Interstate commercial actors often face regulatory mismatches, which refer to differences in legal regulations between states. Regulatory mismatches are a recurring phenomenon that gives rise to compliance costs and complex legal questions. In a new paper, Michael Knoll, Ruth Mason, and Wolfgang Schön explore regulatory mismatches in the U.S. and EU, focusing on the diverging approaches to market integration and regulatory diversity.

The article begins with an overview of regulatory mismatches in the U.S. and a discussion of the Dormant Commerce Clause, which restricts states from adopting laws that discriminate against or unduly burden interstate commerce. The authors describe that the Constitution also limits the ability of states to apply facially neutral regulations that have protectionist implications (see National Pork Producers Council v. Ross, 2023).

Of course, not all cases are clear-cut. In Pike v. Bruce Church, Inc. (1970), the Supreme Court called for balancing legitimate local public interests against the extent of burden on interstate commerce. Still, most Pike balancing cases revolve around questions of intentional economic protectionism. While Congress can harmonize substantive regulation, it is not expected to do so, and regulatory pluralism is commonly recognized as a key benefit of federalism.

The authors note that the Supreme Court has not consistently ruled on cases involving mismatched regulations. In cases without obvious protectionist intent, which the authors consider the most difficult and interesting, the Court has taken both interventionist and noninterventionist approaches to mismatches. When taking a noninterventionist approach in mismatch cases, the Court typically directs those burdened by regulatory diversity to petition Congress for relief. In other cases, the Court has taken an interventionist approach that formally utilizes Pike balancing by applying a relative evaluation to compare the challenged state’s regulation to those of other states. 

The article then analyzes regulatory mismatches in the EU. The authors review the roles of EU institutions with respect to the EU Internal Market, focusing mostly on the CJEU. Like the Supreme Court, the Court of Justice scrutinizes indirectly discriminatory and even nondiscriminatory barriers that disproportionately affect interstate commerce. Nevertheless, it often demands substantial justification for restrictions on market freedoms. For regulatory mismatches, the authors observe that this judicial review appears more prevalent and stringent than that of the U.S. Supreme Court. EU members are held to a strict standard in justifying their measures, and if a state cannot prove that its actions are necessary and suitable, the Court may rule against it.  Moreover, in the EU, mutual recognition is pivotal for addressing mismatches because it permits businesses to operate across the Internal Market without multiple regulatory requirements. The authors articulate the judicial and legislative application of mutual recognition in depth, clarifying that the concept does not lead to “home rule.” In this context, the authors may consider reflecting on whether the mutual recognition principle warrants greater attention in U.S. law. This juncture could also be an opportunity to outline a normative stance or policy recommendation, if the authors choose.

In summary, the article offers an interesting, thorough, and valuable contribution by highlighting the differences and complexities of regulatory mismatches between the U.S. and EU. The authors conclude that the U.S. Supreme Court and the EU Court of Justice consider common market interests against state regulatory interests. The approaches, however, differ in practice. The U.S. generally prioritizes state autonomy and regulatory pluralism, and the Supreme Court tends to presume legality for destination-state rules that depart from the origin state. In contrast, the EU favors interstate legislative harmonization. The Court of Justice requires the destination state to demonstrate both a legitimate public interest and to prove that the national measure is suitable and necessary to accomplish its policy goal.