The relation of nation and states in a federal system - Auth...

Learning Outcomes

This article explains how congressional authorization and related federal doctrines shape the constitutional limits on state regulatory power for MBE-style questions, including:

• distinguishing Dormant Commerce Clause analysis from preemption analysis when Congress has acted or remained silent in a regulatory field
• identifying when Congress may expressly authorize discriminatory or burdensome state laws that would otherwise violate the Dormant Commerce Clause
• evaluating fact patterns for implicit congressional authorization and recognizing why mere federal regulation or non-preemption rarely suffices
• applying the market participant exception to state buying, selling, and subsidizing activity, and separating it from true regulation
• analyzing how federal preemption, obstacle and field preemption, and express savings clauses limit or preserve state regulatory space
• spotting when a federal savings clause permits concurrent state regulation but leaves Dormant Commerce Clause and other constitutional challenges intact
• distinguishing state regulatory conduct from proprietary conduct on the bar exam and predicting how courts will treat each under federal law
• integrating these doctrines into a structured, stepwise approach for resolving complex MBE questions involving federal–state power conflicts

MBE Syllabus

For the MBE, you are required to understand federal–state relations and limits on state power, with a focus on the following syllabus points:

• Dormant Commerce Clause: discriminatory vs non-discriminatory state laws; undue burden analysis
• Congressional power under the Commerce Clause to approve or displace state regulation
• The market participant exception and its limits
• Preemption: express, conflict, obstacle, and field preemption; savings clauses and concurrent regulation
• Relations among states: interstate compacts and congressional consent
• The difference between Commerce Clause / Dormant Commerce Clause analysis and other constraints (e.g., Privileges and Immunities, Equal Protection)

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. A state law bans the export of groundwater to other states. Congress passes a statute stating, “States may prohibit or restrict the export of groundwater as they see fit.” Is the state law constitutional?
   1. No, because it discriminates against interstate commerce.
   2. No, because water is not an article of commerce.
   3. Yes, because Congress has authorized the restriction.
   4. Yes, because the state is acting as a market participant.
2. Congress enacts a law directing that, “Any state may limit bidding on state highway contracts to in-state companies.” A state then passes such a law. A rejected out-of-state bidder sues, alleging a Dormant Commerce Clause violation. What result?
   1. The state law is valid because Congress may regulate interstate commerce and authorize state discrimination.
   2. The state law is invalid because it violates the Equal Protection Clause.
   3. The state law is invalid because Congress cannot force states to discriminate.
   4. The state law is valid only if the contracts are for federally funded highways.
3. A state-owned cement plant sells only to in-state buyers during shortages. Out-of-state buyers sue under the Dormant Commerce Clause. What is the likely result?
   1. The state loses, because it discriminates against interstate commerce.
   2. The state wins, because it is acting as a market participant.
   3. The state loses, unless Congress authorizes the discrimination.
   4. The state wins, only if it treats all in-state buyers equally.
4. Congress enacts a detailed federal statute regulating pesticide labeling but provides, “Nothing in this Act shall preempt more stringent state requirements.” A state then requires additional warning language. The manufacturer argues the state law is preempted. What is the best analysis?
   1. The state law is preempted by field preemption.
   2. The state law is preempted because it conflicts with federal law.
   3. The state law is valid because Congress has expressly saved state regulation.
   4. The state law is invalid unless Congress expressly approves that particular state’s statute.

Introduction

The U.S. Constitution creates a federal system in which both the national government and the states regulate economic activity. But the Constitution also limits state power. Two of the most frequently tested limits on the MBE are:

• the Dormant Commerce Clause, which restricts state laws that burden interstate commerce, and
• federal preemption, under which valid federal law overrides inconsistent state law.

These limits are not absolute. Congress can sometimes authorize state conduct that would otherwise violate the Dormant Commerce Clause or be preempted. Conversely, Congress can occupy a field or expressly preempt state law, eliminating space for state regulation unless Congress clearly preserves it.

Understanding when federal authorization “saves” state action, and when federal law instead displaces it, is central to federal–state relations questions on the MBE.

Key Term: Dormant Commerce Clause
The implied limitation on state power under the Commerce Clause: even when Congress is silent, state laws are unconstitutional if they discriminate against or unduly burden interstate commerce, unless a recognized exception applies or Congress has authorized the state action.

Key Term: Preemption
The doctrine, grounded in the Supremacy Clause, that valid federal law supersedes conflicting state law. Preemption can be express (written into the statute) or implied (because state law conflicts with federal objectives or Congress has occupied the field).

Key Term: Market Participant Exception
A rule under which a state, when acting as a buyer, seller, or producer in the market rather than as a regulator, may favor its own residents without violating the Dormant Commerce Clause.

Key Term: Congressional Authorization
Express or strongly implied approval by Congress that allows states to regulate or discriminate in ways that would otherwise violate the Dormant Commerce Clause or be preempted by federal law.

Key Term: Express Preemption
A statutory provision in which Congress explicitly states that state laws on a topic are displaced, in whole or in part.

Key Term: Implied Preemption
Preemption inferred from the structure or purpose of federal law, such as when state law conflicts with federal requirements, obstructs federal objectives, or Congress has occupied the field.

Key Term: Savings Clause
A statutory clause in which Congress announces that certain kinds of state regulation are preserved and not preempted by the federal statute.

Key Term: State as Market Participant
A state or local government acting as an economic actor (e.g., owning a plant, purchasing goods, providing services) rather than as a regulator; such conduct is usually outside Dormant Commerce Clause limits.

Structuring the Analysis on the MBE

When you see a state law challenged on federal constitutional grounds, a useful sequence is:

• Identify the relevant constraint: Dormant Commerce Clause, preemption, Privileges and Immunities, Equal Protection, or something else.
• Ask whether Congress has acted in the area at all.
  • If Congress is silent, you are squarely in Dormant Commerce Clause territory.
  • If Congress has legislated, you have a preemption question, plus a possible question about authorization.
• Determine whether the state is acting as a regulator or as a market participant.
• Check whether there is clear congressional authorization or a savings clause preserving state power.

The remainder of this article focuses on how congressional authorization and federal approval alter the usual Dormant Commerce Clause and preemption analysis.

Congressional Authorization of State Action

Normally, states may not enact laws that discriminate against or unduly burden interstate commerce. A classic example is a state statute that:

• bans export of in-state natural resources,
• limits landfills to in-state garbage, or
• requires in-state processing before goods can be shipped out.

Such laws are facially discriminatory and almost always unconstitutional under the Dormant Commerce Clause unless a very rare, extremely strong state interest is shown and no less discriminatory means exist.

However, when Congress authorizes state action, it is exercising its affirmative power to regulate interstate commerce. Because the Dormant Commerce Clause is only an implied limit that operates in the absence of federal regulation, Congress can remove that implied limit.

Key Exam Point:
The Dormant Commerce Clause applies only when Congress has not acted. If Congress approves or permits state discrimination, the state law does not violate the Commerce Clause, even if it heavily favors in-state interests.

Explicit Authorization

The cleanest case is explicit authorization: Congress says in so many words that states may adopt a kind of law that would otherwise be unconstitutional under the Dormant Commerce Clause.

Examples:

• “States may prohibit the export of water resources.”
• “States may limit bidding on state-funded construction contracts to in-state firms.”
• “States may tax out-of-state insurance companies at higher rates than in-state companies.”

When Congress uses clear language like this, a state law implementing that permission will be upheld against a Dormant Commerce Clause challenge. Congress is not creating a carve-out from some absolute constitutional right; it is simply exercising its own commerce power in a way that validates state discrimination.

However, congressional authorization does not allow states to violate other independent constitutional provisions. For example:

• Congress cannot authorize a state to deny equal protection to a racial group.
• Congress cannot waive the Article IV Privileges and Immunities Clause, which protects out-of-state citizens with respect to fundamental economic activities like earning a livelihood.

A state law based on federal authorization may defeat a Dormant Commerce Clause challenge but still fail under Equal Protection or Privileges and Immunities analysis.

Implicit Authorization

Congress does not always speak so directly. Sometimes the question is whether congressional authorization to discriminate or burden interstate commerce can be inferred.

Courts require a clear indication of congressional intent before concluding that Congress has authorized state discrimination against interstate commerce. It is not enough that:

• Congress legislated in the same area, or
• Congress failed to preempt state law.

Look for statutory language that at least strongly implies that states may:

• adopt standards more restrictive than federal law, or
• regulate even when the federal scheme might otherwise be read as exclusive.

If the statute merely sets minimum standards and says nothing about more restrictive state laws, courts usually treat that as no authorization, and the standard Dormant Commerce Clause analysis applies.

The Market Participant Exception

Separate from congressional authorization is the market participant exception. When a state acts like a private economic actor rather than a regulator, the Dormant Commerce Clause does not restrict its decisions about with whom to deal.

Typical examples:

• A state-owned cement plant selling only to in-state purchasers.
• A state-owned landfill accepting only in-state garbage.
• A state requiring a 50% local workforce on state-financed construction projects.

In these situations the state is:

• buying or selling goods or services, or
• spending its own money on projects.

Because it is participating in the market, not dictating rules to private actors, it may favor its own residents without violating the Dormant Commerce Clause. No congressional authorization is required.

Exam Caution:
The market participant exception does not allow a state to use its role in one market to regulate downstream or unrelated markets. For example, a state that sells timber as a market participant cannot attach conditions controlling how private purchasers process or sell that timber after the sale if those conditions effectively regulate out-of-state commerce.

Also, remember the distinction between the Dormant Commerce Clause and the Article IV Privileges and Immunities Clause. The market participant exception is a Dormant Commerce Clause doctrine; it does not apply to a Privileges and Immunities challenge. A state “buy local” police hiring rule might survive a Dormant Commerce Clause attack as market participation but still violate the Privileges and Immunities Clause if it discriminates against out-of-state citizens in a fundamental right such as employment.

Preemption and Federal Approval of State Regulation

Under the Supremacy Clause, valid federal law overrides inconsistent state law. Preemption questions often accompany Dormant Commerce Clause or authorization issues on the MBE.

Bar examiners expect you to recognize several preemption patterns:

• Express preemption: Congress states that state laws “concerning X” or “inconsistent with this Act” are preempted.
• Conflict preemption: It is impossible to comply with both federal and state law, or state law forbids what federal law requires (or vice versa).
• Obstacle preemption: State law undermines federal objectives even if literal compliance is possible.
• Field preemption: Federal regulation is so pervasive that Congress is understood to have left no room for state law (common in immigration, some aspects of labor relations, and certain transportation safety schemes).

Congress can also include a savings clause stating that:

• “Nothing in this Act shall preempt more stringent state requirements,” or
• “State law remedies are preserved,” or
• “States remain free to enforce consistent state laws.”

In those situations, Congress is not so much authorizing otherwise unconstitutional state action as it is preserving state regulatory power that might otherwise be displaced by federal occupation of the field.

Exam Tip:
A savings clause is usually the right answer when the question is whether state regulation survives preemption, not whether it survives the Dormant Commerce Clause. With a savings clause, your preemption analysis is largely over—but you must still consider whether the state law violates the Dormant Commerce Clause or other constitutional limits.

Congressional Authorization vs. Preemption: Putting It Together

The same federal statute can be relevant in two distinct ways:

• As a source of authorization that eliminates a Dormant Commerce Clause barrier to discriminatory state regulation; and
• As a source of preemption that displaces state law unless Congress clearly allows concurrent regulation.

When reading a fact pattern:

• If the issue is whether state discrimination against interstate commerce is allowed, focus on whether Congress has clearly authorized that discrimination.
• If the issue is whether any state regulation is permissible given federal occupation of the field, focus on preemption and any savings clause.

Worked Example 1.1

A state passes a law banning the export of water to other states. The law clearly discriminates against out-of-state users. Congress later enacts a statute stating, “States may regulate or prohibit the export of water resources as they choose.” Out-of-state water users challenge the state ban under the Dormant Commerce Clause.

Answer:
The state law is constitutional. The statute is an explicit authorization by Congress for states to regulate or prohibit export of water resources. Because the Dormant Commerce Clause operates only when Congress is silent, this clear authorization removes the Commerce Clause barrier. The state law may still be subject to other constitutional constraints (e.g., Equal Protection), but it survives Dormant Commerce Clause scrutiny.

Worked Example 1.2

A state-owned cement plant refuses to sell cement to out-of-state buyers during shortages, preferring to meet in-state demand first. Out-of-state buyers sue, alleging discrimination against interstate commerce.

Answer:
The state wins. Here the state is operating a cement plant, acting as a seller in the market. Under the market participant exception, the Dormant Commerce Clause does not apply to its purchasing and selling decisions. The state may favor its own residents in allocating cement without any need for congressional authorization.

Worked Example 1.3

Congress enacts a statute regulating truck safety but is silent about snow removal from truck roofs. A state later passes a non-discriminatory law requiring all trucks using its highways, regardless of origin, to stop at random checkpoints so state crews can brush snow from their roofs. The law causes significant delays for interstate trucking companies, but it applies equally to in-state and out-of-state trucks. An out-of-state trucking firm challenges the law.

Answer:
The challenge is likely to fail. Because the statute is non-discriminatory and there is no federal law on snow removal, the Dormant Commerce Clause applies with the undue burden balancing test. Non-discriminatory state regulations are upheld unless the burden on interstate commerce is grossly disproportionate to the local safety benefits. Even if the safety benefit is modest and delays are substantial, courts rarely strike down neutral regulations under this test. No congressional authorization is needed, and no preemption arises because Congress has not regulated this specific safety issue.

Worked Example 1.4

Congress enacts a detailed federal pesticide labeling statute and includes: “Nothing in this Act shall preempt any state law that imposes more stringent labeling requirements.” A state then requires an additional warning on pesticide labels. The manufacturer argues that federal law preempts the state requirement.

Answer:
The state law is valid. The savings clause is an explicit statement that more stringent state regulation is preserved and not preempted. Because Congress has not authorized discrimination and the state requirement applies equally to in-state and out-of-state manufacturers, there is no Dormant Commerce Clause violation. The federal statute functions as federal approval of concurrent, more protective state regulation.

Exam Warning

Congressional authorization must be clear before courts will uphold discriminatory state laws against Dormant Commerce Clause attack. Do not infer authorization simply because Congress legislated in the same area or failed to preempt state law. Look for explicit permission or a very strong implication.

Revision Tip

When analyzing a state law that affects interstate commerce, always ask two separate questions: (1) Has Congress authorized or preserved state regulation (authorization/savings clause)? (2) Is the state acting as a market participant rather than as a regulator? A “yes” to either can fundamentally change your Dormant Commerce Clause and preemption analysis.

Key Point Checklist

This article has covered the following key knowledge points:

• The Dormant Commerce Clause restricts discriminatory and unduly burdensome state laws, but only in the absence of federal action.
• Congress may explicitly or implicitly authorize state laws that would otherwise violate the Dormant Commerce Clause, but cannot authorize violations of other independent constitutional provisions.
• The market participant exception allows states, when acting as buyers or sellers, to favor their own residents without Dormant Commerce Clause limits, and without needing federal approval.
• Federal preemption arises when federal law expressly or impliedly displaces state law; savings clauses can preserve state regulatory space.
• Congressional authorization and savings clauses affect whether state laws survive Dormant Commerce Clause and preemption challenges, but they do not immunize states from Equal Protection, Privileges and Immunities, or other constitutional constraints.

Key Terms and Concepts

• Dormant Commerce Clause
• Preemption
• Market Participant Exception
• Congressional Authorization
• Express Preemption
• Implied Preemption
• Savings Clause
• State as Market Participant