Could Beverage Manufacturers End Up Having to Create and Manufacture Separate Containers for Michigan?

Michigan has a law affecting larger beverage manufacturers (including
alcohol manufacturers) that is the subject of some constitutional
litigation.  If the law is upheld, then
yes, you could be forced to change your packaging or face sanctions.

Doubtless, you remember the Seinfeld episode where Kramer
and Newman try to return bottles and cans to Michigan to collect the 10-cent
refund.  In case you forgot, this should
refresh your memory.

To counteract similar ne’er-do-wells, Michigan
enacted a law criminalizing the return of containers by anyone who knows that
no deposit was paid in the state of Michigan on the container.  The penalty is incremental, but the minimum
is up to 93 days in prison or a fine of not more than $1,000.

This failed to stop the problem of people returning
non-Michigan containers.  The state also
wanted to increase revenue by keeping non-Michigan bottles from being returned,
so the state amended the bottle bill to require that Michigan
containers bear a “symbol, mark, or other distinguishing characteristic that is
placed on a designated metal container, designated glass container, or
designated plastic container by a manufacturer to allow a reverse vending
machine to determine if that container is a returnable container.  The mark “must be unique to the state” and
can only be used in Michigan and other states that have similar laws.

The law phased the dates for effectiveness for different
kinds of bottles and as between Michigan’s lower and upper peninsulas (yes, I’m
calling the mit a peninsula too.)  The
law also applies to manufacturers with products selling over 500,000 cases (or
case equivalents in the context of alcohol) or who sell less than 500,000 but
where people have redeemed over 600,000 of the cases (the Seinfeld scam writ
large).  By mid-2011, the law was in full
effect.

The law has provisions for alcohol manufacturers as well as
non-alcohol manufacturers and a person/company violating the act is guilty of a
misdemeanor punishable by up to 180 days imprisonment or a fine of not more
than $2,000 or both.

This law impacts anyone sending a canned or bottled beverage
to Michigan.  The entire
design/layout/label, some portion of the container, needs to have a unique mark
allowing Michigan’s reverse vending machines to distinguish it from
non-Michigan bottles.  So you can
understand the impact. 

Coca-Cola and Miller and Bud and anyone who produces large
quantities of beverages for consumption in Michigan has to have some separate
and distinct “symbol or mark or other distinguishing characteristic” on the
Michigan containers which aren’t on the non-Michigan containers.

The beverage manufacturers have challenged the law in
federal court claiming that it is unconstitutional because it is
extraterritorial and discriminatory in violation of the dormant commerce clause.  A district court disagreed and found in favor
of the state.  The matter was appealed
and the Sixth
Circuit Court of Appeals agreed with the plaintiffs that the law was extraterritorial
in violation of the dormant commerce clause.  You
can read the opinion here.

A statute violates the dormant commerce clause as extraterritorial
if it directly controls commerce occurring wholly outside the boundaries of a
State and exceed the inherent limits of the enacting State’s authority. 

The argument is that because Michigan is requiring a container
or label or mark that can only be used in Michigan, Michigan “has made itself
an economic island withdrawn from the national commerce stream in beverages.”  In essence, Michigan isn’t just saying what
can be sold in Michigan.  By stating that
the mark must be unique to Michigan, it is saying what can’t be sold outside of
Michigan. The Appellate Court agreed and said “Michigan’s unique-mark requirement
not only requires beverage companies to package a product unique to Michigan
but also allows Michigan to dictate where the product can be sold… [the statute
is] in violation of the dormant commerce clause because it impermissibly
regulates interstate commerce by controlling conduct beyond the State of
Michigan.”

The Court recognized that this was a novel issue that the Supreme Court
hadn’t dealt with and perhaps that’s why the three judges each wrote their own
concurring opinion.  A petition to the
Supreme Court is inevitable.  For now,
the application of the law is stayed pending further review.  But if the law is upheld, somehow, anyone
falling into its scheme will be forced to set up a production line for the unique-mark
containers.