Congressional Authorization of Impermissible State Action
THE COMMERCE CLAUSE AS A RESTRAINT ON STATE POWERS
The grant of power to Congress over commerce, unlike that of power to levy customs duties, the power to raise armies, and some others, is unaccompanied by correlative restrictions on state power.907 This circumstance does not, however, of itself signify that the States were expected to participate in the power thus granted Congress, subject only to the operation of the supremacy clause. As Hamilton pointed out in The Federalist,908 while some of the powers which are vested in the National Government admit of their concurrent exercise by the States, others are of their very nature exclusive, and hence render the notion of a like power in the States contradictory and repugnant. As an example of the latter kind of power, Hamilton mentioned the power of Congress to pass a uniform naturalization law. Was the same principle expected to apply to the power over foreign and interstate commerce?
Unquestionably one of the great advantages anticipated from the grant to Congress of power over commerce was that state interferences with trade, which had become a source of sharp discontent under the Articles of Confederation, would be thereby brought to an end. As Webster stated in his argument for appellant in Gibbons v. Ogden: The prevailing motive was to regulate commerce; to rescue it from the embarrassing and destructive consequences, resulting from the legislation of so many different States, and to place it under the protection of a uniform law.909 In other words, the constitutional grant was itself a regulation of commerce in the interest of uniformity.910
907 Thus, by Article I, § 10, cl. 2, States are denied the power to lay any Im-posts or Duties on Imports or Exports except by the consent of Congress. The clause applies only to goods imported from or exported to another country, not from or to another State, Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1869), which prevents its application to interstate commerce, although Chief Justice Marshall thought to the contrary, Brown v. Maryland, 25 U.S. (12 Wheat.) 419, 449 (1827), and the contrary has been strongly argued. W. CROSSKEY, POLITICS AND THE CONSTITUTION IN THE HISTORY OF THE UNITED STATES 295–323 (1953).
908 THE FEDERALIST No. 32 (J. Cooke ed. 1961), 199–203. Note that in connection with the discussion that follows, Hamilton avowed that the taxing power of the States, save for imposts or duties on imports or exports, remains undiminished. Id. at 201. The States retain [the taxing] authority in the most absolute and unqualified sense[.] Id. at 199.
909 22 U.S. (9 Wheat.) 1, 11 (1824). Justice Johnson’s assertion, concurring, was to the same effect. Id. at 226. Late in life, James Madison stated that the power had been granted Congress mainly as a negative and preventive provision against injustice among the States. 4 LETTERS AND OTHER WRITINGS OF JAMES MADISON 14–15 (1865).
910 It was evident from THE FEDERALIST that the principal aim of the commerce clause was the protection of the national market from the oppressive power of individual States acting to stifle or curb commerce. Id. at No. 7, 39–41 (Hamilton); No. 11, 65–73 (Hamilton); No. 22, 135–137 (Hamilton); No. 42, 283–284 (Madison); No. 53, 362–364 (Madison). See H. P. Hood & Sons v. Du Mond, 336 U.S. 525, 533 (1949). For a comprehensive history of the adoption of the commerce clause, which does not indicate a definitive answer to the question posed, see Abel, The Commerce Clause in the Constitutional Convention and in Contemporary Comment, 25 MINN. L. REV. 432 (1941). Professor Abel discovered only nine references in the Convention records to the commerce clause, all directed to the dangers of interstate rivalry and retaliation. Id. at 470–71 & nn. 169–75.
That, however, the commerce clause, unimplemented by congressional legislation, took from the States any and all power over foreign and interstate commerce was by no means conceded and was, indeed, counterintuitive, considering the extent of state regulation that previously existed before the Constitution.911 Moreover, legislation by Congress regulative of any particular phase of commerce would raise the question whether the States were entitled to fill the remaining gaps, if not by virtue of a concurrent power over interstate and foreign commerce, then by virtue of that immense mass of legislation as Marshall termed it, which embraces everything within the territory of a State, not surrendered to the general government,912 in a word, the police power.
The text and drafting record of the commerce clause fails, therefore, without more ado, to settle the question of what power is left to the States to adopt legislation regulating foreign or interstate commerce in greater or lesser measure. To be sure, in cases of flat conflict between an act or acts of Congress regulative of such commerce and a state legislative act or acts, from whatever state power ensuing, the act of Congress is today recognized, and was recognized by Marshall, as enjoying an unquestionable supremacy.913 But suppose, first, that Congress has passed no act, or second, that its legislation does not clearly cover the ground traversed by previously enacted state legislation. What rules then apply? Since Gibbons v. Ogden, both of these situations have confronted the Court, especially as regards interstate commerce, hundreds of times, and in meeting them the Court has, first, determined that it has power to decide when state power is validly exercised, and, second, it has coined or given currency to numerous formulas, some of which still guide, even when they do not govern, its judgment.914
911 The strongest suggestion of exclusivity found in the Convention debates is a remark by Madison. Whether the States are now restrained from laying tonnage duties depends on the extent of the power ‘to regulate commerce.’ These terms are vague but seem to exclude this power of the States. 2 M. FARRAND, THE RECORDS OF THE FEDERAL CONVENTION OF 1787 625 (rev. ed. 1937). However, the statement is recorded during debate on the clause, Art. I, § 10, cl. 3, prohibiting States from laying tonnage duties. That the Convention adopted this clause, when tonnage duties would certainly be one facet of regulating interstate and foreign commerce, casts doubt on the assumption that the commerce power itself was intended to be exclusive.
913 22 U.S. at 210–11.
914 The writings detailing the history are voluminous. See, e.g., F. FRANKFURTER, THE COMMERCE CLAUSE UNDER MARSHALL, TANEY, AND WHITE (1937); B. GAVIT, THE COMMERCE CLAUSE OF THE UNITED STATES CONSTITUTION (1932) (usefully containing appendices cataloguing every commerce clause decision of the Supreme Court to that time); Sholleys, The Negative Implications of the Commerce Clause, 3 U. CHI. L. REV. 556 (1936). Among the recent writings, see Sedler, The Negative Commerce Clause as a Restriction on State Regulation and Taxation: An Analysis in Terms of Constitutional Structure, 31 WAYNE L. REV. 885 (1985) (a disputed conceptualization arguing the Court followed a consistent line over the years), and articles cited, id. at 887 n.4.
Thus, it has been judicially established that the commerce clause is not only a ‘positive’ grant of power to Congress, but it is also a ‘negative’ constraint upon the States; that is, the doctrine of the ‘dormant’ commerce clause, though what is dormant is the congressional exercise of the power, not the clause itself, under which the Court may police state taxation and regulation of interstate commerce, became well established.
Webster, in Gibbons, argued that a state grant of a monopoly to operate steamships between New York and New Jersey not only contravened federal navigation laws but violated the commerce clause as well, because that clause conferred an exclusive power upon Congress to make the rules for national commerce, although he conceded that the grant to regulate interstate commerce was so broad as to reach much that the States had formerly had jurisdiction over, the courts must be reasonable in interpretation.915 But because he thought the state law was in conflict with the federal legislation, Chief Justice Marshall was not compelled to pass on Webster’s arguments, although in dicta he indicated his considerable sympathy with them and suggested that the power to regulate commerce between the States might be an exclusively federal power.916
915 22 U.S. (9 Wheat.) at 13–14, 16.
916 22 U.S. at 17–18, 209. In Sturges v. Crowninshield, 17 U.S. (4 Wheat.) 122, 193–196 (1819), Chief Justice Marshall denied that the grant of the bankruptcy power to Congress was exclusive. See also Houston v. Moore, 18 U.S. (5 Wheat.) 1 (1820) (militia).
Chief Justice Marshall originated the concept of the dormant commerce clause in Willson v. Black Bird Creek Marsh Co.,917 although in dicta. Attacked before the Court was a state law authorizing the building of a dam across a navigable creek, and it was claimed the law was in conflict with the federal power to regulate interstate commerce. Rejecting the challenge, Marshall said that the state act could not be considered as repugnant to the [federal] power to regulate commerce in its dormant state[.]
Returning to the subject in Cooley v. Board of Wardens of Port of Philadelphia,918 the Court, upholding a state law that required ships to engage a local pilot when entering or leaving the port of Philadelphia, enunciated a doctrine of partial federal exclusivity. According to Justice Curtis’ opinion, the state act was valid on the basis of a distinction between those subjects of commerce which imperatively demand a single uniform rule operating throughout the country and those which as imperatively demand that diversity which alone can meet the local necessities of navigation, that is to say, of commerce. As to the former, the Court held Congress’ power to be exclusive, as to the latter, it held that the States enjoyed a power of concurrent legislation.919 The Philadelphia pilot-age requirement was of the latter kind.
Thus, the contention that the federal power to regulate interstate commerce was exclusive of state power yielded to a rule of partial exclusivity. Among the welter of such cases, the first actually to strike down a state law solely on commerce clause grounds was the State Freight Tax Case.920 The question before the Court was the validity of a nondiscriminatory921 statute that required every company transporting freight within the State, with certain exceptions, to pay a tax at specified rates on each ton of freight carried by it. Opining that a tax upon freight, or any other article of commerce, transported from State to State is a regulation of commerce among the States and, further, that the transportation of merchandise or passengers through a State or from State to State was a subject that required uniform regulation, the Court held the tax in issue to be repugnant to the commerce clause.
918 53 U.S. (12 How.) 299 (1851). The issue of exclusive federal power and the separate issue of the dormant commerce clause was present in the License Cases, 46 U.S. (5 How.) 504 (1847), and the Passenger Cases, 48 U.S. (7 How.) 283 (1849), but, despite the fact that much ink was shed in multiple opinions discussing the questions, nothing definitive emerged. Chief Justice Taney, in contrast to Marshall, viewed the clause only as a grant of power to Congress, containing no constraint upon the States, and the Court’s role was to void state laws in contravention of federal legislation. 46 U.S. (5 How.) at 573; 48 U.S. (7 How.) at 464.
919 48 U.S. at 317–20. Although Chief Justice Taney had formerly taken the strong position that Congress’ power over commerce was not exclusive, he acquiesced silently in the Cooley opinion. For a modern discussion of Cooley, see Goldstein v. California, 412 U.S. 546, 552–560 (1973), in which, in the context of the copyright clause, the Court, approving Cooley for commerce clause purposes, refused to find the copyright clause either fully or partially exclusive.
920 Reading R.R. v. Pennsylvania, 82 U.S. (15 Wall.) 232 (1873). For cases in which the commerce clause basis was intermixed with other express or implied powers, see Crandall v. Nevada, 73 U.S. (6 Wall.) 35 (1868); Steamship Co. v. Portwardens, 73 U.S. (6 Wall.) 31 (1867); Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1868). Chief Justice Marshall, in Brown v. Maryland, 25 U.S. (12 Wheat.) 419, 488– 489 (1827), indicated, in dicta, that a state tax might violate the commerce clause.
921 Just a few years earlier, the Court, in an opinion that merged commerce clause and import-export clause analyses, had seemed to suggest that it was a discriminatory tax or law that violates the commerce clause and not simply a tax on interstate commerce. Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1869).
Whether exclusive or partially exclusive, however, the commerce clause as a restraint upon state exercises of power, absent congressional action, received no sustained justification or explanation; the clause, of course, empowers Congress to regulate commerce among the States, not the courts. Often, as in Cooley, and later cases, the Court stated or implied that the rule was imposed by the commerce clause.922 In Welton v. Missouri,923 the Court attempted to suggest a somewhat different justification. Challenged was a state statute that required a peddler’s license for merchants selling goods that came from other states, but that required no license if the goods were produced in the State. Declaring that uniformity of commercial regulation is necessary to protect articles of commerce from hostile legislation and that the power asserted by the State belonged exclusively to Congress, the Court observed that [t]he fact that Congress has not seen fit to prescribe any specific rules to govern inter-State commerce does not affect the question. Its inaction on this subject . . . is equivalent to a declaration that inter-State commerce shall be free and untrammelled.924
922 Where the subject matter requires a uniform system as between the States, the power controlling it is vested exclusively in Congress, and cannot be encroached upon by the State. Leisy v. Hardin, 135 U.S. 100, 108–109 (1890). The commerce clause remains in the Constitution as a grant of power to Congress . . . and as a diminution pro tanto of absolute state sovereignty over the same subject matter. Carter v. Virginia, 321 U.S. 131, 137 (1944). The commerce clause, the Court has celebrated, does not say what the states may or may not do in the absence of congressional action, nor how to draw the line between what is and what is not commerce among the states. Perhaps even more than by interpretation of its written word, this Court has advanced the solidarity and prosperity of this Nation by the meaning it has given these great silences of the Constitution. H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 534–535 (1949). More recently, the Court has taken to stating that [t]he Commerce Clause ‘has long been recognized as a self-executing limitation on the power of the States to enact laws imposing substantial burdens on such commerce.’ Dennis v. Higgins, 498 U.S. 439, 447 (1991) (quoting South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87 (1984) (emphasis supplied).
923 91 U.S. 275 (1875).
924 91 U.S. at 282. In Steamship Co. v. Portwardens, 73 U.S. (6 Wall.) 31, 33 (1867), the Court stated that congressional silence with regard to matters of local concern may signify willingness that the States regulate. Cf. Graves v. New York ex rel. O’Keefe, 306 U.S. 466, 479 n.1 (1939). The fullest development of the silence rationale was not by the Court but by a renowned academic, Professor Dowling. Interstate Commerce and State Power, 29 VA. L. REV. 1 (1940); Interstate Commerce and State Power—Revisited Version, 47 COLUM. L. REV. 546 (1947).
It has been evidently of little importance to the Court to explain. Whether or not this long recognized distribution of power between the national and state governments is predicated upon the implications of the commerce clause itself . . . or upon the presumed intention of Congress, where Congress has not spoken . . . the result is the same.925 Thus, [f]or a hundred years it has been accepted constitutional doctrine . . . that . . . where Congress has not acted, this Court, and not the state legislature, is under the commerce clause the final arbiter of the competing demands of state and national interests.926
Two other justifications can be found throughout the Court’s decisions, but they do not explain why the Court is empowered under a grant of power to Congress to police state regulatory and taxing decisions. For example, in Welton v. Missouri,927 the statute under review, as observed several times by the Court, was clearly discriminatory as between instate and interstate commerce, but that point was not sharply drawn as the constitutional fault of the law. That the commerce clause had been motivated by the Framers’ apprehensions about state protectionism has been frequently noted.928 A relatively recent theme is that the Framers desired to create a national area of free trade, so that unreasonable burdens on interstate commerce violate the clause in and of themselves.929
928 91 U.S. at 280–81; Brown v. Maryland, 25 U.S. (12 Wheat.) 419, 446 (1827) (Chief Justice Marshall); Guy v. City of Baltimore, 100 U.S. 434, 440 (1879); Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 550, 552 (1935); Maryland v. Louisiana, 451 U.S. 725, 754 (1981).
929 E.g., Gwin, White & Prince, Inc. v. Henneford, 305 U.S. 434, 440 (1939); McLeod v. J. E. Dilworth Co., 322 U.S. 327, 330–331 (1944); Freeman v. Hewit, 329 U.S. 249, 252, 256 (1946); H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 538, 539 (1949); Dennis v. Higgins, 498 U.S. 439, 447–450 (1991). [W]e have steadfastly adhered to the central tenet that the Commerce Clause ‘by its own force created an area of trade free from interference by the States.’ American Trucking Ass’ns v. Scheiner, 483 U.S. 266, 280 (1987) (quoting Boston Stock Exchange v. State Tax Comm’n, 429 U.S. 318, 328 (1977)).
Nonetheless, the power of the Court is established and is freely exercised. No reservations can be discerned in the opinions for the Court.930 Individual Justices, to be sure, have urged renunciation of the power and remission to Congress for relief sought by litigants.931 That has not been the course followed.
The State Proprietary Activity Exception.—In a case of first impression, the Court held unaffected by the commerce clause— the kind of action with which the Commerce Clause is not concerned—a Maryland bounty scheme by which the State paid scrap processors for each hulk automobile destroyed. As first enacted, the bounty plan did not distinguish between in-state and out-of-state processors, but it was subsequently amended to operate in such a manner that out-of-state processors were substantially disadvantaged. The Court held that where a State enters into the market itself as a purchaser, in effect, of a potential article of interstate commerce, it does not, in creating a burden upon that commerce by restricting its trade to its own citizens or businesses within the State, violate the commerce clause.932
930 E.g., Fort Gratiot Sanitary Landfill, Inc. v. Michigan Natural Resources Dep’t, 504 U.S. 353, 359 (1992); Quill Corp. v. North Dakota ex rel. Heitkamp, 504 U.S. 298, 309 (1992); Wyoming v. Oklahoma, 502 U.S. 437, 455 (1992). Indeed, the Court, in Dennis v. Higgins, 498 U.S. 439, 447–450 (1991), broadened its construction of the clause, holding that it confers a right upon individuals and companies to engage in interstate trade. With respect to the exercise of the power, the Court has recognized Congress’ greater expertise to act and noted its hesitancy to impose uniformity on state taxation. Moorman Mfg. Co. v. Bair, 437 U.S. 267, 280 (1978). Cf. Quill Corp., 504 U.S. at 318.
931 In McCarroll v. Dixie Lines, 309 U.S. 176, 183 (1940), Justice Black, for himself and Justices Frankfurter and Douglas, dissented, taking precisely this view. See also Adams Mfg. Co. v. Storen, 304 U.S. 307, 316 (1938) (Justice Black dissenting in part); Gwin, White & Prince, Inc. v. Henneford, 305 U.S. 434, 442 (1939) (Justice Black dissenting); Southern Pacific Co. v. Arizona, 325 U.S. 761, 784 (1945) (Justice Black dissenting); id. at 795 (Justice Douglas dissenting). Justices Douglas and Frankfurter subsequently wrote and joined opinions applying the dormant commerce clause. In Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U.S. 157, 166 (1954), the Court rejected the urging that it uphold all not-patently discriminatory taxes and let Congress deal with conflicts. More recently, Justice Scalia has taken the view that, as a matter of original intent, a dormant or negative commerce power cannot be justified in either taxation or regulation cases, but, yielding to the force of precedent, he will vote to strike down state actions that discriminate against interstate commerce or that are governed by the Court’s precedents, without extending any of those precedents. CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 94 (1987) (concurring); Tyler Pipe Indus. v. Washington State Dep’t of Revenue, 483 U.S. 232, 259 (1987) (concurring in part and dissenting in part); Bendix Autolite Corp. v. Midwesco Enterprises, 486 U.S. 888, 895 (1988) (concurring in judgment); American Trucking Ass’ns, Inc. v. Smith, 496 U.S. 167, 200 (1990) (concurring); Itel Containers Int’l Corp. v. Huddleston, 507 U.S. 60, 78 (1993) (Justice Scalia concurring) (reiterating view); Oklahoma Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 175, 200–01 (1995) (Justice Scalia, with Justice Thomas joining) (same). Justice Thomas has written an extensive opinion rejecting both the historical and jurisprudential basis of the dormant commerce clause and expressing a preference for reliance on the imports-exports clause. Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 609 (1997) (dissenting; joined by Justice Scalia entirely and by Chief Justice Rehnquist as to the commerce clause but not the imports-exports clause).
Affirming and extending somewhat 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.933 The 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.934 It is yet unclear how far this concept of the State as market participant rather than market regulator will be extended.935
Congressional Authorization of Impermissible State Action.—The Supreme Court has heeded the lesson that was administered to it by the Act of Congress of August 31, 1852,936 which pronounced the Wheeling Bridge a lawful structure, thereby setting aside the Court’s determination to the contrary earlier the same year.937 The lesson, subsequently observed the Court, is that [i]t is Congress, and not the Judicial Department, to which the Constitution has given the power to regulate commerce.938 Similarly, when in the late eighties and the early nineties statewide prohibition laws began making their appearance, Congress again approved state laws the Court had found to violate the dormant commerce clause.
The Court applied the “original package” doctrine to interstate commerce in intoxicants, which the Court denominated “legitimate articles of commerce.”17 Although holding that a state was entitled to prohibit the manufacture and sale of intoxicants within its boundaries,18 it contemporaneously laid down the rule, in Bowman v. Chicago & Northwestern Ry. Co.,19 that, so long as Congress remained silent in the matter, a state lacked the power, even as part and parcel of a program of statewide prohibition of the traffic in intoxicants, to prevent the importation of liquor from a sister state. This holding was soon followed by another to the effect that, so long as Congress remained silent, a state had no power to prevent the sale in the original package of liquors introduced from another state.20 Congress soon attempted to overcome the effect of the latter decision by enacting the Wilson Act,21 which empowered states to regulate imported liquor on the same terms as domestically produced liquor, but the Court interpreted the law narrowly as subjecting imported liquor to local authority only after its resale.22 Congress did not fully nullify the Bowman case until 1913, when it enacted the Webb-Kenyon Act,23 which clearly authorized states to regulate direct shipments for personal use.
National Prohibition, imposed by the Eighteenth Amendment, temporarily mooted these conflicts, but they reemerged with repeal of Prohibition by the Twenty-first Amendment. Section 2 of the Twenty-first Amendment prohibits “the importation into any State . . . for delivery or use therein of intoxicating liquors, in violation of the laws thereof.” Initially the Court interpreted this language to authorize states to discriminate against imported liquor in favor of that produced in-state, but the modern Court has rejected this interpretation, holding instead that “state regulation of alcohol is limited by the nondiscrimination principle of the Commerce Clause.”24
17 The Court had developed the “original package” doctrine to restrict application of a state tax on imports from a foreign country in Brown v. Maryland, 25 U.S. (12 Wheat.) 419, 449 (1827). Although Chief Justice Marshall had indicated in dictum in Brown that the same rule would apply to imports from sister states, the Court had refused to follow that dictum in Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1869).
932 Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976).
933 Reeves, Inc. v. Stake, 447 U.S. 429 (1980).
934 447 U.S. at 436–37.
935 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).
936 10 Stat. 112, § 6.
937 Pennsylvania v. Wheeling & Belmont Bridge Co., 54 U.S. (13 How.) 518 (1852), statute sustained in Pennsylvania v. Wheeling & Belmont Bridge Co., 59 U.S. (18 How.) 421 (1856). The latter decision seemed facially contrary to a dictum of Justice Curtis in Cooley v. Board of Wardens of Port of Philadelphia, 53 U.S. (12 How.) 299, 318 (1851), and cf. Tyler Pipe Indus., Inc. v. Washington State Dept. of Revenue, 483 U.S. 232, 263 n. 4 (1987) (Justice Scalia concurring in part and dissenting in part), but if indeed the Court is interpreting the silence of Congress as a bar to action under the dormant commerce clause, then when Congress speaks it is enacting a regulatory authorization for the States to act.
18 Mugler v. Kansas, 123 U.S. 623 (1887). Relying on the distinction between manufacture and commerce, the Court soon applied this ruling to authorize states to prohibit manufacture of liquor for an out-of-state market. Kidd v. Pearson, 128 U.S. 1 (1888).
19 125 U.S. 465 (1888).
20 Leisy v. Hardin, 135 U.S. 100 (1890).
21 Ch. 728, 26 Stat. 313 (1890), upheld in In re Rahrer, 140 U.S. 545 (1891).
22 Rhodes v. Iowa, 170 U.S. 412 (1898).
24 Granholm v. Heald, 544 U.S. 460, 487 (2005). See also Bacchus Imports Ltd. v. Dias, 468 U.S. 263 (1984); Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573 (1986); Healy v. The Beer Institute, 491 U.S. 324 (1989), and the analysis of section 2 under Discrimination Between Domestic and Imported Products.
Less than a year after the ruling in United States v. SouthEastern Underwriters Ass’n,948 that insurance transactions across state lines constituted interstate commerce, thereby logically establishing their immunity from discriminatory state taxation, Congress passed the McCarran Act949 authorizing state regulation and taxation of the insurance business. In Prudential Ins. Co. v. Benjamin,950 a statute of South Carolina that imposed on foreign insurance companies, as a condition of their doing business in the State, an annual tax of three percent of premiums from business done in South Carolina, while imposing no similar tax on local corporations, was sustained. Obviously, said Justice Rutledge for the Court, Congress’ purpose was broadly to give support to the existing and future State systems for regulating and taxing the business of insurance. This was done in two ways:
One was by removing obstructions which might be thought to flow from its own power, whether dormant or exercised, except as otherwise expressly provided in the Act itself or in future legislation. The other was by declaring expressly and affirmatively that continued State regulation and taxation of this business is in the public interest and that the business and all who engage in it ‘shall be subject to’ the laws of the several States in these respects.... The power of Congress over commerce exercised entirely without reference to coordinated action of the States is not restricted, except as the Constitution expressly provides, by any limitation which forbids it to discriminate against interstate commerce and in favor of local trade. Its plenary scope enables Congress not only to promote but also to prohibit interstate commerce, as it has done frequently and for a great variety of reasons.... This broad authority Congress may exercise alone, subject to those limitations, or in conjunction with coordinated action by the States, in which case limitations imposed for the preservation of their powers become inoperative and only those designed to forbid action altogether by any power or combination of powers in our governmental system remain effective.951
Thus, it is now well established that [w]hen Congress so chooses, state actions which it plainly authorizes are invulnerable to constitutional attack under the Commerce Clause.952 But the Court requires congressional intent to permit otherwise impermissible state actions to be unmistakably clear.953 The fact that federal statutes and regulations had restricted commerce in timber harvested from national forest lands in Alaska was, therefore, insufficient indicium that Congress intended to authorize the State to apply a similar policy for timber harvested from state lands. The rule requiring clear congressional approval for state burdens on commerce was said to be necessary in order to strengthen the likelihood that decisions favoring one section of the country over another are in fact collective decisions made by Congress rather than unilateral choices imposed on unrepresented out-of-state interests by individual States.954 And Congress must be plain as well when the issue is not whether it has exempted a state action from the commerce clause but whether it has taken the less direct form of reduction in the level of scrutiny.955
951 328 U.S. at 429–30, 434–35. The Act restored state taxing and regulatory powers over the insurance business to their scope prior to South-Eastern Underwriters. Discriminatory state taxation otherwise cognizable under the commerce clause must, therefore, be challenged under other provisions of the Constitution. See Western & Southern Life Ins. Co. v. State Bd. of Equalization, 451 U.S. 648 (1981). An equal protection challenge was successful in Metropolitan Life Ins. Co. v. Ward, 470 U.S. 869 (1985), invalidating a discriminatory tax and stating that a favoring of local industries constitutes the very sort of parochial discrimination that the Equal Protection Clause was intended to prevent. Id. at 878. Controversial when rendered, Ward may be a sport in the law. See Northeast Bancorp v. Board of Governors of the Federal Reserve System, 472 U.S. 159, 176–178 (1985).
952 Northeast Bancorp v. Board of Governors of the Federal Reserve System, 472 U.S. 159, 174 (1985) (interpreting a provision of the Bank Holding Company Act, 12 U.S.C. § 1842(d), permitting regional interstate bank acquisitions expressly approved by the State in which the acquired bank is located, as authorizing state laws that allow only banks within the particular region to acquire an in-state bank, on a reciprocal basis, since what the States could do entirely they can do in part).
954 467 U.S. at 92. See also Hillside Dairy, Inc. v. Lyons, 539 U.S. 59 (2003) (authorization of state laws regulating milk solids does not authorize milk pricing and pooling laws). Earlier cases had required express statutory sanction of state burdens on commerce but under circumstances arguably less suggestive of congressional approval. E.g., Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941, 958–960 (1982) (congressional deference to state water law in 37 statutes and numerous interstate compacts did not indicate congressional sanction for invalid state laws imposing a burden on commerce); New England Power Co. v. New Hampshire, 455 U.S. 331, 341 (1982) (disclaimer in Federal Power Act of intent to deprive a State of lawful authority over interstate transmissions held not to evince a congressional intent to alter the limits of state power otherwise imposed by the Commerce Clause). But see White v. Massachusetts Council of Construction Employers, 460 U.S. 204 (1983) (Congress held to have sanctioned municipality’s favoritism of city residents through funding statute under which construction funds were received).
955 Maine v. Taylor, 477 U.S. 131 (1986) (holding that Lacey Act’s reinforcement of state bans on importation of fish and wildlife neither authorizes state law otherwise invalid under the Clause nor shifts analysis from the presumption of invalidity for discriminatory laws to the balancing test for state laws that burden commerce only incidentally).