Also known as: market participations · market participant
Written by attorneys — see sources below.
A doctrine permitting a state or local government, when acting as a buyer or seller in the marketplace rather than as a regulator, to favor its own residents in commercial transactions without violating the Dormant Commerce Clause.
State Recycling Corp buys scrap metal from manufacturers. It pays above market rates to in-state sellers represented by Megan Moore and demands minimal paperwork. Out-of-state seller Meridian Motors receives lower prices and must complete extensive documentation. The market participant doctrine permits the state to set these terms in its own purchases.
The state sells timber from public lands to buyers including Mosaic Retail. In-state purchasers face no further restrictions. Out-of-state buyer Millennium Media must agree to process the timber inside the state before any shipment. The market participant doctrine does not protect the downstream processing requirement.
A city funds its own building projects through Majestic Construction. The contracts require that a set percentage of workers be city residents. Out-of-state contractor Melanie Morris objects to the preference. The market participant doctrine allows the city to impose the residency condition on its own projects.
In 1979 the Mayor of Boston issued an executive order requiring that all construction projects funded in whole or in part by city funds, or funds which the city had the authority to administer, and to which the city was a signatory to the construction contract, be performed by a workforce consisting of at least 50 percent bona fide residents of Boston on a craft-by-craft basis. In 1980 approximately $483 million was expended on construction within the city of Boston; of that amount approximately $54 million, or 11 percent, was spent on projects to which the executive order applied by its terms. Of the $54 million, approximately $34 million represented projects being funded in part through federal Urban Development Action Grants. The parties stipulated that the order also applied to projects funded in part through Community Development Block Grants and Economic Development Administration Grants. The case was submitted on an agreed statement of facts that contained no evidence that city funds and private funds were used jointly to finance any projects subjected to the order. The Supreme Judicial Court of Massachusetts held the order unconstitutional under the Commerce Clause. The Supreme Court granted certiorari to decide whether the Commerce Clause prevents the city from giving effect to the Mayor's order. The record before the Court therefore concerned only the application of the order to projects funded wholly with city funds and projects funded in part with the specified federal grants.
View caseSouth Dakota operates a cement plant and sells its output. In-state customers receive priority during shortages. Out-of-state buyer Reeves, Inc. faces delayed deliveries after local needs are met. The market participant doctrine permits the state to favor residents in these sales.
A coastal state owns and operates a cargo port. In-state maritime companies receive discounted dockage rates. Out-of-state carrier Miranda Morales pays higher fees and waits longer for berths. The market participant doctrine allows the state to set these terms for use of its own facility.
Utah owns a research hospital that manufactures a generic drug. In-state pharmacies receive discounted prices. Out-of-state chain Southern Med pays higher rates. The market participant doctrine permits the state to favor residents in these direct sales.
The doctrine applies when the state acts as a buyer or seller in the marketplace rather than as a regulator of private activity. In that proprietary role the state may offer better prices or terms to in-state parties. The distinction turns on whether the state is managing its own commercial dealings or imposing rules on the broader market.
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No. The doctrine protects only the immediate transaction in which the state participates. Conditions that control how purchasers later use or process the goods, such as in-state processing requirements, fall outside the doctrine and remain subject to Dormant Commerce Clause scrutiny.
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Yes. When a state owns and operates a facility and sets fees or terms for its use, it acts as a market participant. It may therefore offer discounts or priority to in-state users without violating the Dormant Commerce Clause.
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Ordinary Dormant Commerce Clause review applies strict scrutiny to state laws that discriminate against interstate commerce. The market participant doctrine removes that scrutiny when the state is buying or selling goods or services for its own account, allowing it to favor residents in those proprietary dealings.
Supporting sources
…Appeals: (1) whether in the absence of congressional approval Alaska's requirement is permissible because Alaska is acting as a market participant, rather than as a market regulator; and (2), if not, whether the local-processing requirement is forbidden by the Commerce Clause. II Although the Commerce Clause is by its text an…