Arkansas Environmental, Energy, and Water Law
Author: Walter G. Wright
The United States Court of Appeals for the Sixth Circuit in American Beverage Association v. Snyder,
700 F.3d 796 (6th Cir. 2012) recently addressed a 2008 amendment to Michigan's Container Act. The amendment requires bottling manufacturers to use a unique mark on all containers sold within the state and limits the sale of such containers in other states.
Originally enacted in 1976, the Michigan Container Act, or "Bottle Bill," served to encourage the recycling of beverage containers by offering a ten-cent deposit refund to consumers and distributors. The Bottle Bill subsequently had redemption problems. Specifically, consumers purchased beverage containers out-of-state and then returned them within Michigan in order to redeem the deposit. By eliminating the initial payment of the ten-cent deposit, the unauthorized redemptions and returns reduced revenue to the state by an estimated $15.6 to $30 million each year.
To address the problem, Michigan enacted a statute to criminalize redemption of the containers by an individual who knew or should have known no deposit had been paid. In addition, the state amended its Bottle Bill to increase revenue by requiring beverage containers to bear an additional mark or symbol unique to the state in order to signal to the manufacturer that the container could be lawfully redeemed. Non-compliance with the "unique-mark" provision resulted in a criminal penalty of up to six months' imprisonment and/or a fine of $2,000.
A non-profit association representing most of the nation's beverage container manufacturers, marketers, distributors and bottlers brought suit against the state of Michigan alleging that the unique mark amendment to the Bottle Bill violated the dormant Commerce Clause. While states may regulate interstate commerce concurrent with the federal government, dormant Commerce Clause jurisprudence holds that they may not unjustifiably discriminate against or burden the flow of commerce in order to benefit in-state interests at the expense of out-of-state competitors. Thus, the association alleged that the unique mark provision was discriminatory in violation of the dormant Commerce Clause, as it required out-of-state companies to change the way in which they source and deliver containers both in Michigan and other states, necessitating more warehouse space to segregate inventory and eliminating flexibility in the supply chain. A Michigan district court granted summary judgment for the state, and the association appealed.
On appeal, the Sixth Circuit weighed whether the unique-mark provision discriminated against out-of-state interests facially, purposefully or in effect. It concluded that the amendment was not facially discriminatory, as the plain language of the provision applied equally to all beverage container manufacturers regardless of geography. Looking to the limited legislative history, the court also concluded that the amendment served to remedy fraudulent redemption rather than to purposefully discriminate. Finally, the court determined that the unique-mark provision did not discriminate in effect, as any extra financial burden incurred by companies in order to comply with the provision applied equally to both in-state and out-of-state manufacturers.
Although the Sixth Circuit found that the unique-mark provision did not discriminate against interstate commerce, it departed from the district court and held that the requirement had an unconstitutional extraterritorial effect. Under existing Supreme Court of the United States precedent, any statute that has "the undeniable effect of controlling commercial activity occurring wholly outside the boundary of the state" is extraterritorial and in violation of the dormant Commerce Clause.
The court deemed Michigan's statute unconstitutionally extraterritorial as it forced beverage manufacturers to package products in a manner unique to the state in order to do business within its boundaries while also prohibiting the sale of those products in other states. Moreover, the court noted that Michigan failed to fully explore reasonable alternatives to accomplish its goals and that other states have enacted bottle redemption laws without imposing civil or criminal penalties on distributors or manufacturers. The Sixth Circuit reversed and remanded the case to the lower court on the extraterritorial issue.
A copy of the opinion can be downloaded below.