There need to be certain parameters to ascertain whether a state is acting discriminatory and not treating in-state and out of the state entities similarly. Discrimination refers to unequal treatment to in-state and outer state entities which benefits the former and burdens the latter. Discrimination also has an economic connotation.
If the discriminating act is direct, then it shall be considered invalid on the face of it. However, if the discriminating act is indirect, then analysis needs to be made with the help of the Pike Balancing Test.
In Pike v. Bruce Church, Inc ., 397 U.S. 137 (1970), the state of Arizona enacted that cantaloupes that were grown in Arizona should put a label that would state the origin of the cantaloupes. One church of Arizona grew cantaloupes in Arizona but would package the same in California due to save costs. The church was forced by the state to package their cantaloupes in Arizona for them to be marked as Arizona origin. The Arizonian law was later considered invalid by the court.
The court further stated that if state regulation is excessive in comparison to the putative benefits that it renders to the local public, then such regulation should be axed. If the local purpose turns out to be legitimate, then an analysis needs to be made concerning the degree and nature of local interest. It should also be analyzed whether such local interest should be encouraged in comparison to interstate commerce.
The Exception to the Dormant Commerce Clause
In certain business transactions, the state itself acts as a buyer or consumer. Hence it ceases to be a market regulator and becomes a market participant.
It was in Hughes v. Alexandria Scrap Corp.,426 U.S. 794 (1976) that the court stated that if a state is a market participant, then it can undertake activities that promote the benefit of its state’s citizen. This forms an exception to the doctrine of the dormant commerce clause. Yet this exception doesnâ€™t give unrequited power to the state authorities.
Congressional Authorization is another exception, whereby if the congress has already decided upon a matter to be an interstate matter or not, then it doesnâ€™t fall under the ambit of the dormant commerce clause.
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