Material Regulation of Out-of-State Production Processes as Impermissible Extraterritorial Law

Rebecca Zhu‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎

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A circuit split exists on whether the Supreme Court limited the Dormant Commerce Clause’s extraterritoriality doctrine to price affirmation statutes in Pharmaceutical Research & Manufacturers of America v. Walsh. This Comment argues  that the Supreme Court has never drawn this limiting principle—in Walsh or otherwise—such that the Ninth Circuit incorrectly characterized Walsh in National Pork Producers Council v. Ross, and it should have held that the district court’s  dependence on this reading constituted clear error in North American Meat Insti tute v. Becerra. Through synthesis of canonical and recent case law, this Comment  proposes a new test for determining impermissible extraterritorial regulation. Under  the first prong, a law violates the extraterritoriality doctrine when it materially regulates out-of-state physical production processes to prevent out-of-state harm. The test uses a factor-based inquiry to determine whether a state law constitutes material (as opposed to incidental) regulation of out-of-state production activity. Under the  second prong, a law that does not materially regulate out-of-state production should  be upheld as per se permissible for purposes of extraterritoriality analysis in certain  circumstances. Finally, this Comment applies the proposed test to Proposition 12,  the law at issue in Ross and Becerra, and argues that it conforms with the extraterritoriality doctrine because it does not materially regulate the production processes of out-of-state farmers, and because it seeks to regulate out-of-state conduct only through a sales ban attaching restrictions to such production activity. Proposition 12 should survive extraterritoriality scrutiny on these grounds, not because it avoids price controls

Recommended Citation

Rebecca Zhu, Material Regulation of Out-of-State Production Processes as Impermissible Extraterritorial Law, 2 U. Chi. Bus. L. Rev. 255 (2023).

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