Dormant Commerce Clause
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The Dormant Commerce Clause doctrine in United States case law limits the right of states to legislate in connection with interstate commerce.
The Dormant Commerce Clause does not expressly exist in the text of the United States Constitution. It is a doctrine of congressional power inferred by the U.S. Supreme Court from the actual Commerce Clause in Article I, § 8 of the Constitution. This article authorizes Congress to "regulate commerce among the states."
The Commerce Clause vests Congress with the power to regulate, "that is, to prescribe the rule by which commerce is to be governed" [1]. Typically, Congress utilizes this power by enacting a law. However, according to the Dormant Commerce Clause, even when Congress has not acted (i.e. Congress’s power to regulate commerce lies dormant) the Supreme Court may find certain state and local laws unconstitutional if they unduly burden interstate commerce.
The Supreme Court, in explaining the necessity for the dormant Commerce Clause, said, "Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the Nation." [2]
- Neither the power to tax nor the police power may be used by the state of destination with the aim and effect of establishing an economic barrier against competition with the products of another state or the labor of its residents. Restrictions so contrived are an unreasonable clog upon the mobility of commerce [3].
Today, if a law is challenged under the doctrine of the dormant Commerce Clause, the Court determines its constitutionality by examining its discriminatory effects. The Court is primarily concerned with whether a law in one state discriminates against out-of-Staters. If so, it is typically found to be unconstitutional. If not, then the Court proceeds in its evaluation of the law using a balancing test. The Court determines whether the burden imposed by a law outweighs the benefits. Again, if such is the case, the law is usually deemed unconstitutional.
There are only two exceptions that permit otherwise unconstitutional laws to remain in effect. The first exception is if Congress approves the law. The second is "if a state is acting as a market participant, rather than as a market regulator" [4].
The Dormant Commerce Clause Doctrine (hereafter DCC) evolved out of Congress' desire to federally regulate commerce by using powers not specifically enumerated in the Constitution. Congress has pulled the basis for this power out of the Commerce Clause. The DCC holds that a state or local law is unconstitutional if it “burdens” interstate commerce. The DCC is dormant because it does not distribute federal law; rather, it prohibits state action. This essay will over-simplify how the Courts evaluate issues arising under the DCC.
Originally, pre-1938, the Supreme Court (hereafter Court) would evaluate the DCC questions per state police powers. See Cooley v. Board of Wardens, 53 U.S. (12 How.) 299 (1851). However, today the Court uses a much more contrived test. First, the Court looks at the language of the state statute. They then determine if it is facially discriminatory or facially neutral. If the statute is facially discriminatory, then the statute is presumed unconstitutional. Cases to look at in this area are the City of Philadelphia v. New Jersey, 437 U.S. 617 (1978) and C&A Carbon, Inc v. Town of Clarkstown, N.Y, 511 U.S. 383 (1994).
This presumption can be rebutted if the state can demonstrate under a strict scrutiny standard that either the law is necessary (that no other non-discriminatory means were available), or that the law meets an important state objective/legitimate local interest. This is a hard presumption to rebut, and consequently the Court has only upheld one facially discriminatory state law. See Maine v. Taylor, 477 U.S. 131 (1986).
If the state statute is facially neutral then the Court will examine its purpose or effect. See Hunt v. Washington State Apple Advertising Comm., 432 U.S. 333 (1997) and Exxon Corp. v. Governor of MD. 437 U.S. 117 (1978).
If the statute's purpose or effect is discriminatory, then it is presumed unconstitutional. See Dean Milk Co. v. City of Madison, Wisconsin, 340 U.S. 349 (1951). Again, this presumption can be rebutted if the state can demonstrate under a strict scrutiny standard that either the law is necessary (that no other non-discriminatory means were available), or that the law meets an important state objective/legitimate local interest. The Court usually finds that there are other means available and holds the state law unconstitutional. See Hunt v. Washington State Apple Advertising Comm. 432 U.S. 333 (1997).
If the Court finds that the purpose or effect of the state statute was not discriminatory, then they apply a balancing test. In this test, the Court balances the burden on interstate commerce versus the state interest. In these cases the Court usually finds for the state. See Loren J. Pike v. Bruce Church, Inc., 397 U.S. (1970), and Bibb, Director, Dept. of Public Safety of Ill.. v. Navajo Freight Lines, Inc., 359 U.S. (1959).
Finally, there are two exceptions to the DCC. The first exception occurs when Congress has acted. See Western & Southern Life Ins. v. State Board of California, 451 U.S. 648 (1981). In this case the DCC is no longer dormant and is a Commerce Clause issue. The second exception is "Market Participation". This occurs when the state is acting like a business. Like a business, a state when acting in this capacity may discriminate in favor of its own citizens or, when it is dolling out government benefits.
The preeminent case for Market exceptions are Reeves v. William Stake, 447 U.S. 429 (1980) and South-Central Timber v. Alaska, 467 U.S. 82 (1984). The Reeves case sets the standard for the Market exception test (supra). In this case state run cement co-ops were allowed to make restrictive rules, (e.g. not sell to out-of-state). Here, this government-sponsored business was acting restrictively like an individually owned business and this action was held to be constitutional. Alaska Timber is important because it limits the Market exception (supra). Alaska Timber sets forth that the market-participant doctrine is limited in allowing a State to impose burdens on commerce within the market in which it is a participant, but allows it to go no further. The State may not impose conditions that have a substantial regulatory effect outside of that particular market.
In United Building & Construction Trades Council v. Camden, 465 U.S. 208 (1984), the city of Camden had passed an ordinance requiring that at least 40 percent of the employees of contractors and subcontractors on city projects be Camden residents. The Supreme Court found that this violated the privileges and immunities clause of Article IV. Justice Rehnquist's opinion distinguishes the market-participant doctrine from the privileges and immunities doctrine. Congress has the power under the commerce clause to regulate state market participation, but it lacks power to authorize regulations that violate Article IV. This protection of the privileges and immunities clause cannot be claimed by corporate persons.
1 Gibbons v. Ogden, 22 U.S. 1, 196, 6 L. Ed. 23, 70 (1824).
2 H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 532, 93 L. Ed. 865, 871 (1949).
3 H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 539, 93 L. Ed. 865, 875 (1949).
4 South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87, 81 L. Ed. 2d 71, 76 (1984).
See also
- Twenty-first Amendment to the United States Constitution- In relation to US Supreme Court a ruling on interstate liquor shipments that considers the Dormant Commerce Clause.