Part Two:

In the twentieth century, the doctrine of selective exclusivity dissolved into a broader and broader interpretation of the court-created Dormant Commerce Clause. Granted, as the national economy became more and more interrelated and interdependent, it became harder and harder to see the line separating interstate commerce from commercial activity that takes place entirely within one state and affects no one in other states; but one can also discern in the Court’s opinions an emerging willingness to evaluate the real or possible effects of state laws on interstate commerce and to presume that such laws exceed state powers.

Justice Frankfurter’s opinion of the court in Freeman v. Hewit (1946) makes it clear that the economic chaos of the new republic, described in the above-cited quotes by Chief Justice Marshall in Brown v. Maryland, in Federalist #42 by James Madison, and in Justice Johnson’s Gibbons concurrence, still provides the historical rationale for the Dormant Commerce Clause:

The power of the States to tax and the limitations upon that power imposed by the Commerce Clause have necessitated a long, continuous process of judicial adjustment. The need for such adjustment is inherent in a federal government like ours, where the same transaction has aspects that may concern the interests and involve the authority of both the central government and of the constituent States. [Footnote omitted.] The history of this problem is spread over hundreds of volumes of our Reports. To attempt to harmonize all that has been said in the past would neither clarify what has gone before not guide the future. Suffice it to say that especially in this field opinions must be read in the setting of the particular cases and as the product of preoccupation with their special facts.

Our starting point is clear. In two recent cases we applied the principle that the Commerce Clause was not merely an authorization to Congress to enact laws for the protection and encouragement of commerce among the States, but by its own force created an area of trade free from interference by the States. In short, the Commerce Clause even without implementing legislation by Congress is a limitation upon the power of the States. [The Court cites Southern Pacific Co. v. Arizona and Morgan v. Virginia]. In so deciding we reaffirmed, upon fullest consideration, the course of adjudication unbroken through the Nation’s history. This limitation on State power, as the Morgan case so well illustrates, does not merely forbid a State to single out interstate commerce for hostile action. A State is also precluded from taking any action which may fairly be deemed to have the effect of impeding the free flow of trade between States. It is immaterial that local commerce is subjected to a similar encumbrance. Freeman v. Hewit, 329 U.S. 249, 251-52 (1946). (Emphasis added.)

Though the Supreme Court has decided dozens of Dormant Commerce Clause cases in the twentieth century, in the development of the case law two lines of cases played a prominent role: transportation cases and milk cases. The first line is understandable. States have an interest in regulating their highways, waterways, and railways for safety and maintenance reasons. Traffic on these arteries is often from or heading out of state. Thus, the state regulations affect interstate commerce.

The milk cases reflect a concern, particularly evident in the first half of the twentieth century, with the purity and the stability of the milk supply. States often enacted regulations that set minimum costs for wholesale milk in order to protect their own dairy farmers from out-of-state suppliers and to lessen the temptation to dilute or “chalk” milk and sell it at an unreasonably low price. In this brief discussion, we only have space to discuss a couple of these cases; other transportation and milk cases are listed on the assignment page for this topic.

The most basic rule of Dormant Commerce Clause jurisprudence is that states are prohibited from passing laws intended to protect their own business from out-of-state competitors. A New York statute established minimum prices for the purchase of raw milk from dairy farmers. The law also prohibited creameries from buying milk in other states at a price lower than they would pay New York farmers, thus protecting New York farmers from out-of-state competition. The Supreme Court struck the New York law down as a discriminatory, protectionist measure that violates the Commerce Clause: “[C]ommerce between the states is burdened unduly when one state regulates by indirection the prices to be paid to producers in another in the faith that augmentation of prices will lift up the level of economic welfare, and that this will stimulate the observance of sanitary requirements in the preparation of the product.” Baldwin v. G.A.F. Seelig, 294 U.S. 511, 524 (1935). State laws may not intentionally discriminate against out-of-state businesses; by doing so they eliminate the free trade area described by Justice Frankfurter.

What if the principal intent of the state legislation is not to discriminate against out-of-state businesses but the effect of the legislation is discriminatory? In the 1938 Barnwell Brothers case, South Carolina passed legislation establishing maximum dimensions for trucks using its state highways, some of which were built with federal funds. The regulations were more stringent than those of some of the surrounding states, and clearly the South Carolina highways bore truck traffic originating from or heading to other states: the state law burdened interstate commerce. But the Court upheld the state law. Referring to the principle of selective exclusivity, but not specifically citing that rule as the governing principle, the Court said:

The commerce clause has . . . been thought to set its own limitation upon state control of interstate rail carriers so as to preclude the subordination of the efficiency and convenience of interstate traffic to local service requirements. But the present case affords no occasion for saying that the bare possession of power by Congress to regulate the interstate traffic forces the states to conform to standards which Congress might, but has, not adopted, or curtails their power to take measures to insure the safety and conservation of their highways which may be applied to like traffic moving intrastate. Few subjects of state regulation are so peculiarly of local concern as is the use of state highways.

With respect to the extent and nature of the local interests to be protected and the unavoidable effect upon interstate and intrastate commerce alike, regulations of the use of the highways are akin to local regulation of rivers, harbors, piers and docks, quarantine regulations, and game laws, which, Congress not acting, have been sustained even though they materially interfere with interstate commerce. (Footnotes omitted.)

Thus, state police power regulations can even “materially interfere” with interstate commerce and still be valid. South Carolina State Highway Department v. Barnwell Brothers, 303 U.S. 177, 184-185, 187-188 (1938).

But the extent of permissible state interference seemed to contract considerably in later years. The Court began to apply a balancing test to questionable state regulations: if, in the opinion of the Court, the demonstrable health or safety benefits of the regulations outweigh the burden on free-moving interstate commerce, the legislation was valid; if not, not. Thus, in the Southern Pacific case, the Court struck down state laws, which, for safety reasons, regulated the length of trains that traveled through the state; many, if not most, of the trains were clearly engaged in interstate travel. The Court balanced the benefits against the degree of interference and found both values to work against the state law:

Here, we conclude that the state does go too far. Its regulation of train lengths, admittedly obstructive to interstate train operation and having a seriously adverse effect on transportation efficiency and economy, passes beyond what is plainly essential for safety, since it does not appear that it will lessen, rather than increase, the danger of accident. Southern Pacific Co. v. Arizona, 325 U.S. 761, 781 (1945) (Interestingly, Justices Black and Douglas dissented.)

Six years later, in the Dean Milk Co. case, the Court added a third element to this balancing formula for cases in which the balance between benefits and burden was too close to call. The city of Madison, Wisconsin, passed an ordinance (which is treated as a state law in constitutional jurisprudence) that required all milk sold in Madison to be processed at a bottling plant within five miles of the city. While Madison, at that time, was surrounded by hundreds of dairy farms, the regulation would apply to all commercial milk sellers within and without Wisconsin who wished to sell milk in Madison. Thus, the law did not explicitly discriminate against out-of-state sellers. The Court struck the regulation down:

In thus erecting an economic barrier protecting a major local industry against competition from without the State, Madison plainly discriminates against interstate commerce. This it cannot do, even in the exercise of its unquestioned power to protect the health and safety of its people, if reasonable nondiscriminatory alternatives, adequate to conserve legitimate local interests, are available. (Footnote omitted; emphasis added.)

Thus, if the state regulation is meritorious but places a significant burden on interstate commerce, it will fail if a “reasonable, non-discriminatory alternative” is available. The Court in Dean Milk held one such alternative was available. Dean Milk Co. v. City of Madison, 340 U.S. 349, 354 (1951). (Again, Justice Black dissented.)

The current law is summarized in an oft-cited opinion by Justice Stewart in the 1970 Pike case:

Although the criteria for determining the validity of state statutes affecting interstate commerce have been variously stated, the general rule that emerges can be phrased as follows: where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will, of course, depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities. Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970). (Citation omitted.)

One final wrinkle in Dormant Commerce Clause law should be mentioned. The cases and rules that were just discussed all applied to laws in which the states regulate activities that affect interstate commerce: the states were “market regulators.” What if the state actually gets involved in business as a buyer or seller of goods and acts as a “market participant” in interstate commerce? The Court treats states differently in these situations. In a 1976 case, Hughes v. Alexandria Scrap, the Court upheld a Maryland law that provided for state bounties on junk automobiles within the state that were towed to approved in-state scrap yards for disposal. The state refused to pay the bounty for junkers taken to out-of-state processors. Thus, the law favored in-state processors and discriminated against out-of-state processors. The Court said:

But we are not persuaded that Maryland's action in amending its statute was the kind of action with which the Commerce Clause is concerned.

The situation presented by this statute and the 1974 amendment is quite unlike that found in the cases upon which appellee relies. In the most recent of those cases, Pike v. Bruce Church, supra, a burden was found to be imposed by an Arizona requirement that fresh fruit grown in the State be packed there before shipment interstate.

This case is essentially different, said the Court:

The common thread of all these [prior] cases is that the State interfered with the natural functioning of the interstate market either through prohibition or through burdensome regulation. By contrast, Maryland has not sought to prohibit the flow of hulks, or to regulate the conditions under which it may occur. Instead, it has entered into the market itself to bid up their price. There has been an impact upon the interstate flow of hulks only because, since the 1974 amendment, Maryland effectively has made it more lucrative for unlicensed suppliers to dispose of their hulks in Maryland, rather than take them outside the State.

Appellee recognizes that the situation presented by this case is without precedent in this Court. (Footnote omitted.)

The Court concluded that “[n]othing in the purposes animating the Commerce Clause prohibits a State, in the absence of congressional action, from participating in the market and exercising the right to favor its own citizens over others.” Hughes v. Alexandria Scrap, 426 U.S. 794, 805, 806-07, 810 (1976).

In Reeves v. Stake (1980), a case in which South Dakota owned a cement plant that by law favored South Dakotans in times of scant supply, the Court upheld the state law, arguing that South Dakota’s proprietorship of a cement-manufacturing plant made it a market participant rather than a market regulator and thus immune from the usual rules imposed by the Dormant Commerce Clause.

Finally, it would not be right to leave this subject without citing the criticism of the very concept of a Dormant Commerce Clause by current justices on the Court. Justice Thomas in particular has been severe and to the point:

The negative Commerce Clause has no basis in the text of the Constitution, makes little sense, and has proved virtually unworkable in application. Camps Newfound/Owatonna v. Town of Harrison, 520 U.S. 564, 609-640 (1997) (Justice Thomas, dissenting)

See also Justice Thomas’s dissent in Hillside Dairy v. Lyons, 539 U.S. 59, 68 (2003).

Justice Scalia and the late Chief Justice Rehnquist have also been critical, as evidenced in Scalia’s dissent in Camps Newfound/Owatonna and other cases.

We have, in this topic, drifted rather far afield from the opinions of the Marshall Court that serve as the principal focus of this course, but the mustard seed of the Dormant Commerce Clause jurisprudence was definitely planted in American constitutional law by Chief Justice Marshall. One cannot help thinking that he would be pleased with the harvest.