Constitutional Law I Market Participant Doctrine Nov. 22, 2004

Fall, 2004Con Law I - Manheim2 Market Participant Doctrine State laws that discriminate against IC are presumptively invalid What about state’s own purchases?  Doesn’t it have to favor 1 supplier over others? Or state’s own sales (e.g., timber sales)  Doesn’t it have to favor 1 purchaser over others? When state is acting like private party, does it have same freedom of action? Should there be a distinction between the governmental & proprietary functions of gov’t?

Fall, 2004Con Law I - Manheim3 Market Participant Doctrine Hughes v. Alexandria Scrap (1976) State car recycling program favoring Maryland sellers. Reeves v. Stake (1980) S.Dak. cement plant favored in-state buyers  What’s a nice state like S.D. doing making cement?

Fall, 2004Con Law I - Manheim4 MPD Theories Com. Clause designed to limit state taxing & regulatory powers, not market activities DCC fails on originalism grounds When regulating, states exercise sovereign power over markets; when participating, states are governed by market economics Sovereign / proprietary distinction When participating in market, states act as fiduciaries over public funds Sovereignty basis for exempting states

Fall, 2004Con Law I - Manheim5 MPD Theories Under MPD, states can be protectionist Despite their effect on interstate markets But, if truly a market participant,  Then subject to federal laws regulating markets  Including anti-trust laws

Fall, 2004Con Law I - Manheim6 MPD & Downstream regulation S.Central Timber v. Alaska (1984) Low-price timber sales to firms processing in AK Designed to protect existing (lumber) industries What market is AK a participant in? Timber sales? Lumber processing? Can it use its MPD exemption in the former to impose conditions on the latter? No. AK is engaging in “downstream regulation” outside of the “discrete, identifiable class of economic activity in which it is a participant”

Fall, 2004Con Law I - Manheim7 Downstream regulation S.Central Timber v. Alaska (1984) With the in-state processing conditions, AK is acting more like a sovereign than a proprietor Rehnquist dissent:  Distinction without a difference AK could sell only to companies with in-state mills AK could process the timber itself, then sell wood products AK could directly subsidize in-state mills  Is formalism important here? Does it matter that most of AK’s timber sales were to Japan?

Fall, 2004Con Law I - Manheim8 Exceptions to MPD When state has monopoly power in the market in which it participates Monopolists enjoy “market power,” i.e., the ability to “regulate” the market Sale of natural resources States have special stewardship responsibilities (akin to regulatory power) over nat. resources Foreign commerce The “dormant” foreign commerce doctrine is even stronger than the DCC, and may not admit of same exception for state market acts