437 U.S. 117 (1978)

EXXON CORP. ET AL.
v.
GOVERNOR OF MARYLAND ET AL.

No. 77-10.

Supreme Court of United States.

Argued February 28, 1978. Decided June 14, 1978.^[*] APPEAL FROM THE COURT OF APPEALS OF MARYLAND.

*119 William Simon argued the cause for appellants in all cases. With him on the briefs for appellants in Nos. 77-10, 77-11, and 77-47 were William L. Marbury, Lewis A. Noonberg, David F. Tufaro, Robert L. Stern, J. Edward Davis, Daniel T. Doherty, Jr., Robert G. Abrams, Lawrence S. Greenwald, Bernard J. Caillouet, Richard P. Delaney, Lauric J. Cusack, Jerry Miller, and A. M. Minotti. Wilbur D. Preston, Jr., Stanley B. Rohd, Andrew K. McColpin, and Richard R. Linn filed a brief for appellants in No. 77-12. David Ginsburg, Fred W. Drogula, and James E. Wesner filed briefs for appellants in No. 77-64.

Francis B. Burch, Attorney General of Maryland, and Thomas M. Wilson III, Assistant Attorney General, argued the cause for respondents in all cases. With them on the brief were John F. Oster, Deputy Attorney General, and John A. Woodstock and Steven P. Resnick, Assistant Attorneys General.^[†]

Jerry S. Cohen filed a brief for the National Congress of Petroleum Retailers as amicus curiae urging affirmance.

Briefs of amici curiae were filed by Evelle J. Younger, Attorney General, Sanford N. Gruskin, Chief Assistant Attorney General, Warren J. Abbott, Assistant Attorney General, and Michael I. Spiegel and Linda L. Tedeschi, Deputy Attorneys General, for the State of California; by Erwin N. Griswold for Champlin Petroleum Co. et al.; and by George W. Liebmann, Robert B. Levin, and Robert G. Levy for Day Enterprises, Inc., et al.

MR. JUSTICE STEVENS delivered the opinion of the Court.

A Maryland statute provides that a producer or refiner of petroleum products (1) may not operate any retail service station within the State, and (2) must extend all "voluntary *120 allowances" uniformly to all service stations it supplies.^[1] The questions presented are whether the statute violates either the Commerce or the Due Process Clause of the Constitution of the United States, or is directly or indirectly pre-empted by the congressional expression of policy favoring vigorous competition found in § 2 (b) of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 49 Stat. 1526.^[2] The Court of Appeals of Maryland answered these questions in *121 favor of the validity of the statute. 279 Md. 410, 370 A. 2d 1102 and 372 A. 2d 237 (1977). We affirm.

I

The Maryland statute is an outgrowth of the 1973 shortage of petroleum. In response to complaints about inequitable distribution of gasoline among retail stations, the Governor of Maryland directed the State Comptroller to conduct a market survey. The results of that survey indicated that gasoline stations operated by producers or refiners had received preferential treatment during the period of short supply. The Comptroller therefore proposed legislation which, according to the Court of Appeals, was "designed to correct the inequities in the distribution and pricing of gasoline reflected by the survey." Id., at 421, 370 A. 2d, at 1109. After legislative hearings and a "special veto hearing" before the Governor, the bill was enacted and signed into law.

Shortly before the effective date of the Act, Exxon Corp. filed a declaratory judgment action challenging the statute in the Circuit Court of Anne Arundel County, Md. The essential facts alleged in the complaint are not in dispute. All of the gasoline sold by Exxon in Maryland is transported into the State from refineries located elsewhere. Although Exxon sells the bulk of this gas to wholesalers and independent retailers, it also sells directly to the consuming public through 36 company-operated stations.^[3] Exxon uses these stations to test innovative marketing concepts or products.^[4] Focusing primarily on the Act's requirement that it discontinue its operation of these 36 retail stations, Exxon's complaint challenged the *122 validity of the statute on both constitutional and federal statutory grounds.^[5]

During the ensuing nine months, six other oil companies instituted comparable actions. Three of these plaintiffs, or their subsidiaries, sell their gasoline in Maryland exclusively through company-operated stations.^[6] These refiners, using trade names such as "Red Head" and "Scot," concentrate largely on high-volume sales with prices consistently lower than those offered by independent dealer-operated major brand stations. Testimony presented by these refiners indicated that company ownership is essential to their method of private brand, low-priced competition. They therefore joined Exxon in its attack on the divestiture provisions of the Maryland statute.

The three other plaintiffs, like Exxon, sell major brands primarily through dealer-operated stations, although they also operate at least one retail station each.^[7] They, too, challenged the statute's divestiture provisions, but, in addition, they specially challenged the requirement that "voluntary allowances" be extended uniformly to all retail service stations supplied in the State. Although not defined in the statute, the term "voluntary allowances" refers to temporary price reductions granted by the oil companies to independent dealers who *123 are injured by local competitive price reductions of competing retailers.^[8] The oil companies regard these temporary allowances as legitimate price reductions protected by § 2 (b). In advance of trial, Exxon, Shell, and Gulf moved for a partial summary judgment declaring this portion of the Act invalid as in conflict with § 2 (b).

The Circuit Court granted the motion, and the trial then focused on the validity of the divestiture provisions. As brought out during the trial, the salient characteristics of the Maryland retail gasoline market are as follows: Approximately 3,800 retail service stations in Maryland sell over 20 different brands of gasoline. However, no petroleum products are produced or refined in Maryland, and the number of stations actually operated by a refiner or an affiliate is relatively small, representing about 5% of the total number of Maryland retailers.

The refiners introduced evidence indicating that their ownership of retail service stations has produced significant benefits for the consuming public.^[9] Moreover, the three refiners that now market solely through company-operated stations may elect to withdraw from the Maryland market altogether if the statute is enforced. There was, however, no evidence that the total quantity of petroleum products shipped into Maryland would be affected by the statute.^[10] After trial, the Circuit Court held the entire statute invalid, primarily on substantive due process grounds.

The Maryland Court of Appeals reversed, rejecting all of the refiners' attacks against both the divestiture provisions and *124 the voluntary-allowance provision. Most of those attacks are not pursued here;^[11] instead, appellants have focused their appeals on the claims that the Maryland statute violates the Due Process and Commerce Clauses and that it is in conflict with the Robinson-Patman Act.

II

Appellants' substantive due process argument requires little discussion.^[12] The evidence presented by the refiners may cast some doubt on the wisdom of the statute, but it is, by now, absolutely clear that the Due Process Clause does not empower the judiciary "to sit as a `superlegislature to weigh the wisdom of legislation' . . . ." Ferguson v. Skrupa, 372 U. S. 726, 731 (citation omitted). Responding to evidence that producers and refiners were favoring company-operated stations in the allocation of gasoline and that this would eventually decrease the competitiveness of the retail market, the State enacted a law prohibiting producers and refiners from operating their own stations. Appellants argue that this response is irrational and that it will frustrate rather than further the State's desired goal of enhancing competition. But, as the Court of Appeals observed, this argument rests simply on an evaluation of the economic wisdom of the statute, 279 Md., at 428, 370 A. 2d, at 1112, and cannot override the State's authority "to legislate against what are found to be injurious practices in their internal commercial and business affairs . . . ." Lincoln Federal Labor Union v. Northwestern Iron & Metal Co., 335 U. S. 525, 536.^[13] Regardless of the ultimate economic *125 efficacy of the statute, we have no hesitancy in concluding that it bears a reasonable relation to the State's legitimate purpose in controlling the gasoline retail market, and we therefore reject appellants' due process claim.

III

Appellants argue that the divestiture provisions of the Maryland statute violate the Commerce Clause in three ways: (1) by discriminating against interstate commerce; (2) by unduly burdening interstate commerce; and (3) by imposing controls on a commercial activity of such an essentially interstate character that it is not amenable to state regulation.

Plainly, the Maryland statute does not discriminate against interstate goods, nor does it favor local producers and refiners. Since Maryland's entire gasoline supply flows in interstate commerce and since there are no local producers or refiners, such claims of disparate treatment between interstate and local commerce would be meritless. Appellants, however, focus on the retail market, arguing that the effect of the statute is to protect in-state independent dealers from out-of-state competition. They contend that the divestiture provisions "create a protected enclave for Maryland independent dealers. . . ."^[14] As support for this proposition, they rely on the fact that the burden of the divestiture requirements falls solely on interstate companies. But this fact does not lead, either logically or as a practical matter, to a conclusion that the State is discriminating against interstate commerce at the retail level.

As the record shows, there are several major interstate marketers of petroleum that own and operate their own retail *126 gasoline stations.^[15] These interstate dealers, who compete directly with the Maryland independent dealers, are not affected by the Act because they do not refine or produce gasoline. In fact, the Act creates no barriers whatsoever against interstate independent dealers; it does not prohibit the flow of interstate goods, place added costs upon them, or distinguishes between in-state and out-of-state companies in the retail market. The absence of any of these factors fully distinguishes this case from those in which a State has been found to have discriminated against interstate commerce. See, e. g., Hunt v. Washington Apple Advertising Comm'n, 432 U. S. 333; Dean Milk Co. v. Madison, 340 U. S. 349. For instance, the Court in Hunt noted that the challenged state statute raised the cost of doing business for out-of-state dealers, and, in various other ways, favored the in-state dealer in the local market. 432 U. S., at 351-352. No comparable claim can be made here. While the refiners will no longer enjoy their same status in the Maryland market, in-state independent dealers will have no competitive advantage over out-of-state dealers. The fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce.^[16]

*127 Appellants argue, however, that this fact does show that the Maryland statute impermissibly burdens interstate commerce. They point to evidence in the record which indicates that, because of the divestiture requirements, at least three refiners will stop selling in Maryland, and which also supports their claim that the elimination of company-operated stations will deprive the consumer of certain special services. Even if we assume the truth of both assertions, neither warrants a finding that the statute impermissibly burdens interstate commerce.

Some refiners may choose to withdraw entirely from the Maryland market, but there is no reason to assume that their share of the entire supply will not be promptly replaced by other interstate refiners. The source of the consumers' supply may switch from company-operated stations to independent dealers, but interstate commerce is not subjected to an impermissible burden simply because an otherwise valid regulation causes some business to shift from one interstate supplier to another.

The crux of appellants' claim is that, regardless of whether the State has interfered with the movement of goods in interstate commerce, it has interfered "with the natural functioning of the interstate market either through prohibition or through burdensome regulation." Hughes v. Alexandria Scrap Corp., 426 U. S. 794, 806. Appellants then claim that the statute "will surely change the market structure by weakening the independent refiners . . . ."^[17] We cannot, however, accept appellants' underlying notion that the Commerce Clause protects the particular structure or methods of operation in a retail market. See Breard v. Alexandria, 341 U. S. 622. As indicated by the Court in Hughes, the Clause protects the interstate market, not particular interstate firms, from prohibitive *128 or burdensome regulations. It may be true that the consuming public will be injured by the loss of the high-volume, low-priced stations operated by the independent refiners, but again that argument relates to the wisdom of the statute, not to its burden on commerce.

Finally, we cannot adopt appellants' novel suggestion that because the economic market for petroleum products is nation-wide, no State has the power to regulate the retail marketing of gas. Appellants point out that many state legislatures have either enacted or considered proposals similar to Maryland's,^[18] and that the cumulative effect of this sort of legislation may have serious implications for their national marketing operations. While this concern is a significant one, we do not find that the Commerce Clause, by its own force, pre-empts the field of retail gas marketing. To be sure, "the Commerce Clause acts as a limitation upon state power even without congressional implementation." Hunt v. Washington Apple Advertising Comm'n, supra, at 350. But this Court has only rarely held that the Commerce Clause itself pre-empts an entire field from state regulation, and then only when a lack of national uniformity would impede the flow of interstate goods. See Wabash, St. L. & P. R. Co. v. Illinois, 118 U. S. 557; see also Cooley v. Board of Wardens, 12 How. 299, 319. The evil that appellants perceive in this litigation is not that the several States will enact differing regulations, but rather that they will all conclude that divestiture provisions are warranted. The problem thus is not one of national uniformity. In the absence of a relevant congressional declaration of policy, or a showing of a specific discrimination against, or burdening *129 of, interstate commerce, we cannot conclude that the States are without power to regulate in this area.

IV

Exxon, Phillips, Shell, and Gulf contend that the requirement that voluntary allowances be extended to all retail service stations is either in direct conflict with § 2 (b) of the Clayton Act, as amended by the Robinson-Patman Act, or, more generally, in conflict with the basic federal policy in favor of competition, which is reflected in the Sherman Act as well as § 2 (b). In rejecting these contentions, the Maryland Court of Appeals noted that the Maryland statute covered two different competitive situations.^[19] In the first situation a competing retailer lowers its price on its own, and the oil company gives its own retailer a price reduction to enable it to meet that lower price. In the second situation, the competing retailer's lower price is subsidized by its supplier, and the oil company gives its own retailer a price reduction to meet the competition. The good-faith defense of § 2 (b) is clearly not available to the oil company in the first situation because the voluntary allowance would not be a response to competition from another oil company. See FTC v. Sun Oil Co., 371 U. S. 505. In the second situation the law is unsettled,^[20] but the *130 Court of Appeals concluded that the defense would also be unavailable. The court therefore reasoned that there was no conflict between the Maryland statute and § 2 (b), since the statute did not apply to any allowance protected by federal law. In our opinion, it is not necessary to decide whether the § 2 (b) defense would apply in the second situation, for even assuming that it does, there is no conflict between the Maryland statute and the Robinson-Patman Act sufficient to require pre-emption.

Appellants' first argument is that compliance with the Maryland statute may cause them to violate the Robinson-Patman Act. They stress the possibility that the requirement that a price reduction be made on a statewide basis may result in discrimination between customers who would otherwise receive the same price, and they describe various hypothetical situations to illustrate this point.^[21] But, "[i]n this as in other areas of coincident federal and state regulation, the `teaching of this Court's decisions . . . enjoin[s] seeking out conflicts between state and federal regulation where none clearly exists.' Huron Cement Co. v. Detroit, 362 U. S. 440, 446." Seagram & Sons, Inc. v. Hostetter, 384 U. S. 35, 45. See also State v. Texaco, Inc., 14 Wis. 2d 625, 111 N. W. 2d 918 (1961). The Court in Seagram & Sons went on to say that "[a]lthough it is possible to envision circumstances under which price discriminations *131 proscribed by the Robinson-Patman Act might be compelled by [the state statute], the existence of such potential conflicts is entirely too speculative in the present posture of this case" to warrant pre-emption. 384 U. S., at 46. That counsel of restraint applies with even greater force here. For even if we were to delve into the hypothetical situations posed by appellants, we would not be presented with a state statute that requires a violation of the Robinson-Patman Act. Instead, the alleged "conflict" here is in the possibility that the Maryland statute may require uniformity in some situations in which the Robinson-Patman Act would permit localized discrimination.^[22] This sort of hypothetical conflict is not sufficient to warrant pre-emption.

Appellants, however, also claim that the Robinson-Patman Act does not simply permit localized discrimination, but actually establishes a federal right to engage in discriminatory pricing in certain situations. They argue that this federal right may be found directly in § 2 (b), or, more generally, in our Nation's basic policy favoring competition as reflected in the Sherman Act as well as § 2 (b). We find neither argument persuasive.

The proviso in § 2 (b) of the Clayton Act, as amended by *132 the Robinson-Patman Act, is merely an exception to that statute's broad prohibition against discriminatory pricing. It created no new federal right; quite the contrary, it defined a specific, limited defense, and even narrowed the good-faith defense that had previously existed.^[23] To be sure, the defense is an important one, and the interpretation of its contours has been informed by the underlying national policy favoring competition which it reflects.^[24] But it is illogical to infer that by excluding certain competitive behavior from the general ban against discriminatory pricing, Congress intended to pre-empt the States' power to prohibit any conduct within that exclusion. This Court is generally reluctant to infer pre-emption, see, e. g., De Canas v. Bica, 424 U. S. 351, 357-358, n. 5; Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414 U. S. 117, 127, and it would be particularly inappropriate to do so in this case because the basic purposes of the state statute and the Robinson-Patman Act are similar. Both reflect a policy choice favoring the interest in equal treatment of all customers *133 over the interest in allowing sellers freedom to make selective competitive decisions.^[25]

Appellants point out that the Robinson-Patman Act itself may be characterized as an exception to, or a qualification of, the more basic national policy favoring free competition,^[26] and argue that the Maryland statute "undermin[es]" the competitive balance that Congress struck between the Robinson-Patman and Sherman Acts.^[27] This is merely another way of stating that the Maryland statute will have an anticompetitive effect. In this sense, there is a conflict between the statute and the central policy of the Sherman Act—our "charter of economic liberty." Northern Pacific R. Co. v. United States, 356 U. S. 1, 4. Nevertheless, this sort of conflict cannot itself constitute a sufficient reason for invalidating 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 destroyed.^[28] We are, therefore, satisfied that neither the broad implications of the Sherman Act nor the Robinson-Patman Act can fairly *134 be construed as a congressional decision to pre-empt the power of the Maryland Legislature to enact this law.

The judgment is affirmed.

So ordered.

MR. JUSTICE POWELL took no part in the consideration or decision of these cases.

MR. JUSTICE BLACKMUN, concurring in part and dissenting in part.

Although I agree that the Maryland Motor Fuel Inspection Law^[1] does not offend substantive due process or federal antitrust *135 policy, I dissent from Part III of the Court's opinion because it fails to condemn impermissible 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 Maryland. The effect is to protect in-state 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 evenhanded regulation. Sections (b) and (c), therefore, violate the Commerce Clause.^[2]

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 U. S. 349 (1951).^[3] The *136 regulation of retail gasoline sales is therefore within the scope of the Commerce Clause. See ibid.; Minnesota v. Barber, 136 U. S. 313 (1890).^[4]

A

The Commerce Clause forbids discrimination against interstate commerce, which repeatedly has been held to mean that States and localities may not discriminate against the transactions of out-of-state actors in interstate markets. E. g., Hunt v. Washington Apple Advertising Comm'n, 432 U. S. 333, 350-352 (1977); Halliburton Oil Well Co. v. Reily, 373 U. S. 64, 69-73 (1963); Dean Milk Co. v. Madison, 340 U. S., at 354; Best & Co. v. Maxwell, 311 U. S. 454, 455-456 (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. (footnote omitted). 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 effect" of discriminating in its operation. 432 U. S., at 350-352.

If discrimination results from a statute, the burden falls upon the state or local government to demonstrate legitimate local benefits justifying the inequality and to show that less discriminatory alternatives cannot protect the local interests. *137 Id., at 353; Dean Milk Co. v. Madison, 340 U. S., at 354. This Court does not merely accept without analysis purported local interests. Instead, it independently identifies the character of the interests and judges for itself whether alternatives will be adequate. For example, in Dean Milk the city attempted to justify a milk pasteurization ordinance by claiming it to be a necessary health measure. The city's assertion was not conclusive, however:

"A different view, that the ordinance is valid simply because it professes to be a health measure, would mean that the Commerce Clause of itself imposes no limitations on state action other than those laid down by the Due Process 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. The city's public health purpose 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 competition 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 *138 integrated producers or refiners. Id., at 190-191. Thirty-four were operated by nonintegrated companies that would not have been affected immediately by the Maryland statute.^[5]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 from participation in the retail gasoline market, 95% were out-of-state firms, operating 98% of the stations in the class. Ibid.

The discrimination suffered by the out-of-state integrated producers and refiners is significant. Five of the excluded enterprises, Ashland Oil, Inc., BP Oil, Inc., Kayo Oil Co., Petroleum Marketing Corp., and Southern States Cooperative, Inc., market nonbranded gasoline through price competition rather than through brand recognition. Of the 98 stations marketing gasoline in this manner, all but 6 are company operated. The company operations result from the dominant fact of price competition marketing. According to repeated testimony from petroleum economics experts and officers of price marketers—testimony that the trial court did not discredit—such nonbranded stations can compete successfully only if they have day-to-day control of the retail price of their products, the hours of operation of their stations, and related business details. App. 320, 357, 370-371, 449-451, 503-504, *139 517, 529-530; Joint App. to Jurisdictional Statements 102a et seq. Only with such control can sufficient sales volume be achieved to produce satisfactory profits at prices two to three cents a gallon below those of the major branded stations. Dealer operation of stations precludes such control because of the illegality of vertical price fixing. See, e. g., 15 U. S. C. § 1 (1976 ed.); White Motor Co. v. United States, 372 U. S. 253 (1963). Therefore, because §§ (b) and (c) forbid company operations, these out-of-state competitors will have to abandon the Maryland retail market altogether. App. 100, 357-358, 455, 519; Joint App. to Jurisdictional Statements 103a et seq.^[6] For the same reason 32 other out-of-state national nonbranded integrated marketers, who operate their own stations without dealers, will be precluded from entering the Maryland retail gasoline market.

The record also contains testimony that the discrimination will burden the operations of major branded companies, such as appellants Exxon. Phillips, Shell, and Gulf, all of which are out-of-state firms. Most importantly, §§ (b) and (c) will preclude these companies, as well as those mentioned in the previous paragraph, from competing directly for the profits of retail marketing. According to Richard T. Harvin, retail sales manager for Exxon's eastern marketing region, Exxon's company-operated stations in Maryland annually return 15% of the company's investment—a profit of $700,000 in 1974. App. 316. Sections (b) and (c) will force this return to be shared with the local dealers. In addition, the ban of the sections will preclude the majors from enhancing brand recognition and consumer acceptance through retail outlets with company-controlled standards. Id., at 316, 320, 647, 668-669. Their ability directly to monitor consumer preferences and *140 reactions will be diminished. Id., at 315, 649, 669. And their opportunity for experimentation with retail marketing techniques will be curtailed. Id., at 316-317, 647-649, 669. In short, the divestiture provisions, which will require the appellant majors to cease operation 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 composed almost entirely of out-of-state businesses.^[7]

*141 With discrimination proved 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 desire 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 justification 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 interest 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 particular competitors—less efficient local businessmen—from the legal competition of more efficient out-of-state firms, the interest is illegitimate under the Commerce Clause. A national economy would hardly flourish if each State could effectively insist that local nonintegrated dealers handle product retailing to the exclusion of out-of-state integrated firms that would not have sufficient local political clout to challenge the influence of local businessmen with their local government leaders.^[8] Each State would be encouraged to "legislate according *142 to its estimate of its own interests, the importance of its own products, and the local advantages or disadvantages of its position in a political or commercial view." J. Story, Commentaries on the Constitution of the United States § 259 (4th ed. 1873), quoted in H. P. Hood & Sons v. Du Mond, 336 U. S. 525, 533 (1949). See also, e. g., The Federalist, Nos. 7, 11, 12 (Hamilton), No. 42 (Madison). The Commerce Clause simply does not countenance such parochialism.

Second, a legitimate concern of the State could be to limit the economic power of vertical integration. But nothing in the record suggests that the vertical integration that has *143 already occurred in the Maryland petroleum market has inhibited competition. Indeed, the trial court found that the retail market, dominated by 3,547 dealer outlets constituting more than 90% of the State's service stations, is highly competitive.^[9] Therefore, the State has shown no need for the divestiture of existing company-owned stations required by § (c). The legitimacy of any concern about future integration, which could support the discrimination of § (b), is suspect because of the exemption granted wholesalers, which, not surprisingly, are local businesses able to influence the state legislature.^[10] See n. 7, supra.

*144 Third, the State appears to be concerned about unfair competitive behavior such as predatory pricing or inequitable allocation of petroleum products by the integrated firms. These are the only examples of specific misconduct asserted in the State's answers. App. 33-34, 54-55, 81-83, 109-111, 133-134, 148-149. But none of the concerns support the discrimination in §§ (b) and (c). There is no proof in the record that any significant portion of the class of out-of-state firms burdened by the divestiture sections has engaged in such misconduct. Furthermore, predatory pricing and unfair allocation already have been prohibited by both state and federal law. See, e. g., Emergency Petroleum Allocation Act of 1973, 87 Stat. 628, 15 U. S. C. § 751 et seq. (1976 ed.); Energy Policy and Conservation Act, § 461, 89 Stat. 955, 15 U. S. C. § 760g (1976 ed.); Maryland Motor Fuel Inspection Law, Md. Code Ann., Art. 56, § 157E (f) (Supp. 1977); Maryland Antitrust Act, Md. Com. Law Code Ann. § 11-201 et seq. (1975); Maryland Unfair Sales Act, Md. Com. Law Code Ann. § 11-401 et seq. (1975). Less discriminatory legislation, which would regulate the leasing of all service stations, not just those owned by the out-of-state integrated producers and refiners, could prevent whatever evils arise from short-term *145 leases. Cf. Maryland Gasoline Products Marketing Act, Md. Com. Law Code Ann. § 11-304 (g) (Supp. 1977).^[11]

In sum, the State has asserted before this Court only a vague interest in preserving competition in its retail gasoline market. It has not shown why its interest cannot be vindicated by legislation less discriminatory toward out-of-state retailers. It therefore has not met its burden to justify the discrimination inherent in §§ (b) and (c), and they violate the Commerce Clause.

II

The arguments of the Court's opinion, the Maryland Court of Appeals decision,^[12] and appellees do not remove the unconstitutional taint from the discrimination inherent in §§ (b) and (c).

A

The Court offers essentially three responses to the discrimination in the retail gasoline market imposed by the divestiture provisions.^[13] First, the Court says that the discrimination *146 against the class of out-of-state producers and refiners does not violate the Commerce Clause because the State has not imposed similar discrimination against other out-of-state retailers. Ante, at 125-126. This is said to distinguish the present case from Hunt v. Washington Apple Advertising Comm'n. In fact, however, the unconstitutional discrimination in Hunt was not against all out-of-state interests. North Carolina had enacted a statute requiring that apples marketed in closed containers within the State bear "`no grade other than the applicable U. S. grade or standard.'" 432 U. S., at 335. The Commission contended that the provision discriminated against interstate commerce because it prohibited the display of superior Washington State apple grading marks. The Court did not strike down the provision because it discriminated against the marketing techniques of all out-of-state growers. The provision imposed no discrimination on growers from States that employed only the United States Department of Agriculture grading system.^[14] Despite this *147 lack of universal discrimination, the Court declared the provision unconstitutional because it discriminated against a single segment of out-of-state marketers of apples, namely, the Washington State growers who employed the superior grading system. In this regard, the Maryland divestiture provisions are identical to, not distinguishable from, the North Carolina statute in Hunt. Here, the discrimination has been imposed against a segment of the out-of-state retailers of gasoline, namely, those who also