Article I, Section 8, Clause 3:

[The Congress shall have Power . . . ] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; . . .

Subject to limited exceptions, the Supreme Court has struck down state laws that discriminate against out-of-state goods or nonresident economic actors, allowing such laws only when the regulatory entity meets the burden of showing that it is “narrowly tailored to advance a legitimate local purpose” and that there is no reasonable, nondiscriminatory regulatory alternative.1 A law that “clearly discriminates against interstate commerce [ ] will be struck down . . . unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism.” 2 Put another way, the Court applies a “virtually per se rule of invalidity” to state laws that evince economic protectionism.3

Applying this rule, the Court has struck down as discriminatory some regulations that expressly treat out-of-state or interstate interests less favorably, or that expressly grant advantages to in-state businesses. For example, the Court invalidated an Oklahoma law that required coal-fired electric utilities in the state, producing power for sale in the state, to burn a mixture containing at least 10% Oklahoma-mined coal.4 Similarly, the Court invalidated a state law that permitted a state public utility commission to restrict the export of hydroelectric power to neighboring states when the commission determined that the energy was required for use within the state.5

Since the advent of the modern framework for evaluating Dormant Commerce Clause challenges, the Court has also continued to strike down state laws that purport to be facially neutral, but which have either the purpose or the effect of depriving out-of-state businesses of a competitive advantage. In Hunt v. Washington State Apple Advertising Commission, the Court invalidated a North Carolina regulation requiring apples shipped in closed containers to display no grade other than the applicable federal grade.6 Washington State mandated that all apples produced and shipped in interstate commerce pass a much more rigorous inspection than that mandated by the United States. The Court held that the inability to display the recognized state grade in North Carolina had the practical effect of discriminating against interstate commerce, could not be defended as a consumer protection measure, and therefore was unconstitutional.7

In some cases, the Supreme Court has emphasized the availability of less discriminatory alternatives for achieving a regulatory goal. In Dean Milk Co. v. Madison, an Illinois-based dairy processor challenged a local ordinance in Madison, Wisconsin that required all milk sold in the city to be pasteurized at an approved plant within five miles of the city.8 The Court concluded that the ordinance “plainly discriminates against interstate commerce,” and noted that it was “immaterial” that the ordinance discriminated against Wisconsin milk from outside the Madison area as well as out-of-state milk.9 The Court also reasoned that “reasonable nondiscriminatory alternatives” were available for the inspection of milk or implementation of safety standards, and that the ordinance could not “be justified in view of the character of the local interests and the available methods of protecting them.” 10

The Court has rejected some claims that state regulations are facially discriminatory. In Minnesota v. Clover Leaf Creamery Co., the Court upheld a state law banning the retail sale of milk products in plastic, nonreturnable containers but permitting sales in other nonreturnable, nonrefillable containers, such as paperboard cartons.11 The Court found no discrimination against interstate commerce, despite a state-court finding that the measure was intended to benefit the local pulpwood industry, because both in-state and out-of-state interests could not use plastic containers. In Exxon Corp. v. Governor of Maryland, the Court upheld a statute that prohibited producers or refiners of petroleum products from operating retail service stations in Maryland.12 The statute did not on its face discriminate against out-of-state companies, but as there were no producers or refiners in Maryland, “the burden of the divestiture requirements” fell solely on such companies. The Court held, however, that “this fact does not lead, either logically or as a practical matter, to a conclusion that the State is discriminating against interstate commerce at the retail level,” as the statute does not “distinguish between in-state and out-of-state companies in the retail market.” 13

Footnotes

1

Tenn. Wine & Spirits Retailers Ass’n, 139 S. Ct. at 2461 (internal quotations omitted); Dep’t of Revenue of Ky. v. Davis, 553 U.S. 328, 338 (2008); Hughes v. Oklahoma, 441 U.S. 322, 336 (1979); Hunt v. Wash. State Apple Advert. Comm’n, 432 U.S. 333, 353 (1977).

2

Wyoming v. Oklahoma, 502 U.S. 437, 454 (1992)

3

Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978).

4

Wyoming, 502 U.S. 437.

5

New England Power Co. v. New Hampshire, 455 U.S. 331 (1982); see also Hughes v. Oklahoma, 441 U.S. 322 (1979) (striking down a ban on transporting minnows caught in the state for sale outside the state); Sporhase v. Nebraska, 458 U.S. 941 (1982) (invalidating a ban on the withdrawal of groundwater from any well in the state intended for use in another state); Camps Newfound/Owatonna, Inc. v. Harrison, 520 U.S. 564 (1997) (striking down a state tax law that disfavored businesses that primarily served nonresidents).

6

432 U.S. 333 (1977).

7

Id. at 351–353; see also W. Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 194–195 (1994); Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 580 (1986).

8

340 U.S. 349 (1951).

9

Id. at 354.

10

Id. at 354–356; see also Hunt v. Wash. State Apple Advert. Comm’n, 432 U.S at 354.

11

449 U.S. 456, 470–474 (1981).

12

437 U.S. 117 (1978).

13

Id. at 125–126.