Extraterritorial Labeling Requirements and Criminal Penalties
The U.S. Chamber urged the Sixth Circuit to strike down as unconstitutional a Michigan beverage container law that attempts to regulate the labels that manufacturers must place on beverage containers manufactured, distributed and sold in other states. In this case, Michigan effectively criminalizes the out-of-state sale of bottles that bear a Michigan-required label. In its amicus brief, the Chamber argued that the Michigan law violates the Commerce Clause of the U.S. Constitution by regulating extraterritorial conduct outside the state. The Chamber explained that the notion that one state can dictate how businesses conduct their affairs in other states is anathema to the most fundamental principles that animate the dormant commerce clause and that are essential to the orderly conduct of business across state lines. The Chamber warned that failure to strike down the Michigan law would encourage the adoption of an amalgamation of overreaching state branding laws that could effectively bring interstate commerce to a halt, not only in the beverage industry but in other consumer product markets as well.
The Sixth Circuit held that Michigan's unique mark requirement is not discriminatory. However, since the requirement forces beverage manfuacturers and distributors to adopt Michigan's unique labeling system, without considering less burdensome alternatives, the requirement has an impermissible extraterritorial effect. The court reversed and remanded to the district court with instructions to proceed consistent with the opion. The court also affirmed the district court's order granting the defendant's motion for summary judgment on the basis the statute is not discriminatory.
U.S. Chamber amicus brief filed 12/9/11.