EXXON CORP. v GOVERNOR OF MARYLAND
57 L. Ed 2d 91

ute and the central policy of the
Sherman Act-our "charter of eco-
nomic liberty." Northern Pacific R.
Co. v United States, 356 US 1, 4, 2 L
Ed 2d 545, 78 S Ct 514. Neverthe-
less, this sort of conflict cannot itself
constitute a sufficient reason for in-
validating the Maryland statute. For
if an adverse effect on competition
were, in and of itself, enough to
render a state statute invalid, the
States' power to engage in economic
regulation would be effectively de-

2N

stroyed We are, therefore, satisfied that neither the broad implications . of the Sherman Act nor the Robinson-Patman Act can fairly be construed as a congressional decision to pre-empt the power of the Maryland Legislature to enact this law.

The judgment is affirmed.

Mr. Justice Powell took no part in the consideration or decision of this case.

SEPARATE OPINION

Mr. Justice Blackmun, concurring in part and dissenting in part.

Although I agree that the Maryland Motor Fuel Inspection law' does not offend substantive due process or federal antitrust policy, I dissent from Part III of the Court's opinion because it fails to condemn imper

28. Appellants argue that Maryland has actually regulated beyond its boundaries, pointing to the possibility that they may have to extend voluntary allowances into neighboring States in order to avoid liability under Robinson Patman Act. See nn 20 and 21. supra But this alleged extraterritorial affect arises from the Robinson-Patman Act, not the Maryland statute.

1. The presently challenged portions of the law were enacted four years ago and amended once since then. 1974 Md Laws, ch 854; 1975 Md Laws, ch 608. The statute is now codified as Md Code Ann Art 56, § 157E (Supp 1977) and reads:

"(a) For the purpose of this law all gasoline and special fuels sold or offered or exposed for sale shall be subject to inspection and analysis as hereinafter provided.

"(b) After July 1. 1974. no producer or refiner of petroleum products shall open a major brand, secondary brand or unbranded retail service station in the State of Maryland, and operate it with company personnel, a subsidiary company, commissioned agent, or under a contract with any person, firm, or corporation, managing a service station on a fee arrangement with the producer or refiner. The station must be operated by a retail service station dealer.

missible discrimination against interstate commerce in retail gasoline marketing The divestiture provisions, Md Code Ann, Art 56, §§ 157E(b) and (c) (Supp 1977) (hereinafter referred to as §§ (b) and (c)), preclude out-of-state competitors from retailing gasoline within Mary

"te) After July 1, 1975, no producer or refiner of petroleum products shall operate a major brand, secondary brand, or unbranded retail service station in the State of Maryland, with company personnel, a subsidiary company, commissioned agent, or under a contract with any person, firm, or corporation managing a service station on a fee arrange ment with the producer or refiner. The sta tion must be operated by a retail service station dealer.

"(d) Every producer, refiner, or wholesaler of petroleum products supplying gasoline and special fuels to retail service station dealers shall extend all voluntary allowances uniformly to all retail service station dealers supplied.

"te) Every producer, refiner, or wholesaler of petroleum products supplying gasoline and special fuels to retail service station dealers shall apply all equipment rentals uniformly to all retail service station dealers supplied.

"In Every producer, refiner, or wholesaler of petroleum products shall apportion uniformly all gasoline and special fuels to all retail service station dealers during periods of shortages on an equitable basis, and shall not discriminate among the dealers in their allotments."

US. SUPREME COURT REPORTS

57 L. Ed 2d

and The effect is to protect in-state_ties may not discriminate against retail service station dealers from the competition of the out-of-state businesses This protectionist discrimination is not justified by any legitimate state interest that cannot be vindicated by more even-handed regulation. Sections (b) and (c), therefore, violate the Commerce Clause.'

I

In Maryland the retail marketing of gasoline is interstate commerce, for all petroleum products come from outside the State. Retailers serve interstate travelers. To the extent that particular retailers succeed or fail in their businesses, the interstate wholesale market for petroleum products is affected. Cf. Dean Milk Co. v Madison, 340 US 349, 95 L Ed 329, 71 S Ct 295 (1951).3 The regulation of retail gasoline sales is therefore within the scope of the Commerce Clause. See ibid.; Minnesota v Barber, 136 US 313, 34 I. Ed 455, 10 S Ct 862 (1890).'

A

The Commerce Clause forbids discrimination against interstate commerce, which repeatedly has been held to mean that States and locali

2. US Const. Art I. §8, el 3: "The Congress shall have Power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes "

3. The inherent effect of local regulation of retail sales on interstate commerce is well illustrated by Dean Milk The city of Madison forbade the sale of pasteurized milk unless pasteurization occurred at a plant located within five miles of the center of the city. General Ordinances of the City of Madison $7 21 (1949) Even though only local sale was prohibited, the Court considered the ordi

the transactions of out-of-state actors in interstate markets. Eg, Hunt v Washington Apple Advertising Comm'n. 432 US 333, 350-352 (1977), 53 L. Ed 2d 383, 97 S Ct 2434; Halliburton Oil Well Co. v Reily, 373 US 64, 69-73, 10 L Ed 2d 202, 83 S Ct 1201 (1963); Dean Milk Co. v Madison, 340 US, at 354, 95 L. Ed 329, 71 S Ct 295; Best & Co. v Maxwell, 311 US 454, 455-456, 85 L Ed 275, 61 S Ct 334 (1940). The discrimination need not appear on the face of the state or local regulation. "The commerce clause forbids discrimination, whether forthright or ingenious. In each case it is our duty to determine whether the statute under attack, whatever its name may be, will in its practical operation work discrimination against interstate commerce." Ibid. The state or local authority need not intend to discriminate in order to offend the policy of maintaining a free-flowing national economy. As demonstrated in Hunt, a statute that on its face restricts both intrastate and interstate transactions may violate the Clause by having the "practical ef fect" of discriminating in its operation. 432 US, at 350-352, 53 L Ed 2d 383, 97 S Ct 2434.

If discrimination results from a

nance to be a regulation of interstate com

merce.

4. Cf Best & Co. v Maxwell, 311 US 454, 85 L. Ed 275, 61 S Ct 334 (1940) (holding that taxation of local retailing was within the reach of the Commerce Clause); United States v Frankfort Distilleries, Inc. 324 US 293, 89 L Ed 951, 65 S Ct 661 (1945) (holding that retailing was interstate commerce within the scope of the Sherman Act) See generally Note. Gasoline Marketing Divestiture Statutes A Preliminary Constitutional and Economic Assessment, 28 Vand L Rev 1277, 1303 (1975).

EXXON CORP. v GOVERNOR OF MARYLAND
57 L. Ed 2d 91

statute, the burden falls upon the
state or local government to demon-
strate legitimate local benefits justif-
ying the inequality and to show that
less discriminatory alternatives can-
not protect the local interests. Id., at
353, 53 L. Ed 2d 383, 97 S Ct 2434;
Dean Milk Co. v Madison, 340 US, at
354, 95 L. Ed 329, 71 S Ct 295. This
Court does not merely accept with-
out analysis purported local inter-
ests. Instead, it independently identi-
fies the character of the interests
and judges for itself whether alter-
natives will be adequate. For exam-
ple, in Dean Milk the city attempted
to justify a milk pasteurization ordi-
nance by claiming it to be a neces-
sary health measure. The city's as-
sertion was not conclusive, however:
"A different view, that the ordi-
nance is valid simply because it
professes to be a health measure,
would mean that the Commerce
Clause of itself imposes no limita-

tions on state action other than those laid down by the Due Proc ess Clause, save for the rare instance where a state artlessly discloses an avowed purpose to discriminate against interstate goods." Ibid.

In an independent assessment of the asserted purpose, the Court determined exactly how the ordinance protected public health and then concluded that other measures could accomplish the same ends. Id., at 354-356, 53 L Ed 2d 383, 97 S Ct 2434. The city's public health pur

5. In 1974 Fisca Oil Co.; Giant Food, Inc.; Hi-Way Oil, Inc.; Homes Oil Co; Hudson Oil Co., Midway Petroleum, National Oil Co.; Pantry Pride; Savon Gas Stations; and Sears, Roebuck & Co. operated gasoline stations in Maryland. Because none of these organizations produced or refined petroleum at that time, the statute would not have restricted

pose therefore did not justify the discrimination, and the ordinance violated the Commerce Clause.

B

With this background, the unconstitutional discrimination in the Maryland statute becomes apparent. No facial inequality exists; §§ (b) and (c) preclude all refiners and producers from marketing gasoline at the retail level. But given the structure of the retail gasoline market in Maryland, the effect of §§ (b) and (c) is to exclude a class of predominantly out-of-state gasoline retailers while providing protection from competi tion to a class of nonintegrated retailers that is overwhelmingly composed of local businessmen. In 1974, of the 3,780 gasoline service stations in the State, 3,547 were operated by nonintegrated local retail dealers. App 191, 569, 755. Of the 233 company-operated stations, 197 belonged to out-of-state integrated producers or refiners. Id., at 190-191. Thirtyfour were operated by nonintegrated companies that would not have been affected immediately by the Maryland statute. Ibid. The only in-state integrated petroleum firm, Crown Central Petroleum, Inc., operated just two service stations. Id., at 189. Of the class of stations statutorily insulated from the competition of the out-of-state integrated firms, then, more than 99% were operated by local business interests. Of the class of enterprises excluded entirely

their operations. It should be noted, however, that the statute will reach any of these firms deciding to integrate, backwards from retailing to refining or producing. After this suit was filed, Hudson Oil Co. acquired a refinery and thus became another out-of-state business subject to the ban of §§ (b) and (c). App 518519.

US SUPREME COURT REPORTS

EXXON CORP. v GOVERNOR OF MARYLAND
57 L. Ed 2d 91

tion of property valued at more than
$10 million, will inflict significant
economic hardship on Maryland's
major brand companies, all of which
are out-of-state firms.

Similar hardship is not imposed upon the local service station dealers by the divestiture provisions. Indeed, rather than restricting their ability to compete, the Maryland Act effectively and perhaps intentionally improves their competitive position by insulating them from competition by out-of-state integrated producers and refiners. In its answers to the various complaints in this case, the State repeatedly conceded that the Act was intended to protect "the retail dealer as an independent businessman [by] reducing the control and dominance of the vertically integrated petroleum producer and refiner in the retail market." Id., at 33; see id., at 51, 54, 104, 128, 132, 145, 147. At trial the State's expert said that the legislation would have the effect of protecting the local dealers against the out-of-state competition. Id., at 613. In short, the foundation of the discrimination in this case is that the local dealers may continue to enter retail transactions and to compete for retail profits while the statute will deny similar opportunities to the class

7. Another indication of the discrimination against out-of-state business was the amend ment of the original legislative proposal to exempt wholesalers of gasoline from the divestiture requirements The author of the proposal intended to ban retailing by wholesalers and "not to discriminate against one class as to another." App 568. On cross-examination he was asked why the exemption was enacted. He replied:

"It was up to the General Assembly to make that decision. Apparently the wholesalers were represented at the testimony in the hearings.... I did hear at a later date that

composed almost entirely of out-of state businesses.'

proved

With discrimination against interstate commerce, the burden falls upon the State to justify the distinction with legitimate state interests that cannot be vindicated with more evenhanded regulation On the record before the Court, the State fails to carry its burden. It asserts only in general terms a de sire to maintain competition in gasoline retailing. Although this is a laudable goal, it cannot be accepted without further analysis, just as the Court could not accept the mere assertion of a public health justifica tion in Dean Milk. Here, the State ignores the second half of its responsibility; it does not even attempt to demonstrate why competition cannot be preserved without banning the out-of-state interests from the retail market.

The State's showing may be so meager because any legitimate inter est in competition can be vindicated with more evenhanded regulation First, to the extent that the State's interest in competition is nothing more than a desire to protect partic ular competitors-less efficient local businessmen-from the legal compe tition of more efficient out-of-state firms, the interest is illegitimate un

they wanted to be exempt from it because some of the wholesalers being local jobberhad no investment or financial activity or engagement with the producer refiner so they wanted to plea upon the mercy of the commit tee so to speak...

"Q. You have no information then as to why the legislature of Maryland chose to make that discrimination? A Not other than hearsay as to the general data that these men were local businessmen, had no definite tie in with the refinery...." Id, at 568-569.