The Internet and the Dormant Commerce Clause
Goldsmith, Jack L., Sykes, Alan O., The Yale Law Journal
First-generation Internet thinkers maintained that Internet communications could not be subjected to local regulation.(1) The argument went as follows: Internet content providers can inexpensively send content via the Internet into every territorial jurisdiction in the world. Territorial governments cannot stop this content at the border and cannot assert regulatory control over the content source located abroad. If governments try to filter content at the border, information can easily be rerouted. And if some governments happen to assert regulatory control over a content provider or its assets, the provider can cheaply and easily relocate to a permissive jurisdiction and continue sending content worldwide from there.
Events during the past five or so years have demonstrated that this conception of the Internet is wrong, or at least incomplete.(2) Contrary to early predictions, governments have taken a variety of steps within their borders to regulate Internet content flows. They have, for example, regulated users, hardware and software, Internet service providers, and financial institutions within their territory. These purely territorial regulations have raised the cost of transmitting and receiving Internet content, and have affected the price and availability of content even when it originates elsewhere.(3)
Many now complain that the Internet is threatened by a patchwork of state, national, and international regulations, and scores of lawsuits have sought to invalidate them. Lawyers in the United States have employed an array of legal weapons in this effort, the most prominent being the Constitution's First Amendment.(4) A less prominent but potentially more powerful weapon--at least with regard to state (as opposed to federal) Internet regulations--is the dormant Commerce Clause.
The dormant Commerce Clause is a judge-made doctrine that prohibits states from regulating in ways that unduly burden interstate commerce. To see how the dormant Commerce Clause has been applied to the Internet, consider the leading case of American Libraries Ass'n v. Pataki.(5) American Libraries Ass'n enjoined enforcement of a New York statute that prohibited the intentional use of the Internet "to initiate or engage" in certain pornographic communications deemed to be "harmful to minors."(6) In enjoining enforcement of the law, the American Libraries Ass'n court reasoned as follows: Because it is difficult for content providers to control access to their websites and communications, a content provider outside New York might inadvertently send proscribed content into New York. Fear of liability in New York thus might chill the activities of a content provider operating legally in California, thereby affecting legitimate commerce wholly outside New York. Moreover, because states regulate pornographic communications differently, "a single actor might be subject to haphazard, uncoordinated, and even outright inconsistent regulation by states that the actor never intended to reach and possibly was unaware were being accessed."(7) These extraordinary burdens on Internet communication were said to outweigh any regulatory benefit in New York. In sum, "the Internet is one of those areas of commerce that must be marked off as a national preserve to protect users from inconsistent legislation that, taken to its most extreme, could paralyze development of the Internet altogether."(8)
As this last sentence suggests, the reasoning of American Libraries Ass'n extends far beyond the regulation at issue in that case. In fact, the dormant Commerce Clause argument, if accepted, threatens to invalidate nearly every state regulation of Internet communications. For under the logic of American Libraries Ass'n, nearly every state regulation of Internet communications will have the extraterritorial consequences the court bemoaned. This explains why the dormant Commerce Clause has been called "a nuclear bomb of a legal theory" against state Internet regulations. …