The University of Chicago Business Law Review
Material Regulation of Out-of-State Production Processes as Impermissible Extraterritorial Law
A circuit split exists on whether the Supreme Court limited the Dormant Commerce Clause’s extraterritoriality doctrine to price affirmation statutes in Pharmaceutical Research & Manufacturers of America v. Walsh. This Comment argues that the Supreme Court has never drawn this limiting principle—in Walsh or otherwise—such that the Ninth Circuit incorrectly characterized Walsh in National Pork Producers Council v. Ross, and it should have held that the district court’s dependence on this reading constituted clear error in North American Meat Institute v. Becerra. Through synthesis of canonical and recent case law, this Comment proposes a new test for determining impermissible extraterritorial regulation. Under the first prong, a law violates the extraterritoriality doctrine when it materially regulates out-of-state physical production processes to prevent out-of-state harm. The test uses a factor-based inquiry to determine whether a state law constitutes material (as opposed to incidental) regulation of out-of-state production activity. Under the second prong, a law that does not materially regulate out-of-state production should be upheld as per se permissible for purposes of extraterritoriality analysis in certain circumstances. Finally, this Comment applies the proposed test to Proposition 12, the law at issue in Ross and Becerra, and argues that it conforms with the extraterritoriality doctrine because it does not materially regulate the production processes of out-of-state farmers, and because it seeks to regulate out-of-state conduct only through a sales ban attaching restrictions to such production activity. Proposition 12 should survive extraterritoriality scrutiny on these grounds, not because it avoids price controls.
"Material Regulation of Out-of-State Production Processes as Impermissible Extraterritorial Law,"
The University of Chicago Business Law Review: Vol. 2:
1, Article 5.
Available at: https://chicagounbound.uchicago.edu/ucblr/vol2/iss1/5