APPEAL FROM THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT.
Blackmun, J., delivered the opinion of the Court, in which Brennan, White, Marshall, and Kennedy, JJ., joined, and in Parts I and IV of which Scalia, J., joined. Scalia, J., filed an opinion concurring in part and concurring in the judgment, post, p. 344. Rehnquist, C. J., filed a dissenting opinion, in which Stevens and O'Connor, JJ., joined, post, p. 345.
JUSTICE BLACKMUN delivered the opinion of the Court.
The State of Connecticut requires out-of-state shippers of beer to affirm that their posted prices for products sold to Connecticut wholesalers are, as of the moment of posting, no higher than the prices at which those products are sold in the bordering States of Massachusetts, New York, and Rhode Island. In these appeals, we are called upon to decide whether Connecticut's beer-price-affirmation statute violates the Commerce Clause.*fn1
Although appellees challenge Connecticut's beer-price-affirmation statute as amended in 1984, this litigation has its roots in the 1981 version of Connecticut's price-affirmation scheme. Having determined that the domestic retail price of beer was consistently higher than the price of beer in the three bordering States, and with the knowledge that, as a result, Connecticut residents living in border areas frequently crossed state lines to purchase beer at lower prices, Connecticut enacted a price-affirmation statute tying Connecticut beer prices to the prices charged in the border States. See United States Brewers Assn., Inc. v. Healy, 532 F. Supp. 1312, 1314, 1316-1317 (Conn. 1982). In an effort to eliminate the price differential between Connecticut and the border States, Connecticut required that brewers and importers (out-of-state shippers)*fn2 post bottle, can, and case prices for
each brand of beer to be sold in Connecticut. Id., at 1317. These posted prices would take effect on the first day of the following month and would continue without change for the rest of that month. Conn. Gen. Stat. Ann. § 30-63(c) (1975 and Supp. 1982). The 1981 statute further required that out-of-state shippers affirm under oath at the time of posting that their posted prices were and would remain no higher than the lowest prices they would charge for each beer product in the border States during the effective period. § 30-63b(b), quoted in 532 F. Supp., at 1314, n. 3. Moreover, in calculating the lowest price offered in the border States, the statute deducted from the reported price the value of any rebates, discounts, special promotions, or other inducements that the out-of-state shippers offered in one or more of the border States.*fn3 § 30-63c(b), quoted in 532 F. Supp., at 1314, n. 4. To the extent that such inducements lowered border-state prices, the statute thus obligated out-of-state shippers to lower their Connecticut prices as well.*fn4
In 1982, a brewers' trade association and various beer producers and importers (a subset of the appellees in the instant litigation) filed suit in the United States District Court for the District of Connecticut, challenging the 1981 statute as
unconstitutional under the Commerce Clause. The District Court, relying primarily on this Court's decision in Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U.S. 35 (1966), upheld the 1981 law. United States Brewers Assn., Inc. v. Healy, 532 F. Supp., at 1325-1326. The Court of Appeals, however, reversed. It held that the 1981 Connecticut statute was facially invalid under the Commerce Clause because it had the practical effect of prohibiting out-of-state shippers from selling beer in any neighboring State in a given month at a price below what it had posted in Connecticut at the start of that month. The court explained: "Nothing in the Twenty-first Amendment permits Connecticut to set the minimum prices for the sale of beer in any other state, and well-established Commerce Clause principles prohibit the state from controlling the prices set for sales occurring wholly outside its territory." United States Brewers Assn., Inc. v. Healy, 692 F.2d 275, 282 (CA2 1982) (Healy I). This Court summarily affirmed. 464 U.S. 909 (1983).
In 1984, the Connecticut Legislature responded to Healy I by amending its beer-price-affirmation statute to its current form. The statute now requires out-of-state shippers to affirm that their posted prices are no higher than prices in the border States only at the time of the Connecticut posting. Conn. Gen. Stat. § 30-63b(b) (1989).*fn5 The legislature also
added § 30-63b(e), which provides that nothing in § 30-63b prohibits out-of-state shippers from changing their out-of-state prices after the affirmed Connecticut price is posted.*fn6 The legislature, however, did not amend § 30-63a(b), which continued to make it unlawful for out-of-state shippers to sell beer in Connecticut at a price higher than the price at which beer is or would be sold in any bordering State during the month covered by the posting.*fn7
In the wake of the 1984 amendments, appellees (a brewers' trade association and major producers and importers of beer) filed suit in the United States District Court for the District of Connecticut, seeking declaratory and injunctive relief and claiming that the effect of the amended law was not different from that of the law struck down in Healy I.*fn8 See United States Brewers Assn. v. Healy, 669 F. Supp. 543, 544-545 (1987). In response to appellees' complaint, Connecticut filed a "Declaratory Ruling" by the Department of Liquor Control, interpreting the statute as amended as requiring out-of-state shippers to affirm that their posted prices in Connecticut were no higher than their lowest prices in any
border State only at the time of posting -- the sixth day of each month. Id., at 547, and n. 9. After the moment of posting, the ruling stated, the statute imposes no restrictions on the right of out-of-state shippers to raise or lower their border-state prices at will. Ibid.
Appellees argued, however, that the Connecticut beer-affirmation statute, even as modified by the declaratory ruling, regulated out-of-state transactions, constituted economic protectionism, and unduly burdened interstate commerce, all in violation of the Commerce Clause. On cross-motions for summary judgment, the District Court upheld the statute as modified by the legislature and construed in the Department of Liquor Control's declaratory ruling, resting its decision on Seagram, supra, and distinguishing this Court's subsequent decision in Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573 (1986), which struck down a statute analogous to Connecticut's 1981 beer-affirmation statute. The District Court found the 1984 Connecticut law constitutional on its face because, "unlike the version in Healy I and Brown-Forman," the 1984 law "leaves brewers free to raise or lower prices in the border states before and after posting in Connecticut and does not, therefore, regulate interstate commerce." 669 F. Supp., at 553.
As in Healy I, the Court of Appeals reversed. It held that the 1984 law (even as interpreted by the declaratory ruling), like its predecessor, violated the Commerce Clause by controlling the prices at which out-of-state shippers could sell beer in other States. First, and foremost, the court held that the Connecticut statute's "purposeful interaction with border-state regulatory schemes" means that shippers cannot, as a practical matter, set prices based on market conditions in a border State without factoring in the effects of those prices on its future Connecticut pricing options. In re Beer Institute, 849 F.2d 753, 760-761 (CA2 1988) (Healy II). Second, the Court of Appeals found that the 1984 statute unconstitutionally restricted the ability of out-of-state shippers
to offer volume discounts in the border States. Id., at 760. Furthermore, relying on Brown-Forman, supra, the court rejected appellants' argument that the statute was a proper exercise of its regulatory authority under the Twenty-first Amendment. 849 F.2d, at 761.
We noted probable jurisdiction. 488 U.S. 954 (1988).
In deciding this appeal, we engage in our fourth expedition into the area of price-affirmation statutes. The Court first explored this territory in Seagram, where it upheld against numerous constitutional challenges a New York statute that required liquor-label owners or their agents to affirm that "'the bottle and case price of liquor . . . is no higher than the lowest price'" at which such liquor was sold "anywhere in the United States during the preceding month." 384 U.S., at 39-40, quoting the New York law. The Court ruled that the mere fact that the New York statute was geared to appellants' pricing policies in other States did not violate the Commerce Clause, because under the Twenty-first Amendment's broad grant of liquor regulatory authority to the States, New York could insist that liquor prices offered to domestic wholesalers and retailers "be as low as prices offered elsewhere in the country." Id., at 43. Although the appellant brand owners in Seagram had alleged that the New York law created serious discriminatory effects on their business outside New York, the Court considered these injuries too conjectural to support a facial challenge to the statute and suggested that the purported extraterritorial effects could be assessed in a case where they were clearly presented. Ibid.
Eighteen years after Seagram, we summarily affirmed the Second Circuit's judgment in Healy I, and then, another two years later, granted plenary review in Brown-Forman, supra. The New York law at issue in Brown-Forman required every liquor distiller or producer selling to wholesalers within the State to affirm that the prices charged for
every bottle or case of liquor were no higher than the lowest price at which the same product would be sold in any other State during the month covered by the particular affirmation. 476 U.S., at 576. Appellant Brown-Forman was a liquor distiller that offered "promotional allowances" to wholesalers purchasing Brown-Forman products. The New York Liquor Authority, however, did not allow Brown-Forman to operate its rebate scheme in New York and, moreover, determined for the purposes of the affirmation law that the promotional allowances lowered the effective price charged to wholesalers outside New York. Because other States with affirmation laws similar to New York's did not deem the promotional allowances to lower the price charged to wholesalers, appellant argued that the New York law offered the company the Hobson's choice of lowering its New York prices, thereby violating the ...