National Pork Producers Council v. Ross may be one of the most consequential cases of the Term, and I don’t just mean for the price of pork chops. A few states, most importantly California, are such large markets that—if the Supreme Court does not intervene—they can impose their notions of proper standards of production on every other state in the Union, at little cost to themselves. Because nationwide producers often cannot segment their markets, producers will be forced to follow California rules for the whole country, or face the crippling consequence of exclusion from the California market.
Add to this the fact that these large states—California, Texas, New York—are also one-party states, whose views on social policy are often at one or another extreme. More moderate Americans in other states will be governed by laws they would not vote for, if they had a chance. This is contrary to the democratic postulates of our federal system.
This is from Eugene Volokh, “From Prof. Michael McConnell (Stanford) on the Dormant Commerce Clause,” The Volokh Conspiracy, October 11, 2022.
Professor McConnell, as Eugene Volokh points out, “is one of the top constitutional law scholars in the country.” On this one, though, I wonder. My disagreement has nothing to do with whether the law in question is a good one; I think it’s bad and I voted against it. But sometimes federalism allows bad laws.
In reading over this brief, I was reminded of the great title that James Buchanan chose (I assume he chose it) for his critique of the first edition of Richard Posner’s Economic Analysis of Law. The title: “Good Economics–Bad Law.”
Except in this case I’m not even sure it’s good economics; more on that anon.
The Law
But now to the law. If it were true that the California law “forced” (McConnell’s words) producers in other states “to follow California rules for the whole country,” then he would have a point. But nothing in the law forces them to do that. I use the term “forced” literally; McConnell apparently does not. Producers in other states are free to produce for 49 states plus D.C. and not sell to consumers in California. He calls this a “crippling consequence,” but is it really? McConnell notes that Californians “consume 13 percent of all pork produced in the United States.” Is is really crippling to forego 13 percent of a large market? I don’t see it.
The essence of federalism is that voters and politicians in various states get to decide on the regulations and laws in that state. There are certain constraints, of course, that the U.S. Constitution imposes. But McConnell doesn’t succeed at saying why the U.S. Constitution forbids California voters from voting to allow only certain products to be sold in the state. It’s not as if the California government is discriminating against out-of-state producers; it applies the same rules to all pork sold in California.
McConnell does make one possibly good legal argument. He writes, “California regulators will roam the land inspecting farms in other states to enforce the law.” If that were true, then he would be right: this would be a state restriction on interstate commerce. It’s hard to see, though, how it would be true. Wouldn’t every pig farmer outside of California be legally able to say, “Get the hell off my land.”
Notice that McConnell tries to bolster his argument by pointing out, correctly, that California is a one-party state in which many people’s views are “at one or another extreme.” Don’t I know it, having lived in this wacky state continuously since 1984. But why should that matter under federalism? Isn’t one of the major points in favor of federalism that it allows for diversity of policies?
The Economics
Now to McConnell’s economics, which I think is suspect on two counts.
First, monopsony. McConnell writes, “Once California is green-lighted to use its monopsony power to pressure businesses all over the country to comply with Californian social preferences, there will be no end to it.” But does control over 13 percent of a market constitute monopsony? I think that’s a reach.
Second, on who will pay the cost. McConnell writes, “A few states, most importantly California, are such large markets that—if the Supreme Court does not intervene—they can impose their notions of proper standards of production on every other state in the Union, at little cost to themselves.” Elsewhere McConnell argues that this law will substantially raise the price of pork. My guess is that he’s right. So how, exactly, is it that we Californians will bear little cost?
Note to Commenters:
I have found, when I’ve commented on legal issues, that people, especially lawyers, tell me to stick to economics. But that’s not an argument. Notice that I didn’t say that McConnell shouldn’t make economic arguments. Rather, I challenged his arguments, showing how weak they are. There’s a reasonable chance that I’m wrong about the constitutional issues here. If so, say why.
READER COMMENTS
Chris
Oct 12 2022 at 10:52am
What % would make you change your mind? How important is it to your argument that the market is “large”?
Throughout its history the Court has tried–largely unsuccessfully–to put forth some sense of how much is too much. In South Dakota v. Dole, the Court determined it was okay for the federal government to threaten about 5% of South Dakota’s portion of the highway bill unless they raised their drinking age to 21 (that was a Spending power case, not a dormant Commerce Clause case), but in NFIB v. Sebelius, the Court (by a 7-2 vote) rejected the Medicaid expansion piece of the Affordable Care Act because the potentially of withholding a state’s Medicaid funding was too coercive.
For your argument is there a tipping point? Maybe not 13%, but 43%, or 73%? Or is it simply the case that California can pass bad laws along these lines, regardless?
Mark Brophy
Oct 12 2022 at 3:36pm
I’d change my mind if it were 35%. I don’t think California should be in the United States, it should be 10 independent countries of 4 million each. Hawaii, Texas, Florida, and New York should be part of the United States, either.
john hare
Oct 12 2022 at 5:56pm
The percentage is dictated by profits forgone or not by taking the other route. The percentage of the market could be 90% and still be irrelevant if I can clear more off of the other 10%. The 10% might be less hassle and more profitable. In construction track builders seem to be towards 90% of new home construction. I don’t do their work for several reasons, among which is the lack of profitability due to their lowball pay scale.
I see it the same way with local rules and regulations, if you make it too hard on me, I’ll take my productivity elsewhere.
David Henderson
Oct 12 2022 at 4:40pm
You wrote:
Good question, to which I don’t have a good answer. I do think, though, that 13% is far from the bright line.
Jon Murphy
Oct 13 2022 at 6:35am
Not to speak for David, but if we’re operating in the context of the quote (monopsony), then the number would have to be 100%, by definition. Even if one wants to use a looser definition, you’d probably still need to be north of 90%.
MarkW
Oct 13 2022 at 9:40am
No, California buyers do not constitute a monopsony (or even close to it). But isn’t this a non-tariff trade barrier? In regulating their own hog farms, California raised their operating costs. By imposing the same regulations on pork produced in other states, they’re protecting CA farmers from lower-priced competition.
Jon Murphy
Oct 13 2022 at 9:46am
There are no pork farmers in California. Pork comes from just a handful of states in the Midwest. It’s not protectionist insofar as there are no producers to protect.
Agreed. McConnell is arguing they are:
MarkW
Oct 13 2022 at 10:42am
There are no pork farmers in California.
Then somebody should inform the California Pork Producers Association.
I agree that McConnell’s is a poor argument. Arguing that such rules constitute unconstitutional interstate trade barriers seems much more straightforward.
Jon Murphy
Oct 13 2022 at 2:32pm
No, it’s me being too sloppy and colloquial in my comment. I meant “no” as in “very very few,” not literally zero. Sorry for the confusion
MarkW
Oct 13 2022 at 2:49pm
No, it’s me being too sloppy and colloquial in my comment. I meant “no” as in “very very few,” not literally zero. Sorry for the confusion.
But a trade barrier doesn’t stop being a trade barrier even if the industry being protected is moribund (as in the case of the Jones Act and and U.S. ship building)
Jon Murphy
Oct 13 2022 at 3:12pm
Touche.
robc
Oct 12 2022 at 12:59pm
I want to apply an example I normally use in other circumstances.
The normal situation is for things like “organic” food. We don’t need a law defining organic, we already know how to handle it — the same way that Kosher is handled. If you care if your food is kosher, you can use the labeling org or your choice. The different organizations have higher or lower standards. The consumer can choose what level they require. The producer can target their audience and meet the requirements of the organization they want.
The same would work for organic.
Unfortunately, it would also work for “CA Pork”. In this case, the consumer, at least in CA, wouldn’t have a choice. But the producer could choose whether or not to let regulators on their land…if they want to sell in CA, they can meet those standards. If they don’t, they don’t have to.
It is still a bad law. It might be unconstitutional, I have no idea. If it passes constitutional muster, I just hope enough pork producers cut California off.
BC
Oct 12 2022 at 9:53pm
I think one must distinguish the activity being regulated — in this case factory farming practices outside CA — from the method of enforcing such regulations, e.g., by prohibiting a factory farmer from selling product in CA. If CA were to outlaw factory farming nationwide and enforce such regulation by arresting and imprisoning any violators that set foot in CA, I think we would agree that CA exceeded its jurisdiction by regulating activities in other states, even if we debated the efficacy of the enforcement mechanism. The fact that one could avoid punishment by not visiting CA wouldn’t really change the fact that CA was trying to regulate activity in other states. Ditto if TX passed a similar law outlawing marijuana consumption outside of TX. Whether the enforcement mechanism is extradition, arrest, fine, denial of a license needed to sell pork, or just prohibition against selling pork in the state doesn’t really change the underlying activity being regulated, or its out-of-state location.
David Henderson
Oct 12 2022 at 10:56pm
You wrote:
Not true. People in other states are free to do what they wish. They simply can’t sell in California.
BC
Oct 13 2022 at 2:24am
By that logic, then the US government didn’t outlaw what Edward Snowden did. After all, as long as Snowden doesn’t set foot in the US (or some other extraditing country), then he can avoid punishment.
Yakov Smirnoff, a comedian, used to joke that they had freedom of speech in the old Soviet Union. It was freedom after speech that they didn’t have, meaning they could say what they wanted but the government might punish them afterwards. Of course, the joke is that, if a government imposes a punishment for what someone says, then the government is not really allowing freedom of speech. Similarly, if California imposes a punishment for out-of-state factory farming — whether a fine or loss of right to sell pork in CA — then it’s regulating out-of-state factory farming. Saying that one can do what one wants as long as one is willing to accept the punishment would mean that one is free to commit any crime because all crimes are punished after the fact.
As McConnell explains, an important point is that CA is not regulating the pork itself, say to protect residents’ health, welfare, and safety. It’s banning certain producers from selling in CA as punishment for those producers’ out-of-state activities. It’s the out-of-state activities that CA is trying to regulate. Another example would be when the US enforces Iran sanctions by threatening to deny violators access to the US financial system. Even proponents of the policy don’t claim that the US is merely regulating its financial institutions. It’s using those powers to enforce restrictions on doing business with Iran. Again, distinguish the activity being regulated or restricted (factory farming or dealing with Iran) from the means of enforcement (access to the CA market or US financial system). As McConnell explains, countries may have the power to impose sanctions on each other, but states are prohibited from doing so under our Constitution: “States cannot punish conduct in other states, and they cannot bar entry or importation of people or products based on conduct that occurred in other states, except when the product will have a material effect within the state.”
Vivian Darkbloom
Oct 13 2022 at 2:36am
“Not true. People in other states are free to do what they wish. They simply can’t sell in California.”
I believe it is very true that California is trying to regulate activity in other states. If not, what purpose does such a prohibition as to importation make? And as far as the Constitutional issue is concerned, the market share is relevant, but not so much in this case. On the other hand, the intent of the legislation and the actual effect are clearly relevant for constitutional purposes.
One could cite numerous other situations in which California has “taken the lead”, to put in mildly, in setting environmental, safety and other standards that have effectively forced manufacturers to bend to them even in respect to products sold outside the state. Clearly, it costs manufacturers significantly more to build autos to special California standards different from the rest of the country, for example. (Insert here the economics joke about practice not adhering to theory).
But, that is largely beyond the point. In most other cases I can think of California legislation has been an attempt to protect the health, welfare or safety of its own citizens (by improving California air quality, etc). Here, I can think of no other purpose than to protect the welfare of animals outside the state of California.
On this point, McConnell was quite clear:
“This is a case for a categorical rule: states cannot bar the movement of commerce across state lines except for the police power purposes of protecting their own residents’ health, welfare, and safety.”
In judging the constitutionality of legislation, the Court often uses a balancing test: what is the benefit here to California residents compared with the harm to farmers outside California? Or, the harm to interstate commerce, to put it somewhat differently in respect to the Commerce Clause? I would say that the 13 percent market share is relevant; but, I would draw the opposite conclusion that 13 percent is far greater than necessary to show harm rather than too low. “Monopsony” is really not the standard that should be used here. We can fault McConnell for using that term as an adjective, particularly when it wasn’t crucial to his argument. I doubt he was using it literally.
Not having read the briefs, I suspect that California wants a novel test something like this: “what is the harm to the animals compared with the harm to the farmers” or, “what is the psychic harm to California residents”?
MarkW
Oct 13 2022 at 6:07am
Aren’t these interstate trade barriers by another name? Would you be OK with California requiring all products sold in the state to have been produced by workers earning at least the California minimum wage? And wouldn’t that serve to protect California based businesses from lower cost competition? If the commerce clause cannot prevent that kind of thing, what can it do?
Paul Schwennesen
Oct 13 2022 at 8:24am
My thoughts exactly. While I think it’s an imbecile and perhaps unconstitutional law *on its own merits, in its own state * I don’t think it’s an interstate trespass. Let Californians do their thing (to themselves) and let the chips fall where they may…
Thomas Lee Hutcheson
Oct 13 2022 at 1:58pm
Since California consumers are not harmed infinitely by “cruelly” produced pork, the proper response would be to tax the cruelty not ban the product. The tax would apply at different rates to different products according to how bad the production process is.
Capt. J Parker
Oct 13 2022 at 2:31pm
Under the Dormant Commerce Clause, A) California cannot discriminate between in state and out of state pork producers. Also under the Dormant Commerce Clause B)states cannot regulate out of state activity. I don’t see how the CA pork law allows both these principals to be true at the same time. Either CA imports pork from out of state suppliers that are “regulated” by CA rules (violating rule B) or it prohibits “unregulated” out of state suppliers (violating rule A).
Further, I believe that CA needs to show some locality based reason that justifies the additional burden on interstate commerce. For example, CA may be allowed to require any fruit imported from other states be treated to kill medflies.
Lastly, there may be a case to be made that Federal laws on port production are extensive enough that the entire field of pork production has been preempted by federal law under the doctrine of “field preemption”
I know that I’m arguing against federalism – possibly a no-no at Econlog. But at the same time I think I’m arguing for a more open national market. If consumers in California are repulsed by factory pork farms then let them curtail the profits from those farms (as Hank Reardon would have them do) by simply not buying from them and not having government make those decisions.
Herb
Oct 18 2022 at 8:46pm
If the pork producers outside California boycott California markets. Their prices will go down (making consumers happy, farmers sad).
The California producers will raise their prices, making consumers sad. It will serve us Californians right for our political malfeasance.
Comments are closed.