Dormant Commerce Clause

The Dormant Commerce Clause, or Negative Commerce Clause, in American constitutional law, is a legal doctrine that courts in the United States have inferred from the Commerce Clause in Article I of the US Constitution. The Dormant Commerce Clause is used to prohibit state legislation that discriminates against interstate or international commerce.If the state activity constitutes 'regulation' of interstate commerce, then the court must proceed to a second inquiry: whether the activity regulates evenhandedly with only 'incidental' effects on interstate commerce, or discriminates against interstate commerce. As we use the term here, 'discrimination' simply means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter. The party challenging the validity of a state statute or municipal ordinance bears the burden of showing that it discriminates against, or places some burden on, interstate commerce. Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S.Ct. 1727, 1736, 60 L.Ed.2d 250 (1979). If discrimination is established, the burden shifts to the state or local government to show that the local benefits of the statute outweigh its discriminatory effects, and that the state or municipality lacked a nondiscriminatory alternative that could have adequately protected the relevant local interests. If the challenging party cannot show that the statute is discriminatory, then it must demonstrate that the statute places a burden on interstate commerce that 'is clearly excessive in relation to the putative local benefits.' Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 471(1981) (quoting Pike, 397 U.S. at 142, 90 S.Ct. at 847).The command has been stated more easily than its object has been attained, however, and the Court's understanding of the dormant Commerce Clause has taken some turns. In its early stages, the Court held the view that interstate commerce was wholly immune from state taxation 'in any form', 'even though the same amount of tax should be laid on (intrastate) commerce'. This position gave way in time to a less uncompromising but formal approach, according to which, for example, the Court would invalidate a state tax levied on gross receipts from interstate commerce, or upon the 'freight carried' in interstate commerce, but would allow a tax merely measured by gross receipts from interstate commerce as long as the tax was formally imposed upon franchises, or ''in lieu of all taxes upon (the taxpayer's) property,'' Dissenting from this formal approach in 1927, Justice Stone remarked that it was 'too mechanical, too uncertain in its application, and too remote from actualities, to be of value.' In 1938, the old formalism began to give way with Justice Stone's opinion in Western Live Stock v. Bureau of Revenue, 303 U.S. 250, which examined New Mexico's franchise tax, measured by gross receipts, as applied to receipts from out-of-state advertisers in a journal produced by taxpayers in New Mexico but circulated both inside and outside the State. Although the assessment could have been sustained solely on prior precedent, Justice Stone added a dash of the pragmatism that, with a brief interlude, has since become our aspiration in this quarter of the law. ... The Court explained that 't was not the purpose of the commerce clause to relieve those engaged in interstate commerce from their just share of state tax burden even though it increases the cost of doing the business.' Appellant's attack is based solely on decisions of this Court holding that a tax on the 'privilege' of engaging in an activity in the State may not be applied to an activity that is part of interstate commerce. See, e. g., Spector Motor Service v. O'Connor, 340 U.S. 602 (1951); Freeman v. Hewit, 329 U.S. 249 (1946). This rule looks only to the fact that the incidence of the tax is the 'privilege of doing business'; it deems irrelevant any consideration of the practical effect of the tax. The rule reflects an underlying philosophy that interstate commerce should enjoy a sort of 'free trade' immunity from state taxation. We note again that no claim is made that the activity is not sufficiently connected to the State to justify a tax, or that the tax is not fairly related to benefits provided the taxpayer, or that the tax discriminates against interstate commerce, or that the tax is not fairly apportioned.We consider a so-called flow control ordinance, which requires all solid waste to be processed at a designated transfer station before leaving the municipality. The avowed purpose of the ordinance is to retain the processing fees charged at the transfer station to amortize the cost of the facility. Because it attains this goal by depriving competitors, including out-of-state firms, of access to a local market, we hold that the flow control ordinance violates the Commerce Clause.In this light, the flow control ordinance is just one more instance of local processing requirements that we long have held invalid ... The essential vice in laws of this sort is that they bar the import of the processing service. Out-of-state meat inspectors, or shrimp hullers, or milk pasteurizers, are deprived of access to local demand for their services. Put another way, the offending local laws hoard a local resource—be it meat, shrimp, or milk—for the benefit of local businesses that treat it. 511 U.S. at 392–393.Compelling reasons justify treating these laws differently from laws favoring particular private businesses over their competitors. 'Conceptually, of course, any notion of discrimination assumes a comparison of substantially similar entities.' General Motors Corp. v. Tracy, 519 U.S. 278 (1997). But States and municipalities are not private businesses—far from it. Unlike private enterprise, government is vested with the responsibility of protecting the health, safety, and welfare of its citizens. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985) ... These important responsibilities set state and local government apart from a typical private business.By the 1980's, the Counties confronted what they could credibly call a solid waste ''crisis.'' ... Many local landfills were operating without permits and in violation of state regulations. Sixteen were ordered to close and remediate the surrounding environment, costing the public tens of millions of dollars. These environmental problems culminated in a federal clean-up action against a landfill in Oneida County; the defendants in that case named over local businesses and several municipalities and school districts as third-party defendants The 'crisis' extended beyond health and safety concerns. The Counties had an uneasy relationship with local waste management companies, enduring price fixing, pervasive overcharging, and the influence of organized crime. Dramatic price hikes were not uncommon: In 1986, for example, a county contractor doubled its waste disposal rate on six weeks' noticeThe contrary approach of treating public and private entities the same under the dormant Commerce Clause would lead to unprecedented and unbounded interference by the courts with state and local government. The dormant Commerce Clause is not a roving license for federal courts to decide what activities are appropriate for state and local government to undertake, and what activities must be the province of private market competition. In this case, the citizens of Oneida and Herkimer Counties have chosen the government to provide waste management services, with a limited role for the private sector in arranging for transport of waste from the curb to the public facilities. The citizens could have left the entire matter for the private sector, in which case any regulation they undertook could not discriminate against interstate commerce. But it was also open to them to vest responsibility for the matter with their government, and to adopt flow control ordinances to support the government effort. It is not the office of the Commerce Clause to control the decision of the voters on whether government or the private sector should provide waste management services. 'The Commerce Clause significantly limits the ability of States and localities to regulate or otherwise burden the flow of interstate commerce, but it does not elevate free trade above all other values.'Not surprisingly, the Court's effort to preserve a national market has, on numerous occasions, come into conflict with the states' traditional power to 'legislat on all subjects relating to the health, life, and safety of their citizens.' Huron Portland Cement Co. v. City of Detroit, 362 U.S. 440, 443 (1960). On these occasions, the Supreme Court has 'struggled (to put it nicely) to develop a set of rules by which we may preserve a national market without needlessly intruding upon the States' police powers, each exercise of which no doubt has some effect on the commerce of the Nation.' Camps Newfound/Owatonna v. Town of Harrison, 520 U.S. 564, 596 (1997) (Scalia, J., dissenting) (citing Okla. Tax Comm'n v. Jefferson Lines, 514 U.S. 175, 180–83 (1995)); see generally Boris I. Bittker, Regulation of Interstate and Foreign Commerce § 6.01, at 6–5 ('he boundaries of the off-limits area are, and always have been, enveloped in a haze.'). Those rules are 'simply stated, if not simply applied.' Camps Newfound/Owatonna, 520 U.S. at 596 (Scalia, J., dissenting).If it was intended to forbid the States from making any regulations of commerce, it is difficult to account for the omission to prohibit it, when that prohibition has been so carefully and distinctly inserted in relation to other powers ... he legislation of Congress and the States has conformed to this construction from the foundation of the government ... The decisions of this court will also, in my opinion, when carefully examined, be found to sanction the construction I am maintaining. The Dormant Commerce Clause, or Negative Commerce Clause, in American constitutional law, is a legal doctrine that courts in the United States have inferred from the Commerce Clause in Article I of the US Constitution. The Dormant Commerce Clause is used to prohibit state legislation that discriminates against interstate or international commerce. For example, it is lawful for Michigan to require food labels that specifically identify certain animal parts, if they are present in the product, because the state law applies to food produced in Michigan as well as food imported from other states and foreign countries; the state law would violate the Commerce Clause if it applied only to imported food or if it was otherwise found to favor domestic over imported products. Likewise, California law requires milk sold to contain a certain percentage of milk solids that federal law does not require, which is allowed under the Dormant Commerce Clause doctrine because California's stricter requirements apply equally to California-produced milk and imported milk and so does not discriminate against or inappropriately burden interstate commerce. The idea that regulation of interstate commerce may to some extent be an exclusive Federal power was discussed even before adoption of the Constitution, but the framers did not use the word 'dormant'. On September 15, 1787, the Framers of the Constitution debated in Philadelphia whether to guarantee states the ability to lay duties of tonnage without Congressional interference so that the states could finance the clearing of harbors and the building of lighthouses. James Madison believed that the mere existence of the Commerce Clause would bar states from imposing any duty of tonnage: 'He was more and more convinced that the regulation of Commerce was in its nature indivisible and ought to be wholly under one authority.' Roger Sherman disagreed: 'The power of the United States to regulate trade being supreme can control interferences of the State regulations when such interferences happen; so that there is no danger to be apprehended from a concurrent jurisdiction.' Sherman saw the commerce power as similar to the tax power, the latter being one of the concurrent powers shared by the federal and state governments. Ultimately, the Philadelphia Convention decided upon the present language about duties of tonnage in Article I, Section 10, which says: 'No state shall, without the consent of Congress, lay any duty of tonnage ...' The word 'dormant', in connection with the Commerce Clause, originated in dicta of Chief Justice John Marshall. For example, in the case of Gibbons v. Ogden, 22 U.S. 1 (1824), he wrote that the power to regulate interstate commerce 'can never be exercised by the people themselves, but must be placed in the hands of agents, or lie dormant.' Concurring Justice William Johnson was even more emphatic that the Constitution is 'altogether in favor of the exclusive grants to Congress of power over commerce.' Later, in the case of Willson v. Black-Bird Creek Marsh Co., 27 U.S. 245 (1829), Marshall wrote: 'We do not think that the act empowering the Black Bird Creek Marsh Company to place a dam across the creek, can, under all the circumstances of the case, be considered as repugnant to the power to regulate commerce in its dormant state, or as being in conflict with any law passed on the subject.' If Marshall was suggesting that the power over interstate commerce is an exclusive federal power, the Dormant Commerce Clause doctrine eventually developed very differently: it treats regulation that does not discriminate against or unduly burden interstate commerce as a concurrent power, rather than an exclusive federal power, and it treats regulation that does so as an exclusive federal power. Thus, the modern doctrine says that congressional power over interstate commerce is somewhat exclusive but 'not absolutely exclusive'. The approach began in the 1851 case of Cooley v. Board of Wardens, in which Justice Benjamin R. Curtis wrote for the Court: 'Either absolutely to affirm, or deny that the nature of this power requires exclusive legislation by Congress, is to lose sight of the nature of the subjects of this power, and to assert concerning all of them, what is really applicable but to a part.' The first clear holding of the Supreme Court striking down a state law under the Dormant Commerce Clause came in 1873. Justice Anthony Kennedy has written that: 'The central rationale for the rule against discrimination is to prohibit state or municipal laws whose object is local economic protectionism, laws that would excite those jealousies and retaliatory measures the Constitution was designed to prevent.' In order to determine whether a law violates a so-called 'dormant' aspect of the Commerce Clause, the court first asks whether it discriminates on its face against interstate commerce. In this context, 'discrimination' simply means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter. Thus, in a dormant Commerce Clause case, a court is initially concerned with whether the law facially discriminates against out-of-state actors or has the effect of favoring in-state economic interests over out-of-state interests. Discriminatory laws motivated by 'simple economic protectionism' are subject to a 'virtually per se rule of invalidity', City of Philadelphia v. New Jersey 437 U.S. 617 (1978), Dean Milk Co. v. City of Madison, Wisconsin, 340 U.S. 349 (1951), Hunt v. Washington State Apple Advertising Comm., 432 U.S. 333 (1977) which can only be overcome by a showing that the State has no other means to advance a legitimate local purpose, Maine v. Taylor, 477 U.S. 131(1986). See also Brown-Forman Distillers v. New York State Liquor Authority, 476 U.S. 573 (1986).