State Proprietary Activity Exception

The State Proprietary Activity (Market Participant) Exception

In a case of first impression, the Court held that a Maryland bounty scheme by which the state paid scrap processors for each “hulk” automobile destroyed is “the kind of action with which the Commerce Clause is not concerned.” 1 As first enacted, the bounty plan did not distinguish between in-state and out-of-state processors, but it was amended in a manner that substantially disadvantaged out-of-state processors. The Court held “that entry by the State itself into the market itself as a purchaser, in effect, of a potential article of interstate commerce [does not] create[ ] a burden upon that commerce if the State restricts its trade to its own citizens or businesses within the State.” 2

More about State Proprietary Activity Exception

Affirming and extending this precedent, the Court held that a state operating a cement plant could in times of shortage (and presumably at any time) confine the sale of cement by the plant to residents of the state.3 “[T]he Commerce Clause responds principally to state taxes and regulatory measures impeding free private trade in the national marketplace. . . . There is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market.” 4 It is yet unclear how far this concept of the state as market participant rather than market regulator will be extended.980

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References

This text about State Proprietary Activity Exception is based on “The Constitution of the United States of America: Analysis and Interpretation”, published by the U.S. Government Printing Office.

[Footnote 1] Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 805 (1976).

[Footnote 2] 426 U.S. at 808.

[Footnote 3] Reeves, Inc. v. Stake, 447 U.S. 429 (1980).

[Footnote 4] 447 U.S. at 436-37.

Tables of Contents

• State Proprietary Activity Exception and other Topics in the Contents – Article 1 of the U.S. Constitution
• U.S. Constitutional Law Category
• List of amendments to the U.S. Constitution
• State Proprietary Activity Exception and other Topics in the Constitution Contents
• Interpretation of the U.S. Constitution (Table of Contents)
• Clauses of the Constitution (Table of Contents)