Michigan Law Review, Vol. 88, No. 3 (December 1989), pp. 395-488


There is no theme more familiar to constitutional law than the clash between federal power and state autonomy. The history of that struggle reveals, by and large, a long losing battle by the states. Over the years, the Supreme Court has recognized far-reaching congressional powers, rebuffed efforts to rein them in through use of the tenth amendment, and saddled the states with every significant restraint imposed by the Bill of Rights. From time to time, however, the currents of constitutional doctrine run in favor of local control. In recent years, for example, the Court has stemmed the tide toward constitutionalizing the law of criminal procedure, and cut down federal judicial authority through development of the abstention doctrine and state-favoring constructions of the eleventh amendment. This article focuses on another important vehicle through which the modern Court has moved to protect local prerogatives: the market-participant exemption to the dormant commerce clause.

The core of the Court's dormant commerce clause jurisprudence is well-settled: "The commerce clause, by its own force, prohibits discrimination against interstate commerce, whatever its form or method...." Over the past two decades, however, the Court has lifted this prohibition when states act as "market participants" rather than as "market regulators." Invoking this distinction, the Court has shielded from commerce clause attack blatant favoritism of local interests when a state or municipality buys printing services, sells cement, purchases goods, or hires workers.

This article explores the market-participant rule. Part I traces the rule's evolution and shows how it has proven less rigid than some initially feared. Part II probes the roots of the rule by challenging justifications for it suggested by other observers. Part III offers an alternative theory of the market-participant doctrine, arguing in particular that it rests on a cluster of rationales that properly have led the Court to uphold marketplace preferences as the "general rule." Part IV builds on Part III to advance a new, four-part framework for evaluating market-participant issues. Part V then uses that framework to apply the market-participant rule to nine key categories of cases. This article rejects an all-or-nothing approach to these cases, advocating instead a sensitive application of the market-participant rule in light of its underlying justifications.

Many observers have attacked the market-participant rule. this article seeks to show that these challenges are misplaced. The Court's market-participation decisions reflect a sound, if complex, accommodation of competing constitutional values. This article lays bare those values and details the course they suggest courts should follow in deciding future market-participation cases.