The Internet and the Dormant Commerce Clause

Abstract

This paper challenges the conventional wisdom that the dormant commerce clause requires invalidation of most state regulation of the Internet. The paper argues that conventional wisdom is flawed in three respects: it rests on an impoverished understanding of the architecture of the Internet; it misreads dormant commerce clause jurisprudence; and it misunderstands the economics of state regulation of transborder transactions. The paper does not argue that all state regulation of Internet communications should be immune from dormant commerce clause scrutiny. Such a general conclusion would be inappropriate because different state raise different empirical and technical issues that remain unresolved. The paper aims, more modestly, to deflate the emerging conventional wisdom and to show that the dormant commerce clause, properly understood, leaves states with much more flexibility to regulate Internet transactions than is commonly thought. Along the way, the paper contributes to dormant commerce clause theory generally by bringing theoretical clarity to the extraterritoriality and inconsistent regulations prongs of dormant commerce clause jurisprudence.