South Carolina Supreme Court Holds That Economic Protectionism Is Outside the Constitutional Scope of the Police Power
by Max Hess
The South Carolina Supreme Court this week added, or revived, an arrow to the quiver of arguments potentially available to challengers of State measures in regulation of the beverage alcohol industry: Put aside due process, equal protection, the dormant Commerce Clause, the Sherman Act, etc., there are intrinsic limits to the scope of the police power.
At issue were a couple of State statutes capping, at three, the number of retail liquor stores that could be owned by one person or entity.
As the majority opinion duly notes, the South Carolina Constitution acknowledges the right of the South Carolina General Assembly to regulate the manufacture, sale, and retail of beverage alcohol in exercise of the police power. So often the mere invocation of the police power with respect to liquor has meant the game was over; as the majority opinion writes, the position of the defenders of the challenged statutes "amounts to ’it's just liquor.’" But, as the South Carolina Supreme Court observes: “Under this rationale, market regulation — no matter how oppressive — cannot ever be said to be unconstitutional.” Retail Services & Systems, Inc. v. South Carolina Dep’t of Revenue, App. Case No. 2014-002728 (heard Nov. 5, 2015; filed Mar. 29, 2017) (RSSI), slip op. no. 27709, at 6 (tendential marks). READ HERE
The RSSI Court did not, in the end, reach the due process and equal protection claims, but rather held that the challenged statutes are “unconstitutional as violative of the General Assembly's police powers.” RSSI, Slip op. no. 27709, at 6-7. To test the proper scope of the General Assembly’s police powers, the RSSI Court reaches back, in part, to a pair of opinions (George and McCullough) from the 1890s — opinions that cover some of the same ground as contemporary discussions about the nature of government and judicial review.
The George case.
In State ex rel. George v. City Council of Aiken, 42 S.C. 222, 20 S.E. 221 (1894), building upon the understanding of the Federal government, and “’the congress of the United States,’” as a limited government with “’special and enumerated powers,’” an argument was made that the same understanding should be applied to “’the powers of the legislature of South Carolina.’” 20 S.E. at 229 (citation omitted). Relying upon prior precedent, the argument was rejected as attempting “’to change entirely the nature of [State] legislative power, and to introduce anomalous ideas in the structure of the government.’” Id. (citation omitted).
But, then, a couple of limitations, intrinsic to the nature of State legislative power, were acknowledged in the George opinion. For instance, ”’even in the absence of any express restrictions upon the taxing power of the legislature, such power can only be exercised for some public purpose, and that whenever it is attempted to be exercised for a private purpose it is the duty of the courts to declare such legislation void.’ The very definitions of taxation, making it clear that it must be for a public purpose, showed that there was no necessity for resort to the doctrine of reserved limitations to declare null and void a tax for a private purpose.” Id. (citation omitted).
This theme was recalled again later in the George opinion when it was argued that, in regulating beverage alcohol, the South Carolina “legislature [had unconstitutionally] embark[ed] the state in a commercial enterprise.” 20 S.E. at 230. The George court responded, “We have no doubt that if such was the object of the act, and it was not intended as a police measure, it would be unconstitutional . . . . As we have said, if the act is not a police measure, it is unconstitutional. . . . The very distinction for which we contend is pointed out in the case of Mauldin v. City Council, 33 S. C. 1, 11 S. E. 434. In that case the court showed it was not wrong for the city to buy and sell for a public purpose, but that the act only became illegal when it was for a private purpose.” Id. (emphasis supplied) (emphasized language is the language quoted by the South Carolina Supreme Court in RSSI this week).
The George court summed up, “The conclusions herein announced are in conflict with the case of McCullough v. Brown, supra. That case, therefore, and those decided upon its authority, are overruled in so far as they are antagonistic to the principles upon which this case is decided.” 20 S.E. at 230. McCullough, as it happens, is the second opinion from the 1890s that the South Carolina Supreme Court relied upon this week.
The McCullough case.
In McCullough v. Brown, 41 S.C. 220, 19 S.E. 458 (1894), the South Carolina Supreme Court wrote,
19 S.E. at 472. The McCullough court summarized, “It seems to us, therefore, that in no view of the case can the dispensary act [under challenge] be regarded as a police regulation of the business of selling intoxicating liquors . . .“ 19 S.E. at 472-73. (emphasis supplied) (emphasized language is the language quoted by the South Carolina Supreme Court in RSSI this week).
RSSI, Slip op. no. 27709, at 5 (emphasis original).
Without “evidence of the alleged safety concerns” that might bring the challenged statutes within a “supportable police power justification,” “economic protectionism” was outside the scope of and, therefore, “unconstitutional as violative of the General Assembly's police powers.” RSSI, Slip op. no. 27709, at 6-7.
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