise to inconsistent legislation being applied to the same activity.[7]

A law that is not facially discriminatory can still be struck down by a court as unconstitutional under the Commerce Clause if the effect or purpose of the law is to burden interstate commerce.  In some cases, Courts apply strict scrutiny in evaluating these laws,[8] but in other cases Courts use a balancing test that evaluates whether the burdens on interstate commerce are “clearly excessive in relation to the putative local benefits.”[9]

If a State is a participant in the market, rather than a regulator, that regulation is immune from Commerce Clause scrutiny.[10] Under this market participant exception, the Supreme Court upheld a Maryland program that paid haulers to remove abandoned cars from streets and made it more difficult for out-of-state haulers to participate[11] and a South Dakota policy to restrict out-of-state sales by a State-owned cement factory during times of shortage.[12]

 
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[1] Hughes v. Oklahoma, 441 U.S. 322, 325-26 (1979).

[2] Granholm v. Heald, 544 U.S. 460, (2005).

[3] Wyoming v. Oklahoma, 502 U.S. 437 (1992)

[4] New Energy Co. of Indiana v. Limbach, 486 U.S. 269 (1988)

[5] New England Power Co. v. New Hampshire, 455 U.S. 331 (1982).

[6]Brown-Forman Distillers Corp. v. NY State Liquor Auth., 476 US 573 (1986).

[7]Healy v. Beer Institute, 491 U.S. 324 (1989).

[8]Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333 (1977).

[9] Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).

[10] Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976).

[11] id.

[12] Reeves, Inc., v. Stake, et al., 447 U.S. 429 (1980).

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