The term “market participant” refers to a US state that buys, produces or sells goods in the market. The US Supreme Court has defined this term in relation to the commerce clause of the constitution, which prohibits states from passing laws that unduly restrict interstate commerce. When a state acts as a market operator and not a regulator, it has the right to engage or avoid customers or suppliers as it sees fit.
Market participant may refer to a US state that buys, produces or sells goods in the market, rather than acting as a regulator. This term has developed a special definition in US constitutional law. The United States Supreme Court, in applying the commerce clause of the constitution in 1980, had to decide whether a state cement plant could offer preferential terms to state-resident buyers and less favorable terms to non-residents. By defining the state as a market operator in that case, the court ensured that the term had a precise legal meaning in applying the commerce clause to subsequent cases involving states.
Interstate commerce was considered so important to the nation’s prosperity that its impact was specifically reserved for the federal government in Article I of the United States Constitution. Enforcement of this clause prohibits states from passing any law that unduly restricts interstate commerce. National law under the Constitution was designed to protect all states equally and to reserve the ability for the federal government to pass laws affecting rights and obligations between states. This was to ensure the harmonious development of the country, so that states would not be able to operate as mini fiefdoms, passing exclusionary laws benefiting state residents and burdening out-of-state residents.
Normally, a state regulates trade within its borders. Applying the Commerce Clause to this situation would test whether or not the state applied the regulation uniformly to both state-owned and out-of-state enterprises. In some cases, however, the state is the actual buyer, producer or seller of the goods. The US Supreme Court had to decide whether there was a distinction between the state as regulator and the state as a market maker, or entrepreneur, for purposes of the commerce clause.
For example, a state might be a market participant by acting as a purchaser of contracted services to construct a government office building. A state can also act as a market player by selling academic services through state universities. In both cases, the state offers state-owned enterprises or residents preferential treatment.
The US Supreme Court has looked into this issue and said there is a distinction between when the state acts as a regulator and when it acts as a private business. As a market operator and not a regulator, the spending of state funds can be considered the same as any private enterprise that has the right to determine how it spends its money. The court held that states have the right to engage or avoid customers or suppliers as they see fit when the state is a market player.
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