The State Proprietary Activity (Market Participant) Exception.

In a case of first impression, the Court held that a Mary- land bounty scheme by which the state paid scrap processors for each “hulk” automobile destroyed is “the kind of action with which the Commerce Clause is not concerned.”986 As first enacted, the bounty plan did not distinguish between in-state and out-of-state processors, but it was amended in a manner that substantially disadvantaged out-of-state processors. The Court held “that entry by the State itself into the market itself as a purchaser, in effect, of a potential article of interstate commerce [does not] create[ ] a burden upon that commerce if the State restricts its trade to its own citizens or businesses within the State.”987

Affirming and extending this precedent, the Court held that a state operating a cement plant could in times of shortage (and presumably at any time) confine the sale of cement by the plant to residents of the state.988 “[T]he Commerce Clause responds principally to state taxes and regulatory measures impeding free private trade in the national marketplace. . . . There is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market.”989 It is yet unclear how far this concept of the state as market participant rather than market regulator will be extended.990

Footnotes

986
Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 805 (1976). [Back to text]
987
426 U.S. at 808. [Back to text]
988
Reeves, Inc. v. Stake, 447 U.S. 429 (1980). [Back to text]
989
447 U.S. at 436–37; see also McBurney v. Young, 569 U.S. ___, No. 12–17, slip op. at 14 (2013) (to the extent that the Virginia Freedom of Information Act created a market for public documents in Virginia, the Commonwealth was the sole manufacturer of the product, and therefore did not offend the Commerce Clause when it limited access to those documents under the Act to citizens of the Commonwealth). [Back to text]
990
See also White v. Massachusetts Council of Construction Employers, 460 U.S. 204 (1983) (city may favor its own residents in construction projects paid for with city funds); South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82 (1984) (illustrating the deep divisions in the Court respecting the scope of the exception). [Back to text]