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CRS Annotated Constitution

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Regulation.—Adoption of the modern standard of commerce–clause review of state regulation of or having an impact on interstate commerce was achieved in Southern Pacific Co. v. Arizona,967 although it was presaged in a series of opinions, mostly dissents, by Chief Justice Stone.968 The Southern Pacific case tested the validity of a state train–length law, justified as a safety measure. Revising a hundred years of doctrine, the Chief Justice wrote that whether a state or local regulation was valid depended upon a “reconciliation of the conflicting claims of state and national power is to be attained only by some appraisal and accommodation of the competing demands of the state and national interests involved.”969 Save in those few cases in which Congress has acted, “this Court, and not the state legislature, is under the commerce[p.234]clause the final arbiter of the competing demands of state and national interests.”970

That the test to be applied was a balancing one, the Chief Justice made clear at length, stating that in order to determine whether the challenged regulation was permissible, “matters for ultimate determination are the nature and extent of the burden which the state regulation of interstate trains, adopted as a safety measure, imposes on interstate commerce, and whether the relative weights of the state and national interests involved are such as to make inapplicable the rule, generally observed, that the free flow of interstate commerce and its freedom from local restraints in matters requiring uniformity of regulation are interests safeguarded by the commerce clause from state interference.”971

The test today continues to be the Stone articulation, although the more frequently quoted encapsulation of it is from Pike v. Bruce Church, Inc.972 “Where the statute regulates even–handedly 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.”

Obviously, the test requires “even–handedness.” Discrimination in regulation is another matter altogether. When on its face or in its effect a regulation betrays “economic protectionism,” an intent to benefit in–state economic interests at the expense of out–of–state interests, no balancing is required. “When a state statute clearly discriminates against interstate commerce, it will be struck down . . . unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism, . . . . Indeed, when the state statute amounts to simple economic protectionism, a ‘virtually per se rule of invalidity’ has applied.”973 Thus, an Oklahoma law that required coal–fired electric utilities in the State, producing[p.235]power for sale in the State, to burn a mixture of coal containing at least 10% Oklahoma–mined coal was invalidated at the behest of a State that had previously provided virtually 100% of the coal used by the Oklahoma utilities.974 Similarly, the Court invalidated a state law that permitted interdiction of export of hydroelectric power from the State to neighboring States, when in the opinion of regulatory authorities the energy was required for use in the State; a State may not prefer its own citizens over out–of–state residents in access to resources within the State.975

States may certainly promote local economic interests and favor local consumers, but they may not do so by adversely regulating out–of– state producers or consumers. In Hunt v. Washington State Apple Advertising Comm.,976 the Court confronted a state requirement that closed containers of apples offered for sale or shipped into North Carolina carry no grade other than the applicable U. S. grade. Washington State mandated that all apples produced in and shipped in interstate commerce pass a much more rigorous inspection than that mandated by the United States. The inability to display the recognized state grade in North Carolina impeded marketing of Washington apples. The Court obviously suspected the impact was intended, but, rather than strike the state requirement down as purposeful, it held that the regulation had the practical effect of discriminating, and, inasmuch as no defense based on possible consumer protection could be presented, the state law was invalidated.977 State actions to promote local products and[p.236]producers, of everything from milk978 to alcohol,979 may not be achieved through protectionism.

Even garbage transportation and disposition is covered by the negative commerce clause. A state law that banned the importation of most solid or liquid wastes that originated outside the State was struck down, because the State could not justify it as a health or safety measure, in the form of a quarantine, inasmuch as it did not limit in– state disposal at its landfills; the State was simply attempting to conserve landfill space and lower costs to its residents by keeping out trash from other States.980 States may not interdict the movement of persons into the State, whatever the motive to protect themselves from economic or similar difficulties.981

Supplement: [P. 236, add to text following n.980:]

Further extending the limitation of the clause on waste disposal,45 the Court invalidated as a discrimination against interstate commerce a local “flow control” law, which required all solid waste within the town to be processed at a designated transfer station before leaving the municipality.46 The town’s reason for the restriction was its decision to have built a solid waste transfer station by a private contractor, rather than with public funds by the town. To make the arrangement appetizing to the contractor, the town guaranteed it a minimum waste flow, for which it could charge a fee significantly higher than market rates. The guarantee was policed by the requirement that all solid waste generated within the town be processed at the contractor’s station and that any person disposing of solid waste in any other location would be penalized.

The Court analogized the constraint as a form of economic protectionism, which bars out–of–state processors from the business of treating the locality’s solid waste, by hoarding a local resource for the benefit of local businesses that perform the service. The town’s goal of revenue generation was not a local interest that could justify the discrimination. Moreover, the town had other means to accomplish this goal, such as subsidization of the local facility through general taxes or municipal bonds. The Court did not deal with, indeed, did not notice, the fact that the local law conferred a governmentally–granted monopoly, an exclusive franchise, indistinguishable from a host of local monopolies at the state and local level.47

Drawing the line between discriminatory regulations that are almost per se invalid and regulations that necessitate balancing is not an easy task. Not every claim of protectionism is sustained. Thus, in Minnesota v. Clover Leaf Creamery Co.,982 there was attacked 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. The Court found no discrimination against interstate commerce, because both in–state and out–of–state interests could not use plastic containers, and it refused to credit a lower, state–court finding that the measure was intended to benefit the local pulpwood industry. In Exxon Corp. v. Governor of Maryland,983 the Court upheld a statute that prohibited producers or refiners of petroleum products from operating retail service stations in Maryland. No discrimination was found, first, because there were no local producers or refiners within Maryland and therefore since the State’s entire gasoline supply flowed in interstate commerce there was no favoritism, and, second, although the bar on operating fell entirely on[p.237]out–of–state concerns, there were out–of–state concerns that did not produce or refine gasoline and they were able to continue operating in the State, so that there was some distinction between all in–state operators and some out–of–state operators as against some other out–of– state operators.

Still a model example of balancing is Chief Justice Stone’s opinion in Southern Pacific Co. v. Arizona.984 At issue was the validity of Arizona’s law barring the operation within the State of trains of more than 14 passenger cars, no other State had a figure this low, or 70 freight cars, only one other State had a cap this low. First, the Court observed that the law substantially burdened interstate commerce. Enforcement of the law in Arizona, while train lengths went unregulated or were regulated by varying standards in other States, meant that interstate trains of a length lawful in other States had to be broken up before entering the State; inasmuch as it was not practicable to break up trains at the border, that act had to be accomplished at yards quite removed, with the result that the Arizona limitation controlled train lengths as far east as El Paso, Texas, and as far west as Los Angeles. Nearly 95% of the rail traffic in Arizona was interstate. The other alternative was to operate in other States with the lowest cap, Arizona’s, with the result that that State’s law controlled the railroads’ operations over a wide area.985 If other States began regulating at different lengths, as they would be permitted to do, the burden on the railroads would burgeon. Moreover, the additional number of trains needed to comply with the cap just within Arizona was costly, and delays were occasioned by the need to break up and remake lengthy trains.986

Conversely, the Court found that as a safety measure the state cap had “at most slight and dubious advantage, if any, over unregulated train lengths.” That is, while there were safety problems[p.238]with longer trains, the shorter trains mandated by state law required increases in the numbers of trains and train operations and a consequent increase in accidents generally more severe than those attributable to longer trains. In short, the evidence did not show that the cap lessened rather than increased the danger of accidents.987

Conflicting state regulations appeared in Bibb v. Navajo Freight Lines, Inc.988 There, Illinois required the use of contour mudguards on trucks and trailers operating on the State’s highways, while adjacent Arkansas required the use of straight mudguards and banned contoured ones. At least 45 States authorized straight mudguards. The Court sifted the evidence and found it conflicting on the comparative safety advantages of contoured and straight mudguards. But, admitting that if that were all that was involved the Court would have to sustain the costs and burdens of outfitting with the required mudguards, the Court invalidated the Illinois law, because of the massive burden on interstate commerce occasioned by the necessity of truckers to shift cargoes to differently designed vehicles at the State’s borders.

Arguably, the Court in more recent years has continued to stiffen the scrutiny with which it reviews state regulation of interstate carriers purportedly for safety reasons.989 Difficulty attends any evaluation of the possible developing approach, inasmuch as the Court has spoken with several voices. A close reading, however, indicates that while the Court is most reluctant to invalidate regulations that touch upon safety and that if safety justifications are not illusory it will not second–guess legislative judgment, nonetheless, the Court will not accept, without more, state assertions of safety motivations. “Regulations designed for that salutary purpose nevertheless may further the purpose so marginally, and interfere with commerce so substantially, as to be invalid under the Commerce Clause.” Rather, the asserted safety purpose must be weighed against the degree of interference with interstate commerce. “This ‘weighing’ . . . requires . . . ‘a sensitive consideration of the weight and nature of the state regulatory concern in light of the extent of the burden imposed on the course of interstate commerce.”990

[p.239]

Balancing has been used in other than transportation–industry cases. Indeed, the modern restatement of the standard was in such a case.991 There, the State required cantaloupes grown in the State to be packed there, rather than in an adjacent State, so that in–state packers’ names would be associated with a superior product. Promotion of a local industry was legitimate, the Court, said, but it did not justify the substantial expense the company would have to incur to comply. State efforts to protect local markets, concerns, or consumers against outside companies have largely been unsuccessful. Thus, a state law that prohibited ownership of local investment–advisory businesses by out–of– state banks, bank–holding companies, and trust companies was invalidated.992 The Court plainly thought the statute was protectionist, but instead of voiding it for that reason it held that the legitimate interests the State might have did not justify the burdens placed on out–of–state companies and that the State could pursue the accomplishment of legitimate ends through some intermediate form of regulation. In Edgar v. Mite Corp.,993 an Illinois regulation of take– over attempts of companies that had specified business contacts with the State, as applied to an attempted take–over of a Delaware corporation with its principal place of business in Connecticut, was found to constitute an undue burden, with special emphasis upon the extraterritorial effect of the law and the dangers of disuniformity. These problems were found lacking in the next case, in which the state statute regulated the manner in which purchasers of corporations chartered within the State and with a specified percentage of in–state shareholders could proceed with their take–over efforts. The Court emphasized that the State was regulating only its own corporations, which it was empowered to do, and no matter how many other States adopted such laws there would be no conflict. The burdens on interstate commerce, and the Court was not that clear that the effects of the law were burdensome in the appropriate context, were justified by the State’s interests in regulating its corporations and resident shareholders.994

In other areas, while the Court repeats balancing language, it has not applied it with any appreciable bite,995 but in most re[p.240]spects the state regulations involved are at most problematic in the context of the concerns of the commerce clause.


Footnotes

967 325 U.S. 761 (1945).
968 E.g., DiSanto v. Pennsylvania, 273 U.S. 34, 43 (1927) (dissenting); California v. Thompson, 313 U.S. 109 (1941); Duckworth v. Arkansas, 314 U.S. 390 (1941); Parker v. Brown, 317 U.S. 341, 362–368 (1943) (alternative holding).
969 Southern Pacific Co. v. Arizona, 325 U.S. 761, 768–769 (1941).
970 Id., 769.
971 Id., 770–771.
972 397 U.S. 137, 142 (1970).
973 Wyoming v. Oklahoma, 112S.Ct.789,800 (1992) (quoting City of Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978)). See also Brown–Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 579 (1986). In Maine v. Taylor, 477 U.S. 131 (1986), the Court did uphold a protectionist law, finding a valid justification aside from economic protectionism. The State barred the importation of out–of–state baitfish, and the Court credited lower–court findings that legitimate ecological concerns existed about the possible presence of parasites and nonnative species in baitfish shipments.
974 Wyoming v. Oklahoma, 112S.Ct.789 (1992). See also Maryland v. Louisiana, 451 U.S. 725 (1981) (a tax case, invalidating a state first–use tax, which, because of exceptions and credits, imposed a tax only on natural gas moving out–of–state, because of impermissible discrimination).
975 New England Power Co. v. New Hampshire, 455 U.S. 331 (1982). See also Hughes v. Oklahoma, 441 U.S. 322 (1979) (voiding 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 ground water from any well in the State intended for use in another State). These cases largely eviscerated a line of older cases recognizing a strong state interest in protection of animals and resources. See Geer v. Connecticut, 161 U.S. 519 (1896). New England Power had rather old antecedents. E.g., West v. Kansas Gas Co., 221 U.S. 229 (1911); Pennsylvania v. West Virginia, 262 U.S. 553 (1923).
976 432 U.S. 333 (1977). Other cases in which the State was attempting to promote and enhance local products and businesses include Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) (State required producer of high–quality cantaloupes to pack them in the State, rather than in an adjacent State at considerably less expense, in order that the produce be identified with the producing State); Foster–Fountain Packing Co. v. Haydel, 278 U.S. 1 (1928) (State banned export of shrimp from State until hulls and heads were removed and processed, in order to favor canning and manufacture within the State).
977 That discriminatory effects will result in invalidation, as well as purposeful discrimination, is also drawn from Dean Milk Co. v. City of Madison, 340 U.S. 349 (1951)
978 E.g., H. P. Hood & Sons v. Du Mond, 336 U.S. 525 (1949). See also Great Atlantic & Pacific Tea Co. v. Cottrell, 424 U.S. 366 (1976) (state effort to combat discrimination by other States against its milk through reciprocity provisions).

Supplement: [P. 236, add to n.978:]

In West Lynn Creamery, Inc. v. Healy, 512 U.S. 186 (1994) , the Court held invalidly discriminatory against interstate commerce a state milk pricing order, which imposed an assessment on all milk sold by dealers to in– state retailers, the entire assessment being distributed to in–state dairy farmers despite the fact that about two– thirds of the assessed milk was produced out of State. The avowed purpose and undisputed effect of the provision was to enable higher–cost in–state dairy farmers to compete with lower–cost dairy farmers in other States.

979 Healy v. Beer Institute, Inc., 491 U.S. 324 (1989); Brown– Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573 (1986). And see Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984) (a tax case).
980 City of Philadelphia v. New Jersey, 437 U.S. 617 (1978), reaffirmed and applied in Chemical Waste Management, Inc. v. Hunt, 112S.Ct.2009 (1992), and Fort Gratiot Sanitary Landfill v. Michigan Natural Resources Dept., 112S.Ct.2019 (1992).
981 Edwards v. California, 314 U.S. 160 (1941) (California effort to bar “Okies,” persons fleeing the Great Plains dust bowl in the Depression). Cf. the notable case of Crandall v. Nevada, 6 Wall. (73 U.S.) 35 (1867) (without tying it to any particular provision of Constitution, Court finds a protected right of interstate movement). The right of travel is now an aspect of equal protection jurisprudence.
982 449 U.S. 456, 470–474 (1981).
983 437 U.S. 117 (1978).
984 325 U.S. 761 (1945). Interestingly, Justice Stone had written the opinion for the Court in South Carolina State Highway Dept. v. Barnwell Bros., 303 U.S. 177 (1938), in which, in a similar case involving regulation of interstate transportation and proffered safety reasons, he had eschewed balancing and deferred overwhelmingly to the state legislature. Barnwell Bros. involved a state law that prohibited use on state highways of trucks that were over 90 inches wide or that had a gross weight over 20,000 pounds, with from 85% to 90% of the Nation’s trucks exceeding these limits. This deference and refusal to evaluate evidence resurfaced in a case involving an attack on railroad “full–crew” laws. Brotherhood of Locomotive Firemen & Enginemen v. Chicago, R.I. & P. Railroad Co., 393 U.S. 129 (1968).
985 The concern about the impact of one State’s regulation upon the laws of other States is in part a reflection of the Cooley national uniformity interest and partly a hesitation about the autonomy of other States, E.g., CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 88–89 (1987); Brown–Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 583–584 (1986).
986 Southern Pacific Co. v. Arizona, 325 U.S. 761, 771–775 (1945).
987 Id., 775–779, 781–784.
988 359 U.S. 520 (1959).
989 Raymond Motor Transp. v. Rice, 434 U.S. 429 (1978); Kassel v. Consolidated Freightways Corp., 450 U.S. 662 (1981).
990 Kassel v. Consolidated Freightways Corp., 450 U.S. 662, 67– 671 (1981) (quoting Raymond Motor Transp. v. Rice, 434 U.S. 429, 441, 443 (1978)). Both cases invalidated state prohibitions of the use of 65– foot single–trailer trucks on state highways.
991 Pike v. Bruce Church, Inc., 397 U.S. 137 (1970).
992 Lewis v. BT Investment Managers, Inc., 447 U.S. 27 (1980).
993 457 U.S. 624 (1982) (plurality opinion).
994 CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987).
995 E.g., Northwest Central Pipeline Corp. v. State Corp. Comm. of Kansas, 489 U.S. 493, 525–526 (1989); Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 472–474 (1981); Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 127–128 (1978). But see Bendix Autolite Corp. v. Midwesco Enterprises, Inc., 486 U.S. 888 (1988).

Supplement Footnotes

45 See also Oregon Waste Systems, Inc. v. Department of Envtl. Quality, 511 U.S. 93 (1994) (discriminatory tax).
46 C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 (1994) .
47 See The Supreme Court, Leading Cases, 1993 Term, 108 Harv. L. Rev. 139, 149–59 (1994). Weight was given to this consideration by Justice O’Connor, 511 U.S. at 401 (concurring) (local law an excessive burden on interstate commerce), and by Justice Souter, id. at 410 (dissenting).
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