Also known as: extraterritorial
Written by attorneys · grounded in primary & secondary sources — see below
A doctrine that bars states from enacting laws with the practical effect of controlling commercial transactions occurring entirely outside their borders. The doctrine treats such regulation as a per se violation of the dormant Commerce Clause even when framed as a condition on in-state sales.
Echo Systems, an out-of-state brewer, sells beer to retailers in multiple states. A state statute requires Echo Systems to file an annual certification that its prices charged to in-state buyers are no higher than the prices it charges anywhere else. To comply without losing market access, Echo Systems must either raise its out-of-state prices or lower its in-state prices to match the lowest national level.
NimbusCloud, an out-of-state provider, markets subscriptions nationwide. A coastal state law conditions sales to its residents on NimbusCloud certifying that its in-state rates never exceed the lowest rate it offers in any other state and on filing quarterly nationwide price schedules. NimbusCloud must therefore adjust prices in every market or exit the coastal state.
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Horizon Renewables sells power to utilities across several states. Raven State requires out-of-state producers to certify that the price charged for sales into its grid is no higher than the lowest price charged to any utility elsewhere. Horizon Renewables must either harmonize all its contracts or forgo the Raven market.
Fair Plastics manufactures appliances outside Michigan and sells to retailers in multiple states. Michigan demands that any manufacturer selling to in-state retailers certify that its Michigan wholesale prices are no higher than the lowest prices offered anywhere in the country. Fair Plastics must realign its national pricing or stop selling in Michigan.
Granite Bank issues credit cards to customers in many states. Fairmont requires any out-of-state issuer marketing to its residents to certify that its annual percentage rates and fees in Fairmont are no higher than the lowest rates offered anywhere else. Granite Bank must either raise rates nationwide or withdraw from the Fairmont market.
A state law triggers the doctrine when it conditions access to the state's market on the seller's compliance with pricing or other terms that effectively dictate the seller's conduct in other states. Courts examine whether the law forces sellers to adjust prices or practices outside the regulating state to remain compliant.
No. The Amendment does not shield laws that project a state's regulatory scheme into other states by controlling out-of-state prices. Courts have invalidated such statutes even in the alcohol context when they impose extraterritorial price controls.
A court looks to the practical operation of the law rather than its facial terms. If sellers with uniform national pricing must reduce prices elsewhere or exit the market to comply, the requirement controls out-of-state transactions and violates the Commerce Clause.
No. Framing the statute as a condition on in-state transactions does not save it when the condition ties the legality of those transactions to the seller's pricing or conduct in other states. The economic compulsion to harmonize nationwide prices renders the law invalid.
…have had sufficient "laboring oars" in this litigation since its inception to be bound from subsequent relitigation of the extraterritorial scope of the § 7 consultation requirement.[^maj-20] As a result, I believe respondents' injury would likely be redressed by a favorable decision. The second redressability obstacle relied…