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< | It is strongly recommended that you include your outline in the body of your essay by using the outline as section titles. The headings below are there to remind you how section and subsection titles are formatted. |
| | A Distinction Without a Substance: The Market Participation Exception |
| | In Hughes v. Alexandria Scrap Corp., the Court upheld a state program that aimed to reduce the number of abandoned cars littered on the sides of the roads by choosing to buy in-state junked cars and in-state junk processing services at higher prices and with more lenient documentation standards. “Nothing in the purposes of the Commerce Clause prohibits a state from participating in the market,” wrote Justice Powell for the majority. |
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> | Why don't you link the
case? This is the web. |
| | Limitation
Yet market participation was held to have its limits. Eight years later in Central Timber Development v. Wunnicke, the Court ruled that states, while enacting legislation to enable market participation, must not “impose conditions, whether by statute, regulation, or contract that have a substantial regulatory effect outside the particular market.” This restriction marked the “limit of the market-participant doctrine.” |
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> | This is a misreading of
the case, which you don't link. In Wunnicke, the Supreme Court did
not issue an opinion on the dormant Commerce Clause issues. Justice
Marshall did not participate, and the sections of Justice White's
opinion reaching that issue have only four votes. On those points,
there's no holding below and no law in the Supreme Court. What the
Court agreed on was the rejection of the Court of Appeals "implied
approval" theory, only.
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| | The Takeaway
The dormant commerce power and the market participation exception, working together, appear to flesh out a cohesive doctrine. When states pass legislation that affects interstate commerce, that legislation is subject to Constitutional review. If it is found to “regulate” the market, it is to be struck down pursuant to dormant commerce clause doctrine. If, however, the legislation merely enables the state to “participate” in the market, it is acceptable. |
| | Participation versus regulation – a tidy verbal distinction indeed! The word “participate” has a flavor of passivity. If I run in a race and am awarded a medal for being a “participant,” the strong implication is that I didn’t really affect the outcome in any meaningful way. The word “regulate,” however, has a more active nature. To regulate is to create changes; it implies control and agency. If we accept these notions, the distinct treatment of market participation as opposed to market regulation seems well in step with dormant commerce clause doctrine as a whole, for it is the domain of the federal government to make changes in the realm of interstate commerce and not the states. But how do these categories of behavior actually differ in practice? Directing attention away from the transcendental legal terminology and towards the actual economic effects reveals a categorical breakdown. |
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> | Only if you pay no
attention to the fact that "market" is a term of art, not a general
reference to the existence of markets for goods and services in which
states participate. If one were going to claim that Wunnicke
established anything on this point, which it did not, the proposition
it established is that regulatory consequences in markets other than
the one in which the State acts as participant are still subject to
dormant Commerce Clause analysis. Hence, on the facts in Wunnicke,
as Justice White's plurality opinion states, the participation rules
the State imposes on itself in the timber market have regulatory
consequences in a different market, the market for timber processing
services.
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| | Two Terms, One Effect
Imagine that a state decided to pass a law dictating that all state departmental offices may only purchase assets from companies or individuals who had not violated the National Labor Relations Act. Would this be a “regulatory” decision – Constitutionally impermissible – or a simple act of “market participation?” On the one hand, the state can make a claim that it is simply participating in the market as any other economic actor could. Perhaps the state has acknowledged that its employees are happier using products from NLRA-compliant manufacturers which boosts their productivity, or that products manufactured by NLRA-compliant industries tend to be of higher quality. Either rationale would seem an acceptable exercise of market participation for an individual. On the other hand, the legislation could be regarded as an attempt to regulate the market by forcing industries across the nation to comply with the NLRA or lose their presumably lucrative asset supply contracts with the state. The Court, in Wisconsin Dept. of Labor Relations v Gould, deemed the legislation to be an overreaching attempt to regulate commerce, and struck it down. Suppose, however, that the Wisconsin legislature had never passed the offending statute but had still bought assets from the same manufacturers that it had turned to as a result of the ban on NLRA violators - perhaps because these companies offered their goods at the lowest price. Such a decision would doubtlessly be deemed an exercise in market participation, but the economic effect would have been precisely the same. |
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> | Here too, you have
misstated the situation in
Wisconsin Department of Industry, Labor, and Human Relations v. Gould,
which you don't link to or name
correctly. Here, the Court found the Wisconsin statute explicitly
preempted by the NLRA. The Court rejects application of a standard
appropriate to situations of Congressional silence.
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| | Participation as a Label |
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< | If it is accepted that the latter hypothetical would be deemed mere market participation, two possible conclusions emerge. The first is that the Court simply decided Gould incorrectly. While such a conclusion may indicate that the distinction between market regulation and market participation is much too fuzzy to practically use as a jurisdictional tool, there is otherwise little analytical value in such a conclusion. The second possibility is that the Court is basing their distinction not on the economic effects of the legislation, but rather upon some unspoken assumption about how a reasonable actor will choose to participate in a free market. Perhaps, then, “market participation” is a merely a label for an economic action taken while evaluating only a particular range of economic considerations. If a state makes a decision based on price or quality of a good, that state is participating in the market. If it is compelled to act by other means, this action will be deemed regulatory. |
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> | If it is accepted that the latter hypothetical would be deemed mere market participation, two possible conclusions emerge. The first is that the Court simply decided Gould incorrectly. While such a conclusion may indicate that the distinction between market regulation and market participation is much too fuzzy to practically use as a jurisdictional tool, there is otherwise little analytical value in such a conclusion. The second possibility is that the Court is basing their distinction not on the economic effects of the legislation, but rather upon some unspoken assumption about how a reasonable actor will choose to participate in a free market. |
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< | Final Thoughts |
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> | The third possibility is
that you misread the case. |
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< | All state economic behavior has consequences in interstate commerce. Yet if market participation is not able to be differentiated from market regulation by an analysis of actual market effect, making a dormant commerce clause exception for the former while still diligently restricting the latter seems unnecessary and arbitrary. Either the market participation exception must be only the first effort in a larger doctrinal shift to erode the dormant commerce clause, or the market participation exception should be deemed an unnecessary departure from dormant commerce clause doctrine and should be eliminated. |
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> | Perhaps, then, “market participation” is a merely a label for an economic action taken while evaluating only a particular range of economic considerations. If a state makes a decision based on price or quality of a good, that state is participating in the market. If it is compelled to act by other means, this action will be deemed regulatory. |
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> | Final Thoughts |
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> | All state economic behavior has consequences in interstate commerce. Yet if market participation is not able to be differentiated from market regulation by an analysis of actual market effect, making a dormant commerce clause exception for the former while still diligently restricting the latter seems unnecessary and arbitrary. Either the market participation exception must be only the first effort in a larger doctrinal shift to erode the dormant commerce clause, or the market participation exception should be deemed an unnecessary departure from dormant commerce clause doctrine and should be eliminated. |
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> | This is three mistakes
arising from the two mistakes you already made. Criticism of a weak
rule used occasionally is easy and probably justified, but the
supposed mere verbal distinction is actually a substantive division
you misstate rather than analyzing, and the supposed conflicts in the
cases are actually failure to differentiate holding from dicta and
opinion of the Court from plurality opinion. The best way to revise,
I think, is to decide whether you have other better points against
this doctrine to put forward, and then to reshape the essay around
the answer. |