Exxon Corp. v. Governor of Maryland, 437 U.S. 117 

Supreme Court of the United States

1978

Chapter

2

Title

Federalism At Work

Page

262

Topic

State Regulation of Interstate Commerce

Quick Notes

o         A Maryland statute provides that a producer or refiner of petroleum products may not operate any retail service state within the State.

Court - No Competitive Advantage

o         In-state independent dealers will have no competitive advantage over out-of-state dealers.

Note

o         The fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce.

Rule

o         A state law that burdens some, but not all, out-of-state interests does not, by itself, violate the Commerce Clause.

Book Name

Constitutional Law : Stone, Seidman, Sunstein, Tushnet.  ISBN:  978-0-7355-7719-0

Issue

o         Whether it is a violation of the commerce clause when a state prohibits and producer or wholesaler from also being a retailer?  No, but there is heavy dissent.

o         Does a state law which does not shut down interstate commerce, but burdens one class of out-of-state interests, violate the commerce clause?  No.

Procedure

Appellant

o         Affirmed.  The wholesale flow of petroleum products into the State was not restricted.  Court of Appeals of Maryland  rejected [the appellants] allegations that certain provisions of the act, violated the Due Process and Commerce Clauses.

Supreme

o         Affirmed

Facts

Discussion

Key Phrases

Rules

Pl Exxon Corp (Appellant)

Df Maryland (Appellee)

Description

o          A Maryland statute provides that a producer or refiner of petroleum products may not operate any retail service state within the State.

Exxon

o         All of the gas sold by Exxon in Maryland is transported into the State from refineries located elsewhere.

o         Most of it gas is sold to wholesalers and independent retailers.

o         It does sell directly to 36 company-operated stations.

Maryland

o         3800 gas states selling over 20 different brands of gas.

o         No petroleum products are produced or refined in Maryland.

o         Only 5% of gas stations are operated by a refiner or an affiliate.

3 Refiners will with draw of else

o         Because they market solely through company operated stations.

[Justice Stevens]

Total Quantity of petro products shipped into Maryland

o         No evidence that there would be an effect.

Court Does not discriminate, Does not favor local producer/refiners

o         Maryland's entire gasoline supply flows in interstate commerce.

o         There are no local producers or refiners

o         Claims of disparate treatment between interstate and local commerce would be meritless.

Appellants Arg Statute protects in-state independent dealers from out-of-state competition

o         They contend the burden of the divestiture requirements falls solely on interstate companies.

Court This does not show interstate discrimination

o         But this fact does not lead, either logically or as a practical matter, to a conclusion that the State is discriminating against interstate commerce at the retail level.

Court - Interstate Marketers no affected the Act

o         Several major interstate marketers of petroleum that own and operate their own retail  gasoline stations are not affected by the Act because they do not refine or produce gasoline.

Court What the Act does not do

o         Creates no barriers whatsoever against interstate independent dealers;

o         It does not prohibit the flow of interstate goods,

o         It does not place added costs upon them, or

o         It does not distinguish between in-state and out-of-state companies in the retail market.

Court - No Competitive Advantage

o         In-state independent dealers will have no competitive advantage over out-of-state dealers.

Note

o         The fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce.

Appellant Arg Interfered with natural functioning interstate market

o         Regardless of whether the State has interfered with the movement of goods in interstate commerce, it has interfered "with the natural functioning of the interstate market either through prohibition through burdensome regulation."

Appellant Arg Will weaken independent refiners

o         The statute will surely change the market structure by weakening the independent refiners.

Court Commerce Clause protects interstate market not particular firms

o         The Clause protects the interstate market, not particular interstate firms, from prohibitive or burdensome regulations.

o         It may be true that the consuming public will be injured by the loss of the high-volume, low-priced stations operated by the independent refiners, but again that argument relates to the wisdom of the statute, not to its burden on commerce.

[Justice Blackmun] DISSENT as to the commerce clause issue

Blackmun Divestiture is not justified.

Precludes

o         The provision precludes out-of-state competitors from retailing gasoline within Maryland.

Protects in-state stations

o         The effect is to protect in-state retail service station dealers from the competition of the out-of-state businesses.

Protectionist  Discrimination

o         This protectionist discrimination is not justified by any legitimate state interest that cannot be vindicated by more evenhanded regulation.

Excluding out-of-state retailers (95%) and protecting local businessmen (99%)

o         Of the class of stations statutorily insulated from the competition of the out-of-state integrated firms, then, more than 99% were operated by local business interests.

o         Of the class of enterprises excluded entirely from participation in the retail gasoline market, 95% were out-of-state firms, operating 98% of the stations in the class.

How the ban will hurt Exxon

o         Preclude enhancing brand name recognition.

o         Preclude experimentation.

o         Appellants will have to cease operation which will cost $10 million.

o         This will inflict significant economic hardship.

o         The closing of 199 stations, allowing 34 to remain open.

How the ban will help Maryland

o         Improve position of local service station.

o         Insulates them from out-of-state competition.

When is a burden unconstitutional

o         But when the burden is significant,

o         When it falls on the most numerous and effective group of out-of-state competitors,

o         When a similar burden does not fall on the class of protected in-state businessmen,

o         When the State cannot justify the resulting disparity by showing that its legislative interests cannot be vindicated by more evenhanded regulation, unconstitutional discrimination exists.

Blackmun Does not effect wholesalers, but it does effect retailers.

Commerce Clause

o         The Commerce Clause does not forbid ONLY legislation that discriminates under ALL factual circumstances.

o         It forbids discrimination in effect against interstate commerce on the SPECIFIC facts of each case.

An Act that might be allowed

o         If production or refining of gasoline occurred in Maryland it might not be unconstitutional.

o         The producers and refiners would have a fair opportunity to influence their local legislators and thereby to prevent the enactment of economically disruptive legislation.

Basic Assumptions of Commerce Clause

o         One of the basic assumptions of the Commerce Clause is that local political systems will tend to be unresponsive to problems not felt by local constituents.

Basic Purpose of the Commerce Clause

o         To prevent the vindication of such self-interest from unfairly burdening out-of-state concerns and thereby disrupting the national economy.

Rules

Rule

o         A state law that burdens some, but not all, out-of-state interests does not, by itself, violate the Commerce Clause.

Class Notes