Friday, November 30, 2012

Sixth Circuit Strikes Michigan's Bottle Return Label Requirement

The Sixth Circuit ruled in American Beverage Association v. Snyder that Michigan's requirement that returnable beverage containers bear a unique mark violated the Dormant Commerce Clause.  The ruling strikes Michigan's requirement. 

The ruling turns on the dormant Commerce Clause's "extraterritorial doctrine," which, according to one concurring judge on the panel, is "a relic of the old world with no useful role to play in the new[.]"  If so, this case could offer the Supreme Court a good chance to clean up this corner of the dormant Commerce Clause.

The case involves Michigan's bottle-deposit law, which requires consumers to pay a ten-cent deposit on a beverage container (like a can or bottle).  Containers sold in Michigan must bear a designation--"MI 10c"--in order to distinguish them from containers sold in other states.  Consumers who return a container with the "MI 10c" designation get a ten-cent deposit back when they return the container.  (Michigan is one of ten states with a bottle-deposit law.)

Some consumers discovered that they could return containers in Michigan that were purchased from states that have no deposit law (that is, non-"MI 10c" containers) and net ten cents on each return.  This was especially easy with "reverse vending machines"--automated return machines that did not distinguish between Michigan containers and out-of-state containers.

The Michigan legislature responded by requiring beverage manufacturers to place a unique mark on Michigan returnable containers (in addition to the "MI 10c" mark) that would allow a reverse vending machine to determine whether the container was, in fact, a Michigan returnable container.  Failure to comply could result in a penalty of up to six months' imprisonment or a $2,000 fine or both.

Manufacturers sued, arguing that the requirement amount to an unconstitutional restraint on interstate commerce in violation of the dormant Commerce Clause.

The Sixth Circuit agreed.  It ruled that while the requirement did not discriminate against interstate commerce (on its face, in its purpose, or in its effect), it did "directly control[] commerce occurring wholly outside the boundaries of a State," and thus was extraterritorial under Healy v. Beer Inst. Inc. (1989).  This doctrine renders extraterritorial regulation "virtually per se invalid under the dormant Commerce Clause."  Op. at 13.

Judge Sutton concurred but wrote separately "to express skepticism about the extraterritoriality doctrine."  Judge Sutton wrote that the doctrine may have outlived its usefulness.

SDS

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