Washington Law Review

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The Dormant Commerce Clause “Effect”: How the Difficulty in Reconciling Exxon and Hunt Has Led to a Circuit Split for Challenges to Laws Affecting National Chains

December 21, 2016 | 91 Wash. L. Rev. 1895

Abstract: The onslaught of chains such as Wal-Mart and Starbucks has driven some state and local lawmakers to craft regulations prohibiting these types of national chains. In response, several national chains have challenged the constitutionality of such regulations, claiming that they amount to economic protectionism. The dormant Commerce Clause (DCC) doctrine prohibits states from engaging in protectionism directed at commerce from other states. Courts use a two-tiered analysis when considering these types of challenges. The tier-level analysis is important because regulations rarely survive the first tier’s elevated scrutiny. The first tier applies when a state law directly discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests.

The Supreme Court reached inconsistent decisions as to whether a regulation has a discriminatory effect, as demonstrated by a careful analysis of Hunt v. Washington State Apple Advertising Commission and Exxon Corporation v. Governor of Maryland. These two decisions are difficult to reconcile: Hunt supports a finding of discriminatory effect where a regulation stripped an out-of-state entity of a competitive advantage it secured through its particular business practice, but Exxon indicates that the DCC does not protect particular structures or methods of business. This inconsistency has contributed to a split between courts in the First, Ninth, and Eleventh Circuits. While courts in the First and Ninth Circuits have found that prohibitions affecting chain stores do not produce a discriminatory effect, the Eleventh Circuit has come to the opposite conclusion. This circuit split tracks the tension between Hunt and Exxon. Potential solutions to this split include eliminating the first tier elevated scrutiny analysis, creating a special exception for national chains, or otherwise clarifying the Supreme Court’s jurisprudence regarding discriminatory effect.

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