Constitutional Law I, Pages 313–318

South-Central Timber Development, Inc. v. Wunnicke

1984

Facts:

Alaska sold timber cheap on the condition that the buyer partially process the timber within the state. It did this to "protect existing industries, [establish] new industries, [and] derive revenue." SC primarily exported its timber to Japan and asserted that Alaska violated the dormant commerce clause.

Issues:

  • Did Congress authorize Alaska's discrimination?

    Evaluation:

    No, it did not.

  • Does the market participant exception allow a state participating in the market to impose conditions on what is done with sold goods after purchase?

Rules:

  • Google Scholar LogoPage 314

    [I]f a State is acting as a market participant, rather than as a market regulator, the dormant Commerce Clause places no limitation on its activities.

  • Google Scholar LogoPage 316

    [T]he market-participant doctrine . . . allows a State to impose burdens on commerce within the market in which it is a participant, but allows it to go no further. The State may not impose conditions, whether by statute, regulation, or contract, that have a substantial regulatory effect outside of that particular market

Reasoning:

Alaska is not just subsidizing local timber processing to offset the higher costs present in local processing. It is instead removing the timber purchaser's choice if he buys from the state. This also makes it not just a simple seller of timber.

Here, Alaska is only selling timber. It conducts no business processing timber and therefore cannot regulate that industry.

In addition, states face stricter scrutiny when burdening foreign commerce, as here, instead of merely out-of-state commerce. This is supposed to be done by the federal government.

Holding:

No, the market-participant doctrine does not allow a state to impose downstream regulations. Reversed and remanded.

Dissenting Opinion:

Rehnquist: The line between market participant and market regulator is artificial and unconvincing. This is not a regulation. Alaska is just setting additional terms for its sale. The state could do this in a number of other ways anyway; there is no reason to just forbid this one method.