Online Merchants Guild v. Daniel Cameron ( 2021 )

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 21a0096p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
ONLINE MERCHANTS GUILD, ┐
Plaintiff-Appellee, │
│
> No. 20-5723
v. │
│
│
DANIEL J. CAMERON, in his official capacity as │
Attorney General of Kentucky, │
Defendant-Appellant. │
┘
Appeal from the United States District Court
for the Eastern District of Kentucky at Frankfort.
No. 3:20-cv-00029—Gregory F. Van Tatenhove, District Judge.
Argued: March 10, 2021
Decided and Filed: April 29, 2021
Before: BATCHELDER, MOORE, and BUSH, Circuit Judges.
_________________
COUNSEL
ARGUED: Matthew F. Kuhn, OFFICE OF THE KENTUCKY ATTORNEY GENERAL,
Frankfort, Kentucky, for Appellant. Aaron K. Block, THE BLOCK FIRM LLC, Atlanta,
Georgia, for Appellee. ON BRIEF: Matthew F. Kuhn, Brett R. Nolan, Victor B. Maddox,
OFFICE OF THE KENTUCKY ATTORNEY GENERAL, Frankfort, Kentucky, for Appellant.
Aaron K. Block, THE BLOCK FIRM LLC, Atlanta, Georgia, Paul S. Rafelson, RAFELSON
SCHICK, PLLC, Boca Raton, Florida, Mark A. Gilbert, DEATHERAGE, MYERS & LACKEY,
Hopkinsville, Kentucky, for Appellee. Sarah A. Hunger, OFFICE OF THE ILLINOIS
ATTORNEY GENERAL, Chicago, Illinois, Christopher E. Ondeck, Jennifer E. Tarr,
PROSKAUER ROSE LLP, Washington, D.C., Kelly Landers Hawthorne, Chantel L. Febus,
PROSKAUER ROSE LLP, New York, New York, for Amici Curiae.
No. 20-5723 Online Merchants Guild v. Cameron Page 2
_________________
OPINION
_________________
KAREN NELSON MOORE, Circuit Judge. Early in the COVID-19 pandemic, some
sought to capitalize on consumers’ fear and uncertainty by charging outrageous prices for hand
sanitizer, disinfecting wipes, masks, and other cleaning and protective products. In response, the
Commonwealth of Kentucky’s Attorney General, Daniel J. Cameron, announced that his office
would enforce the Commonwealth’s price-gouging laws against Kentucky businesses involved in
such schemes. True to his word, the Attorney General opened civil price-gouging investigations
into various Kentucky-based merchants, including at least one member of Plaintiff Online
Merchants Guild (the “Guild”) that was selling goods to Kentuckians through Amazon’s online
marketplace.
The Guild brought suit against Attorney General Cameron to challenge the
constitutionality of Kentucky’s price-gouging laws as applied to sellers on Amazon, invoking,
among other things, the extraterritoriality doctrine of the dormant commerce clause. Accepting
that the Attorney General sought only to enforce the Commonwealth’s price-gouging laws
against Kentucky-based sellers in connection with sales to Kentucky consumers through
Amazon’s platform, the district court nevertheless granted the Guild’s motion for a preliminary
injunction, concluding that enforcing the laws in connection with Amazon sales would have
impermissible extraterritorial effects. Because we conclude that the Attorney General’s
enforcement of Kentucky’s price-gouging laws in this fashion is unlikely to run afoul of the
dormant commerce clause’s extraterritoriality doctrine, we VACATE the preliminary injunction
and REMAND for further proceedings.
No. 20-5723 Online Merchants Guild v. Cameron Page 3
I. BACKGROUND
A. Amazon’s Online Marketplace and the Guild
Because the district court’s analysis depended on the structure of Amazon’s online
marketplace, a brief overview is in order.1 Amazon is an eCommerce website that offers goods
for sale via the internet and is “responsible for over 50% of all eCommerce sales in the [United
States].” R. 10-1 (Rafelson Decl. at ¶ 15) (Page ID #64). It operates by contracting with third-
party sellers, which supply the goods to Amazon, which in turn sells the products to consumers.
See id. at ¶¶ 9–10, 16 (Page ID #62, 64). Thus, according to the Guild, the third-party sellers
“are not in privity of contract with Amazon’s customers; Amazon is.” Id. at ¶ 16 (Page ID #64).
Most notably for present purposes, Amazon operates as a national online marketplace. It
allegedly sets a single, national price for goods, and third-party sellers cannot choose to have
their goods withheld from consumers in particular states. Id. at ¶¶ 12–14 (Page ID #63–64).
Third-party sellers propose a price for their goods, but it is Amazon that has final authority as to
whether to accept or reject that price. Id. at ¶ 14 (Page ID #63–64).
The Guild “is a trade association for online merchants,” such as Amazon’s third-party
sellers. Id. at ¶ 3 (Page ID #60). The Guild’s purpose “is to advocate for a free and fairly-
regulated online marketplace, and for the interests of online merchants.” Id. According to the
Guild, “Amazon’s store is . . . a critically important sales channel for online merchants.” Id. at
¶ 8 (Page ID #62).
B. Kentucky’s Price-Gouging Laws
The Commonwealth has two statutes that address price gouging. The first—and the more
direct of the two—is Kentucky Revised Statutes § 367.374, which is triggered when the
Governor or the United States Department of Homeland Security declares a state of emergency.
1The factual record regarding Amazon’s functioning comes exclusively from the declaration of the Guild’s
executive director. The Attorney General accepts these representations at this stage, but states that “[t]he Guild’s
averments will be thoroughly tested during discovery.” Appellant’s Br. at 7 n.5.
No. 20-5723 Online Merchants Guild v. Cameron Page 4
§ 367.374(1)(a). Once triggered,2 the statute prohibits any person from selling, renting, or
offering to sell specified goods—including “[g]oods . . . used for emergency cleanup,”
“[e]mergency supplies,” and “[m]edical supplies”—“for a price which is grossly in excess of the
price prior to the declaration and unrelated to any increased cost to the seller.” § 367.374(1)(b).
The statute includes safe-harbor provisions that preclude liability where, for example, the price is
(1) ten percent (or less) above the pre-declaration price for the good; (2) ten percent (or less)
above “costs and normal markup” for the good; or (3) “[g]enerally consistent with fluctuations in
applicable commodity, regional, national, or international markets, or seasonal fluctuations.”
§ 367.374(1)(c).
The second applicable statute is the Kentucky Consumer Protection Act, which prohibits
“[u]nfair, false, misleading, or deceptive acts or practices in the conduct of any trade or
commerce.” Ky. Rev. Stat. § 367.170. The statute defines “unfair . . . to mean unconscionable.”
§ 367.170(2). “[T]rade” and “commerce,” as used in the statute, mean “the advertising, offering
for sale, or distribution of any . . . property . . . and shall include any trade or commerce directly
or indirectly affecting the people of this Commonwealth.” Ky. Rev. Stat. § 367.110(2).
Kentucky law empowers the Attorney General to initiate civil investigations into
suspected price gouging when he “has reason to believe” that a violation has occurred, is
occurring, or will occur. See Ky. Rev. Stat. §§ 367.240(1), 367.378. Consistent with this
authority, the Attorney General may compel the production of documentation or testimony
regarding the subject matter of the investigation through subpoenas and civil investigative
demands (“CIDs”). Ky. Rev. Stat. §§ 367.240(1), 367.250. The Attorney General may also
petition a state court for a restraining order where doing so would be in the public interest and he
has reason to believe a violation has occurred, is occurring, or will occur. See Ky. Rev. Stat.
§ 367.190(1). Those found to have committed a price-gouging violation face civil monetary
penalties and private damages actions. See Ky. Rev. Stat. §§ 367.220, 367.378, 367.990.
2At this time, the Guild does not contest that an emergency order triggering the statute’s protections was in
place at all relevant times.
No. 20-5723 Online Merchants Guild v. Cameron Page 5
C. The Attorney General’s Response to Suspected Price Gouging
On March 26, 2020, in response to complaints by Kentucky consumers of price gouging
involving N95 masks and other essential goods by third-party sellers on Amazon—including
markups of up to 1,951%—Kentucky’s Attorney General publicly announced that “[t]he
egregious actions of these third-party sellers will not be tolerated in Kentucky.” Elizabeth Kuhn,
Attorney General Cameron Issues Subpoenas to Amazon Third-Party Sellers for Price Gouging
During COVID-19 Pandemic (March 26, 2020), https://kentucky.gov/Pages/Activity-
stream.aspx?n=AttorneyGeneral&prId=888 (last visited April 28, 2021). This was not just tough
talk; the Attorney General issued subpoenas to six Kentucky-based sellers “who used Amazon’s
online platform to engage in suspected price gouging during the [COVID-19] pandemic” and
stated in a press release that the subpoenas “should serve as a warning to anyone who tries to
illegally profit from COVID-19.” Id.
Among the Kentucky-based sellers that drew the Attorney General’s attention regarding
suspected price-gouging was a member of the Guild, Jones & Panda, LLC (“Jones & Panda”).
R. 22-3 (Cocanougher Ltr. at 1) (Page ID #179). On March 25, 2020, the Attorney General sent
a letter informing Jones & Panda that he was opening a price-gouging investigation into its
pricing of hand sanitizer and respirators on Amazon. Id.3 “In furtherance of [his] investigation,”
id., the Attorney General served Jones & Panda with a subpoena and CID stating that he had
“reason to believe that a person has engaged in, is engaging in, or is about to engage in” an
unlawful act under Kentucky’s price-gouging laws, R. 22-4 (CID at 1) (Page ID #181). The CID
requested pricing, sales, and cost data for hand sanitizer and respirators offered on Amazon
between February 15, 2020 and March 25, 2020, along with documentation and records
regarding the sales or justifying any price increases. See id., Att. at 2–3 (Page ID #184–85).
Rather than comply with the CID, Jones & Panda petitioned in state court to have the CID set
aside or modified. See R. 34-3 (First Am. Pet. at 1) (Page ID #393).
3The letter erroneously refers to “the Commonwealth’s price-gouging laws set forth in Kentucky Revised
Statutes (KRS) 367.372 to 367.368.” R. 22-3 (Cocanougher Ltr. at 1) (Page ID #179) (emphasis added). The end of
that range should be “367.378” as it appears in the CID that accompanied the letter. See R. 22-4 (CID at 1) (Page ID
#181).
No. 20-5723 Online Merchants Guild v. Cameron Page 6
D. This Lawsuit
The Guild initiated this suit on May 1, 2020, seeking through injunctive and declaratory
relief to prevent the Attorney General from enforcing § 367.374 and § 367.170 against the
Guild’s members. See R. 1 (Compl. at ¶ 65) (Page ID #16).4 It alleges that the application (or
threatened application) of Kentucky’s price-gouging laws to members of the Guild for sales on
Amazon violated the dormant commerce clause, the Due Process Clause, and the First
Amendment. Id. at ¶¶ 48–64 (Page ID #14–16). After a series of briefings and telephonic
hearings, the district court granted the Guild’s motion for a preliminary injunction and enjoined
the Attorney General from “applying KRS § 367.170 and KRS § 367.374, including by
subpoena, investigation, or prosecution, to Amazon suppliers in connection with offers or sales
on Amazon.” Online Merchants Guild v. Cameron, 468 F. Supp. 3d 883, 904 (E.D. Ky. 2020).
In doing so, the district court concluded that the Guild was likely to succeed on the merits of its
dormant commerce clause claim—invoking the clause’s extraterritoriality doctrine to find a per
se violation—and that it was likely to establish standing to pursue its challenge. Id. at 891–902.
The district court did not address the Guild’s other constitutional claims. This timely
interlocutory appeal followed.
II. DISCUSSION
“While the ultimate decision to grant or deny a preliminary injunction is reviewed for an
abuse of discretion, we review the district court’s legal conclusions de novo and its factual
findings for clear error.” Obama for Am. v. Husted, 697 F.3d 423, 428 (6th Cir. 2012). To
obtain a preliminary injunction, “[a] plaintiff . . . must establish that he is likely to succeed on the
merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the
balance of equities tips in his favor, and that an injunction is in the public interest.” Winter v.
NRDC, 555 U.S. 7, 20 (2008). Here, the district court abused its discretion in granting the
Guild’s motion for a preliminary injunction because it “improperly applied the governing law,”
Obama for Am., 697 F.3d at 428 (quoting Mascio v. Pub. Emps. Ret. Sys. of Ohio, 160 F.3d 310,
4At various points in its complaint the Guild erroneously refers to Kentucky Revised Statutes § 367.364
instead of § 367.374. See, e.g., R. 1 (Compl. at ¶ 25) (Page ID #8).
No. 20-5723 Online Merchants Guild v. Cameron Page 7
312 (6th Cir. 1998)), namely, the dormant commerce clause’s extraterritoriality doctrine, to
conclude that the Guild is likely to succeed on the merits.
A. Likelihood of Success on the Merits
The State Attorney General attacks on two fronts the district court’s conclusion that the
Guild is likely to succeed on the merits of its constitutional challenge to Kentucky’s price-
gouging laws. First, the Attorney General argues that the Guild is unlikely to establish standing,
such that it is unlikely even to reach the merits in the first place. Second, the Attorney General
argues that its enforcement of the Commonwealth’s price-gouging laws against Kentucky-based
sellers in connection with Amazon sales to Kentucky consumers does not offend the
extraterritoriality doctrine of the dormant commerce clause. Although we agree with the district
court that the Guild is likely to establish standing, we hold that it erred in concluding that the
Guild is likely to succeed on its extraterritoriality doctrine claim. See id. (“The district court’s
determination that a plaintiff is likely to succeed on the merits is a question of law that we review
de novo.”).
1. Standing
To succeed on the merits, a party must first reach the merits, and to do so it must
establish standing. Thus, a preliminary injunction is warranted only where the party seeking
relief is likely to establish: (1) an injury in fact; (2) traceability; and (3) redressability. Spokeo,
Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016); Waskul v. Washtenaw Cnty. Cmty. Mental Health,
900 F.3d 250, 256 n.4 (6th Cir. 2018). The injury must be “concrete and particularized” and
“actual or imminent, not conjectural or hypothetical.” Spokeo, 136 S. Ct. at 1548 (quoting Lujan
v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). Where, as here, injunctive relief is sought, “a
plaintiff must show actual present harm or a significant possibility of future harm in order to
demonstrate the need for pre-enforcement review.” Nat’l Rifle Ass’n of Am. v. Magaw, 132 F.3d
272, 279 (6th Cir. 1997). The Guild argues that it is likely to establish standing to sue on its own
behalf and also on behalf of its members. See MX Grp., Inc. v. City of Covington, 293 F.3d 326,
332–33 (6th Cir. 2002) (“An association or organization may assert standing in one of two ways:
No. 20-5723 Online Merchants Guild v. Cameron Page 8
(1) on its own behalf because it has suffered a palpable injury as a result of the defendants’
actions; or (2) as the representative of its members.”). We agree.
a. Direct Organizational Standing
To establish direct standing to sue in its own right, an organizational plaintiff like the
Guild must demonstrate that the “purportedly illegal action increases the resources the group
must devote to programs independent of its suit challenging the action.” Hous. Opportunities
Made Equal, Inc. v. Cincinnati Enquirer, Inc., 943 F.2d 644, 646 (6th Cir. 1991) (alteration
omitted) (quoting Spann v. Colonial Vill., Inc., 899 F.2d 24, 27 (D.C. Cir. 1990)). We have,
however, rejected assertions of direct organizational standing where an overly speculative fear
triggered the shift in organizational resources. See Memphis A. Philip Randolph Inst. v. Hargett,
978 F.3d 378, 389 (6th Cir. 2020).
The district court found a likelihood that the Guild would establish direct organizational
standing based upon the declaration of its executive director, Paul S. Rafelson. See R. 10-1
(Rafelson Decl. at ¶ 2) (Page ID #60). Rafelson declared that the Guild has “expend[ed]
organizational resources in response to the [Attorney General’s price-gouging] investigation” by
working with members on how best to respond to the subpoenas and CIDs, analyzing “the
complex web of investigations,” and “discuss[ing] open questions with merchants who have not
received subpoenas, but are confused and concerned about what they can and cannot sell online.”
Id. at ¶ 21 (Page ID #65–66). Although Rafelson does not say so explicitly, it can reasonably be
inferred that the Guild was not previously expending resources in this fashion from the fact that
the Attorney General’s investigations triggered the shift in resources. See id. Indeed, at one of
the hearings on the Guild’s motion for a preliminary injunction below, counsel for the Guild
confirmed that, prior to the pandemic (and the Attorney General investigations that followed
closely thereafter), the Guild “spent ‘little to no time’ on price gouging issues.” Online
Merchants Guild, 468 F. Supp. 3d at 893. That comes as little surprise, given that § 367.374 is
enforceable only during declared emergencies and that the unprecedented COVID-19 pandemic
has led to extended emergency declarations. See § 367.374(1)(a).
No. 20-5723 Online Merchants Guild v. Cameron Page 9
Rafelson’s declaration is uncontroverted with respect to the Guild’s shifted resources, and
the facts asserted therein are in line with those where this court has found direct organizational
standing. The Guild diverted resources that could have been expended elsewhere to address the
Attorney General’s price-gouging investigations, and price gouging is an issue that the Guild had
previously spent a negligible amount of time on. See, e.g., Miami Valley Fair Hous. Ctr., Inc. v.
Connor Grp., 725 F.3d 571, 576 (6th Cir. 2013) (diverting staff time and resources to address
purportedly discriminatory housing advertisement); cf. Fair Elections Ohio v. Husted, 770 F.3d
456, 459–60 (6th Cir. 2014) (no direct organizational standing where premised on activities that
would have happened anyway at a “single regularly scheduled meeting”). Moreover, there is no
issue regarding the speculative nature of the harm, given that the Guild’s new price-gouging
activities resulted from subpoenas and CIDs directed at its own membership regarding
activities—online sales—in which its members partake. Cf. Memphis A. Philip Randolph Inst.,
978 F.3d at 389 (no standing for speculative harm). Accordingly, based on the record as it
stands, the Guild is likely to establish direct organizational standing.
The Attorney General’s sole rejoinder is that the Guild cannot point to its recent price-
gouging expenditures to establish direct organizational standing because they fall within its
mission to advocate for the interests of online merchants. To support this argument, he cites
Shelby Advocates for Valid Elections v. Hargett, 947 F.3d 977 (6th Cir.) (per curiam), cert.
denied, 141 S. Ct. 257 (2020), for the sweeping proposition that if an organizational plaintiff’s
new expenditures “are actually part of the organization’s mission, then there is no diversion of
resources and thus no injury-in-fact.” Appellant’s Br. at 14. But Shelby Advocates stands for no
such thing, because that would contradict the various earlier—and thus controlling—cases to the
contrary from this circuit, not to mention Supreme Court precedent, all of which affirm that
within-mission organizational expenditures are enough to establish direct organizational
standing. See, e.g., Miami Valley Fair Hous. Ctr., 725 F.3d at 576 (concluding that an
organization with a mission to “promote fair housing and eliminate housing discrimination” had
direct standing to sue over an allegedly discriminatory housing advertisement); Hous.
Opportunities Made Equal, Inc., 943 F.2d at 646; see also Havens Realty Corp. v. Coleman, 455
U.S. 363, 368, 379 (1982). In Shelby Advocates, we concluded that the voting rights
organization in question lacked standing to seek injunctive relief due to the “speculative” nature
No. 20-5723 Online Merchants Guild v. Cameron Page 10
of its fears that voting irregularities would occur in an upcoming election, applying the rule that
only “certainly impending” future harms can constitute an injury in fact where injunctive relief is
sought. 947 F.3d at 982. So, the opinion’s brief discussion of the organization’s factual claim
that it had to divert funds from its mission did not contribute to the panel’s holding. See id. In
short, Shelby Advocates does not undermine the district court’s correct conclusion that the Guild
is likely to establish direct organizational standing by way of a straightforward application of this
circuit’s (and the Supreme Court’s) longstanding precedent.
b. Representative Standing
Even where an organizational plaintiff lacks standing to sue in its own right, it may sue
on behalf of its members if “its members would otherwise have standing to sue in their own
right, the interests at stake are germane to the organization’s purpose, and neither the claim
asserted nor the relief requested requires the participation of individual members in the lawsuit.”
Friends of the Earth, Inc. v. Laidlaw Env’t Servs. (TOC), Inc., 528 U.S. 167, 181 (2000). The
district court concluded that Jones & Panda—the Guild member that received the Attorney
General’s price-gouging subpoena and CID—would be able to sue in its own right, a conclusion
that the Attorney General contests. There is no question that the Guild otherwise satisfies the
requirements of representative standing: addressing price gouging as it relates to eCommerce
falls within the scope of the Guild’s mission, “to advocate for a free and fairly-regulated online
marketplace,” R. 10-1 (Rafelson Decl. at ¶ 3) (Page ID #60), and the constitutional claims
asserted and injunctive relief sought do not require Jones & Panda’s participation.
Because the Guild’s assertion of Jones & Panda’s standing to sue is based on Jones &
Panda’s receipt of the Attorney General’s subpoena and CID, this case implicates the rules for
pre-enforcement challenges, where it is the “threatened enforcement of a law” that is said to
create an injury in fact. Susan B. Anthony List v. Driehaus, 573 U.S. 149, 158 (2014). In such
cases, the plaintiff establishes a sufficiently imminent injury where it has “an intention to engage
in a course of conduct arguably affected with a constitutional interest, but proscribed by a statute,
and there exists a credible threat of prosecution thereunder.” Id. at 159 (quoting Babbitt v. Farm
Workers, 442 U.S. 289, 298 (1979)).
No. 20-5723 Online Merchants Guild v. Cameron Page 11
The first requirement for pre-enforcement standing—intent “to engage in a course of
conduct arguably affected with a constitutional interest, but proscribed by statute,” id. (quoting
Babbitt, 442 U.S. at 298)—is met here. Jones & Panda is engaged in commercial activity
through Amazon’s national (interstate) marketplace. R. 33-1 (Jones Decl. at ¶ 4) (Page ID
#253). This conduct, which Jones & Panda hopes to continue, see id. at ¶ 9 (Page ID #254), is
affected with a constitutional interest because the dormant commerce clause protects commercial
actors against discriminatory, extraterritorial, and unduly burdensome state regulations of
interstate commerce. See Alexis Bailly Vineyard, Inc. v. Harrington, 931 F.3d 774, 778 (8th Cir.
2019) (citing Or. Waste Sys., Inc. v. Dep’t of Env’t Quality of Or., 511 U.S. 93, 99 (1994)).
Furthermore, Jones & Panda’s online sales are arguably proscribed by Kentucky’s price-gouging
laws. See Susan B. Anthony List, 573 U.S. at 159. Indeed, the subpoena and CID that Jones &
Panda received asserted that the Attorney General had “reason to believe that a person has
engaged in, is engaging in, or is about to engage in” unlawful acts under the Commonwealth’s
price-gouging laws. R. 22-4 (CID at 1) (Page ID #181); see Susan B. Anthony List, 573 U.S. at
163 (“Nothing in this Court’s decisions requires a plaintiff who wishes to challenge the
constitutionality of a law to confess that he will in fact violate that law.”).
The Attorney General does not dispute that Jones & Panda’s commercial activity is
affected with a constitutional interest or arguably proscribed by the Commonwealth’s price-
gouging laws, but instead, by minimizing the subpoena and CID, argues that Jones & Panda is
not subject to a “credible threat of prosecution.” See Susan B. Anthony List, 573 U.S. at 159.
Various factors inform our analysis of whether there is a credible threat of prosecution sufficient
to confer standing: (1) “a history of past enforcement against the plaintiffs or others”;
(2) “enforcement warning letters sent to the plaintiffs regarding their specific conduct”; (3) “an
attribute of the challenged statute that makes enforcement easier or more likely, such as a
provision allowing any member of the public to initiate an enforcement action”; and (4) the
“defendant’s refusal to disavow enforcement of the challenged statute against a particular
plaintiff.” McKay v. Federspiel, 823 F.3d 862, 869 (6th Cir. 2016). These McKay factors are
not exhaustive, nor must each be established. See id. (noting that this court has held there to be
standing where “some combination” of the factors are present). We address each in turn.
No. 20-5723 Online Merchants Guild v. Cameron Page 12
History of Enforcement. Although the record does not establish a particularly significant
history of enforcement for the Commonwealth’s price-gouging laws, this first factor carries little
weight here. Because § 367.374 is enforceable only during a declared emergency, it makes sense
that there would be at best limited evidence of a history of enforcement. In any case, there is at
least some evidence of past enforcement actions, not to mention the other subpoenas and CIDs
that the Attorney General issued in 2020. See Commonwealth ex rel. Conway v. Wingate, No.
2009-SC-000324-MR, 2010 WL 252251 (Ky. Jan. 21, 2010) (regarding a discovery dispute in a
civil price-gouging action brought by the Attorney General related to gasoline sales after
Hurricane Katrina); Marathon Petroleum Co. v. Stumbo, 528 F. Supp. 2d 639, 643 (E.D. Ky.
2007) (dismissing, on abstention grounds, a suit against the Attorney General seeking to enjoin
enforcement of Kentucky’s price-gouging laws because of a pending civil enforcement action).
Warning Letters. The second factor favors the Guild. The Attorney General sent Jones
& Panda a subpoena and CID regarding suspected price gouging. Although these materials were
formally part of the investigative process and stopped short of asserting that Jones & Panda in
fact committed price gouging, the subpoena also represents that the Attorney General has
“reason to believe” that a violation of Kentucky’s price-gouging laws has occurred or will occur.
See R. 22-4 (CID at 1) (Page ID #181). To downplay the significance of the subpoena and CID,
the Attorney General points to Kiser v. Reitz, 765 F.3d 601, 609 (6th Cir. 2014), and Berry v.
Schmitt, 688 F.3d 290, 297 (6th Cir. 2012), both of which involve warning letters that
specifically stated that the recipient had been found in violation of the challenged regulation.
According to the Attorney General, the CID here, which stops short of finding a violation has
occurred, is “nothing like” the warning letters in Kiser and Berry and thus Jones & Panda lacks a
credible fear of prosecution. Appellant’s Br. at 20. But the Attorney General’s argument makes
a logical error; the letters in those cases may have been more threatening than the subpoena and
CID here, but it does not follow that the subpoena and CID negate the credibility of Jones &
Panda’s fear of prosecution. Indeed, this court has held there to be standing for a pre-
enforcement challenge without any warning letter or similar specific correspondence whatsoever.
See Platt v. Bd. of Comm’rs on Grievances & Discipline of Ohio Supreme Court, 769 F.3d 447,
452 (6th Cir. 2014). Thus, the Attorney General’s subpoena and CID, directed to Jones & Panda
No. 20-5723 Online Merchants Guild v. Cameron Page 13
specifically and with “reason to believe” a price-gouging violation had or was likely to occur,
support the conclusion that Jones & Panda has a “credible” fear of enforcement.
Statutory Attributes. As for the third factor—attributes of the law that would make
enforcement more likely—it cuts both ways, but still slightly favors the Guild. As the Attorney
General concedes, private plaintiffs may bring a damages action to remedy price-gouging
violations, which increases the likelihood that Guild members will have to defend against price-
gouging suits. Appellant’s Br. at 25; see Ky. Rev. Stat. §§ 367.220, 367.378; Platt, 769 F.3d at
452 (threat of enforcement credible where “any person—not just a prosecutor or state agency—
may initiate enforcement”). And although § 367.374 employs various safe harbors that preclude
liability if an enforcement action materializes, this does not preclude enforcement actions and the
associated costs that the Guild’s members would incur in cases where the Attorney General’s
investigative actions are inconclusive. In any case, this factor is most probative in cases without
an express threat of enforcement, and so it is less weighty here given that the Attorney General
has already targeted Jones & Panda specifically with a subpoena and CID. Cf. Platt, 769 F.3d at
452.
Disavowed Enforcement. Finally, the fourth factor strongly favors the Guild. The
Attorney General has not disavowed enforcement with respect to Jones & Panda. To the
contrary, he has vigorously litigated enforcement of the Jones & Panda subpoena and CID in
state court. See Online Merchants Guild, 468 F. Supp. 3d at 898 (considering whether abstention
under Younger v. Harris, 401 U.S. 37 (1971), was appropriate because of the state court
proceedings); R. 34-2 (Mot. to Enforce at 1–2) (Page ID #378–79). Moreover, the Attorney
General has engaged in significant posturing regarding his price-gouging investigations in public
comments. For example, the Attorney General denounced “[t]he egregious actions of” third-
party sellers suspected of price gouging, which “will not be tolerated in Kentucky,” and warned
that the subpoenas and CIDs “should serve as a warning to anyone who tries to illegally profit
from COVID-19.” Kuhn, supra, Attorney General Cameron Issues Subpoenas. Indeed, as the
Guild points out, the Attorney General made use of “drug bust imagery” in a public appearance
by posing with hand sanitizer, disinfecting wipes, and other products recovered from a suspected
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price-gouging investigation.5 Appellee’s Br. at 7. Especially with regard to the Attorney
General’s public comments and appearances, his actions have undercut his arguments here,
which seek to minimize the subpoenas and CIDs as preliminary, investigatory actions unlikely to
lead to enforcement.
In sum, the McKay factors demonstrate that Jones & Panda’s fear of prosecution is far
from “imaginary or wholly speculative.” Susan B. Anthony List, 573 U.S. at 160 (quoting
Babbitt, 442 U.S. at 302). Although not all of the factors are present here in strength, this court’s
precedent is clear that a threat of prosecution can be sufficiently “credible” for the purposes of
establishing an injury in fact in circumstances such as these. See Platt, 769 F.3d at 452. Thus,
the Guild is likely to establish that one of its members—Jones & Panda—has suffered an injury
in fact. Because Jones & Panda would have no difficulty demonstrating that this injury can be
traced directly to the Attorney General’s enforcement of Kentucky’s price-gouging laws and that
injunctive relief would redress the injury, the Guild is likely to establish standing on its
member’s behalf. See Spoeko, 136 S. Ct. at 1547. Thus, the Guild is likely to be able to proceed
to the merits of its constitutional claims, which we turn to now.
2. Extraterritoriality
The Commerce Clause’s grant to Congress of the authority to “regulate Commerce with
foreign Nations, and among the several States,” U.S. Const. art. I, § 8, cl. 3, connotes an
unspoken limit on state authority “to enact laws imposing substantial burdens on
such commerce,” Int’l Dairy Foods Ass’n v. Boggs, 622 F.3d 628, 644 (6th Cir. 2010) (quoting
S.–Cent. Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87 (1984)). To address claims brought
under this “dormant” feature of the Commerce Clause, we typically employ a “two-tiered
analysis.” Id. At the first tier, the court must determine whether the challenged state law is
(virtually) per se invalid, because either it discriminates against interstate commerce, favors in-
state interests, or regulates extraterritorially. Id.; Am. Beverage Ass’n v. Snyder, 735 F.3d 362,
5See Lawrence Smith, Kentucky, Tennessee authorities seize 17,000 bottles of hand sanitizer in alleged
price gouging scheme, WDRB (updated April 28, 2020), https://www.wdrb.com/news/kentucky-tennessee-
authorities-seize-17-000-bottles-of-hand-sanitizer-in-alleged-price-gouging-scheme/article_cd56f5e0-6ac7-11ea-
bf6b-ff9ce788c5be.html (last visited March 22, 2021).
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369–70 (6th Cir. 2013). If the state law is not discriminatory or impermissibly extraterritorial,
then the second tier comes into play, and “the court must apply the balancing test established in
Pike [v. Bruce Church, Inc., 397 U.S. 137 (1970)]. Under the Pike balancing test, a state
regulation is upheld unless the burden it imposes upon interstate commerce is clearly excessive
in relation to the putative local benefits.” Am. Beverage, 735 F.3d at 370 (internal quotation
marks omitted). Thus, although there are two tiers to our dormant commerce clause analysis,
there are three sorts of dormant commerce clause claims: (1) claims that a state regulation
discriminates in favor of state interests or against interstate commerce; (2) claims that a state law
regulates extraterritorially; and (3) claims that a state regulation, although not discriminatory or
impermissibly extraterritorial, unduly burdens interstate commerce. See id.; Int’l Dairy,
622 F.3d at 644.
We are concerned here with the second of those categories—extraterritoriality—which
was the sole basis for the district court’s conclusion that the Guild was likely to succeed on the
merits of its challenge to the constitutionality of Kentucky’s price-gouging laws. Although
extraterritoriality cases are rarer than others invoking the dormant commerce clause, see Energy
& Env’t Legal Inst. v. Epel, 793 F.3d 1169, 1172 (10th Cir. 2015) (Gorsuch, J.) (describing
extraterritoriality as “the most dormant” strand of dormant commerce clause doctrine), we
distilled the essence of such a claim in American Beverage, explaining that “[a] statute is
extraterritorial,” and thus per se invalid under the dormant commerce clause, “if it ‘directly
controls commerce occurring wholly outside the boundaries of a State [and] exceeds the inherent
limits of the enacting State’s authority.’” 735 F.3d at 373 (quoting Healy v. Beer Inst. Inc.,
491 U.S. 324, 336 (1989)). Put in terms of the Supreme Court’s most recent occasion to address
the extraterritoriality doctrine, a state law is invalid if it controls wholly out-of-state commerce
“by its express terms or by its inevitable effect.” Pharm. Research & Mfrs. of Am. v. Walsh,
538 U.S. 644, 669 (2003) (quoting Pharm. Research & Mfrs. of Am. v. Concannon, 249 F.3d 66,
81–82 (1st Cir. 2001), aff’d sub nom. Pharm. Research & Mfrs. of Am., 538 U.S. 644).
To conduct our extraterritoriality inquiry, we ask “whether the ‘practical effect of the regulation
is to control conduct beyond the boundaries of the State.’” Am. Beverage, 735 F.3d at 373
(quoting Healy, 491 U.S. at 336). In doing so, we “not only consider[] the consequences of the
statute itself, but also ‘how the challenged statute may interact with the legitimate regulatory
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regimes of other States and what effect would arise if not one, but many or every, State adopted
similar legislation.’” Id. (quoting Healy, 491 U.S. at 336). Broadly speaking, “[t]he principles
guiding this assessment . . . reflect the Constitution’s special concern both with the maintenance
of a national economic union unfettered by state-imposed limitations on interstate commerce and
with the autonomy of the individual States within their respective spheres.” Healy, 491 U.S. at335–36 (footnote omitted).
The district court thought that Kentucky’s price-gouging laws likely violate the dormant
commerce clause because their enforcement against third-party sellers on Amazon would “have
the inevitable effect of regulating the price charged outside of Kentucky. In other words, the
Attorney General’s actions effectively dictate the price of items for sale on Amazon nationwide.”
Online Merchants Guild, 468 F. Supp. 3d at 901. The district court based this conclusion on the
limitations of Amazon’s marketplace, which does not allow third-party sellers to set state-
specific prices for their goods or to limit sales to consumers in certain states. See id. Rather, as
explained above, third-party sellers propose a national price for their goods, which Amazon can
accept or reject in selling the product to a consumer. See id. Based on this understanding, the
district court reasoned that the enforcement of Kentucky’s price-gouging laws would enable the
Attorney General to set a ceiling on the price of goods supplied by third-party sellers in
Kentucky but sold out of state. See id. To avoid liability, the third-party seller would have to
propose a lower price, which would apply to all sales—including out-of-state sales—because of
Amazon’s national pricing model, or stop selling on Amazon altogether. See id.
The Attorney General argues that fundamental errors infect the district court’s
extraterritoriality analysis. Primarily, he argues that Kentucky’s price-gouging laws do not
directly or inevitably control commerce occurring wholly outside of the Commonwealth. First,
the Attorney General argues that because Kentucky’s price-gouging laws apply only to sales
made to Kentucky consumers, they do not control wholly out-of-state commerce, such that there
is no extraterritoriality concern. Second, the Attorney General argues that even if the
Commonwealth’s price-gouging laws do have an effect on wholly out-of-state commerce, that
effect is not the law’s direct or inevitable result. We agree with the second of the Attorney
General’s arguments. Whether Kentucky’s price-gouging laws address only sales made to
No. 20-5723 Online Merchants Guild v. Cameron Page 17
Kentucky consumers is inconsequential because our inquiry also considers a law’s practical
effect. See Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 583
(1986) (“That the [purportedly extraterritorial law] is addressed only to sales of liquor in New
York is irrelevant if the ‘practical effect’ of the law is to control liquor prices in other States.”).
But there is no extraterritoriality problem here because, even if the enforcement of Kentucky’s
price-gouging laws against Kentucky-based sellers involved in Amazon sales to Kentucky
consumers would have the practical effect of setting a price ceiling for wholly out-of-state
Amazon sales, that is not the direct or inevitable result of those state laws.
To begin, the record does support the district court’s conclusion that—because of
Amazon’s structure—the enforcement of Kentucky’s price-gouging laws against Kentucky-
based third-party sellers involved in Amazon sales to Kentucky consumers would have the
practical effect of setting a maximum national price for goods sold on Amazon. Like the district
court, we think that an example illustrates the point. Mom & Pop’s is a fictional partnership
based in Lexington, Kentucky that sells widgets. Although it started selling widgets out of its
brick-and-mortar shop in town, Mom & Pop’s decided recently to sell its widgets also through
Amazon’s online marketplace. Through Amazon, Mom & Pop’s has supplied widgets sold to
consumers in Kentucky and every other state, at a price of $5, which it proposed and Amazon
approved. As the number of COVID-19 cases increased and the Governor declared an
emergency, Mom & Pop’s saw an opportunity to profit from its widget’s supposed health
benefits and proposed a new price of $50 per widget, which Amazon again approved, resulting in
sales to consumers both inside and outside of Kentucky. This brought scrutiny by the Kentucky
Attorney General, who issued Mom & Pop’s a CID asserting that he had reason to believe that
Mom & Pop’s was engaged in price gouging in its sale of widgets on Amazon, in violation of
§ 367.374 and § 367.170. Mom & Pop’s wants to avoid liability but cannot limit the sale of
$50 widgets on Amazon to consumers outside of Kentucky because Amazon does not allow
Mom & Pop’s to set state-specific prices or to limit widget sales to certain states. Thus, to
comply with Kentucky’s price-gouging laws, Mom & Pop’s proposes, and Amazon approves, a
reduced national price of $5.50 per widget, within § 367.374(1)(c)(2)’s statutory safe harbor for
price increases of up to 10% of the pre-emergency declaration price. As a practical matter, then,
the enforcement of Kentucky’s price-gouging laws would set a national ceiling—applicable to
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Kentuckians and non-Kentuckians alike—on the price of Mom & Pop’s widgets sold on
Amazon. At least insofar as the sales involving out-of-state consumers would formally be
between those consumers and Amazon, a foreign entity (not Mom & Pop’s, a Kentucky
partnership), see R. 10-1 (Rafelson Decl. at ¶ 16) (Page ID #64), the practical effect of
Kentucky’s price-gouging laws would be to affect wholly out-of-state commerce, raising
extraterritoriality concerns.
It does not follow, however, that Kentucky’s price-gouging laws are unconstitutional—a
state law’s effect on out-of-state commerce must be direct or inevitable to be invalid under the
extraterritoriality doctrine. That is not the case here because the effect of Kentucky’s price-
gouging laws depends entirely upon Amazon’s independent decisions in how it structures its
online marketplace. If Amazon allowed for state-specific pricing or allowed third-party sellers to
limit where their goods were sold—and no one contends that Amazon lacks the power to
structure its marketplace in this fashion—then there would be no effect at all on interstate
commerce (or at most the effect would be de minimis). Returning to our example, Mom & Pop’s
could propose a Kentucky-specific price for widgets sold on Amazon that did not violate the
Commonwealth’s price-gouging laws, while charging higher prices elsewhere, or Mom & Pop’s
could limit their Amazon sales to only consumers outside of Kentucky. In either case, the
enforcement or threatened enforcement of Kentucky’s price-gouging laws would not set a
national price ceiling for widgets, as a practical matter or otherwise, because any responsive
pricing or limitation on availability would affect only Kentucky consumers. Thus, the effect of
Kentucky’s price-gouging laws on out-of-state commerce is far from “inevitable,” Pharm.
Research & Mfrs. of Am., 538 U.S. at 669; it is at best indirect, because it depends entirely upon
decisions made by Amazon. That being the case, the district court erred in concluding that the
Guild is likely to succeed on its extraterritoriality claim.
Two of our most recent extraterritoriality cases illustrate this flaw in the Guild’s
argument. On the one hand, there is American Beverage, where we considered a Michigan law
that “require[d] certain returnable bottles and cans to possess a unique-to-Michigan mark
designation” in order to facilitate container deposit redemptions and inhibit fraudulent
redemptions. 735 F.3d at 366. Because the law provided that the unique mark could be used
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only on beverage containers sold in Michigan (or states with a substantially similar law), id. at
367–68, 375, the law “not only require[d] beverage companies to package a product unique to
Michigan but also allow[ed] Michigan to dictate where the product can be sold,” id. at 376.
We held the law to be an invalid extraterritorial regulation because it directly and expressly
prohibited wholly out-of-state commerce—the sale of a beverage bearing a unique Michigan
mark outside of Michigan. Id.
On the other hand, there is International Dairy, a case that we distinguished in American
Beverage. In International Dairy, we considered an Ohio dairy label regulation that
“prohibit[ed] dairy processors from making claims about the absence of artificial hormones in
their milk products . . . and . . . also require[d] them to include a disclaimer when making
[certain] claims about their production processes.” 622 F.3d at 632. The plaintiffs raised a
similar challenge to the one that the Guild raises here, arguing that “due to the complex national
distribution channels through which milk products are delivered and the costs associated with
changing their labels, the Rule in effect forces them to create a nationwide label in accordance
with Ohio’s requirements.” Id. at 647. But we rejected that argument, concluding that Ohio’s
“labeling requirements have no direct effect on the Processors’ out-of-state labeling conduct.”
Id. (emphasis added). Rather, any impact that the label regulation had on out-of-state labeling
was due to the nature of the milk market’s distribution channels—milk producers might choose
to utilize Ohio-compliant labels in wholly out-of-state transactions because doing so was more
cost-efficient, but that was not a direct result of the regulation. See id.To us, this case is analogous to International Dairy. As in that case, it is not the state law
that directly controls out-of-state commerce; rather, the effect is indirect because it depends on
the realities of a given market or marketplace and the independent choices of private market
participants. In International Dairy, it was “the complex national distribution channels through
which milk products are delivered and the costs associated with changing their labels” that
compelled out-of-state labeling conduct. 622 F.3d at 647. Here, it is Amazon’s decision to
structure its online marketplace to allow only a single, national price while preventing third-party
sellers from limiting the states in which their goods are sold that allows Kentucky’s price-
gouging laws to set, in effect, a national ceiling for certain goods sold on Amazon. Unlike in
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American Beverage, where the Michigan law expressly forbade a class of out-of-state
transactions, here Kentucky’s price-gouging laws say nothing about the prices to be charged in
out-of-state transactions, and the laws’ effect on out-of-state commerce would be virtually
nonexistent but for Amazon’s limitations on third-party sellers. See 735 F.3d at 376. Although
Kentucky’s price-gouging laws may indirectly impact out-of-state pricing on Amazon, that is not
the laws’ “inevitable effect” nor is that effect dictated by the laws’ “express terms.” Pharm.
Research & Mfrs. of Am., 538 U.S. at 669; see also Am. Express Travel Related Servs. Co. v.
Kentucky, 730 F.3d 628, 634 (6th Cir. 2013) (no extraterritoriality issue where extraterritorial
effect resulted from seller’s own choices).
The Guild largely eschews International Dairy in favor of an analogy to the sole context
where the Supreme Court has invalidated a state law under the extraterritoriality doctrine: price-
affirmation statutes, which “force regulated entities to certify that the in-state price they charge
for a good is no higher than the price they charge out-of-state.” Am. Beverage, 735 F.3d at 373.
But the Court’s price-affirmation cases are of no help to the Guild because those cases involve
state laws that directly controlled out-of-state commerce and thus underscore the inapplicability
of the extraterritoriality doctrine here.
For example, in Brown-Forman, the Supreme Court invalidated a New York price-
affirmation statute that required “every liquor distiller or producer that sells liquor to wholesalers
within the State to sell at a price that is no higher than the lowest price the distiller charges
wholesalers anywhere else in the United States.” 476 U.S. at 575. The law operated in part by
requiring distillers to file a monthly price schedule “contain[ing] a precise description of each
item the distiller intend[ed] to sell, and a per-bottle and per-case price.” Id. By tying in-state
and out-of-state prices in this fashion, the New York statute directly and inevitably controlled out
of state transactions because “[o]nce a distiller . . . posted prices in New York, it [was] not free to
change its prices elsewhere in the United States during the relevant month.” Id. at 582. That is
not the case here. Kentucky has not tied its in-state prices to those charged out of state; Amazon
has tied those prices together by structuring its online marketplace as it has. The effect of
Kentucky’s price-gouging laws on Amazon’s national prices is not inevitable or direct because it
depends upon Amazon’s decisionmaking.
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The Court reached a similar conclusion in Healy, which is no more helpful to the Guild
than Brown-Forman. Healy involved a Connecticut law that “require[d] out-of-state shippers of
beer to affirm that their posted prices for products sold to Connecticut wholesalers [were], as of
the moment of posting, no higher than the prices at which those products [were] sold in the
bordering States of Massachusetts, New York, and Rhode Island.” 491 U.S. at 326. The
Connecticut law interacted with those states’ regulatory regimes to control directly the price of
beer sold in those states. For example, because Massachusetts required brewers to post monthly
prices on the first of the month, “as a practical matter, Connecticut’s . . . affirmation statute
prospectively preclude[d] the alteration of out-of-state prices after the moment of affirmation.”
Id. at 338 (internal quotation marks omitted). Similarly, because Massachusetts, New York, and
Rhode Island laws allowed volume discounts, and Connecticut did not but treated such discounts
as a reduction in price, “[t]he Connecticut [price-affirmation] statute, like the New York law
struck down in Brown–Forman, require[d] out-of-state shippers to forgo the implementation of
competitive-pricing schemes in out-of-state markets because those pricing decisions [were]
imported by statute into the Connecticut market regardless of local competitive conditions.” Id.
at 339. Thus, the Court held that the Connecticut law was invalid under the extraterritoriality
doctrine because it had “the undeniable effect of controlling commercial activity occurring
wholly outside the boundary of the State.” Id. at 337. Again, that is not the case here. It is not
Kentucky law (alone or in combination with other state laws) that dictates a price ceiling for
Amazon transactions, it is Amazon that does so by structuring its online marketplace so that
there can be only a single, national price for goods.
Relying on the Court’s price-affirmation cases, the Guild points to other states’ price-
gouging laws and argues that “applying such vague and conflicting standards to the interstate
marketplace ‘create[s] just the kind of competing and interlocking local economic regulation that
the Commerce Clause was meant to preclude.’” Appellee’s Br. at 31–32 (quoting Healy,
491 U.S. at 337). To be sure, many states have adopted price-gouging laws of their own, and as
the thirty amici states and the District of Columbia6 readily acknowledge, there is some variation
6Insupport of the Attorney General’s position, the following states filed a brief as amici curiae: Alaska,
Arkansas, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon,
No. 20-5723 Online Merchants Guild v. Cameron Page 22
in what qualifies as unlawful price gouging under these laws. Br. Amici Curiae Illinois et al. at
31. Thus, a price increase of over 10% might be unlawful under Kentucky law, see
§ 367.374(1)(c)(1) (safe harbor for increases of 10% or less from pre-emergency price), but
lawful under Alabama law, see Ala. Code § 8-31-4 (increase of 25% prima facie evidence of
price gouging). But this is not the sort of conflict that the Court’s extraterritoriality cases target
when they task us with determining whether every or many states adopting a similar law would
result in “inconsistent legislation.” Healy, 491 U.S. at 337. As we explained in International
Dairy, the “key problem with the New York statute in Brown-Forman” was that compliance with
the New York law “raise[d] the possibility” that a regulated entity’s compliance with New
York’s law would put it out of compliance with another state’s laws. 622 F.3d at 647. That was
not an issue in International Dairy because producers could employ state-specific labels or
national (or regional labels) that complied with all the relevant state laws. See id. Similarly, that
is not an issue here because sellers can sell in non-Amazon marketplaces where they are allowed
to establish state-specific prices. Thus, the fact that numerous states have enacted or might enact
price-gouging laws that differ somewhat from Kentucky’s is of little consequence here. See id.Entities doing business in multiple states must comply with those states’ valid consumer
protection laws—this is nothing new, and nothing that the extraterritoriality doctrine frowns
upon. See id.7
Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, Virginia, Washington, and Wisconsin. See Br. Amici
Curiae Illinois et al. United Egg Producers, Inc., “a Capper-Volstead Agriculture Cooperative with egg farmer-
members from around the country, who collectively represent approximately 95 percent of all U.S. egg production,”
filed an amicus brief in support of the Guild. Br. Amicus Curiae United Egg Producers, Inc. at 1.
7The Guild finds no more support for its argument in the out-of-circuit extraterritoriality precedent that it
cites than in the Supreme Court’s precedent or our own. The most analogous of these is Association for Accessible
Medicines v. Frosh, 887 F.3d 664 (4th Cir. 2018), on which the district court heavily relied. There, the Fourth
Circuit, in a split decision, invalidated a Maryland pharmaceutical price-gouging law because it “directly regulate[d]
the price of transactions that occur outside Maryland.” Id. at 666. But the Maryland law at issue in Frosh is
fundamentally different from Kentucky’s price-gouging laws. Whereas the Maryland law expressly targeted
upstream sales that took place wholly outside of Maryland and would have imposed liability for unconscionable
price increases in those transactions, see id. at 671–72, the Kentucky laws at issue here do no such thing. Rather,
Kentucky’s price-gouging statutes apply to transactions involving Kentucky consumers and only indirectly impact
out-of-state transactions due to the structure of Amazon’s online marketplace. In Frosh, the effect on wholly out-of-
state commerce was a direct result of the Maryland law’s express terms, but here the effect on out-of-state
commerce is at most an indirect result of Kentucky’s price-gouging laws. See id.
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The district court characterized this case by posing a question: “Is an old constitution
relevant to a new economy?” Online Merchants Guild, 468 F. Supp. 3d at 889. In answering
that question in the affirmative, the district court explained that “[t]he protections of the
Commerce Clause are available to those in a virtual economy no less than those who trade in an
economy defined by bricks and mortar.” Id. Fair enough, but that does not mean that a virtual
economy should expand those protections. The Guild conceded at our oral argument that there
would be no extraterritoriality problem if the Attorney General enforced the Commonwealth’s
price-gouging laws against a Kentucky brick-and-mortar shop for sales made in-person in
Kentucky. In terms of our hypothetical Mom & Pop’s, the Guild concedes that if Mom & Pop’s
engaged in price-gouging in the sale of widgets at its brick-and-mortar Lexington shop, the
extraterritoriality doctrine would be no bar to the Attorney General’s enforcement of those laws.
Yet the Guild is asking us to reach a different result because Mom & Pop’s—or any other
Kentucky-based business—has chosen to sell to Kentuckians through Amazon. The Guild has
given us no reason to hold that the choice to sell in the virtual economy should afford a business
added protection in these circumstances. Yes, the choice to sell through Amazon’s online
marketplace means that merchants may need to consider Kentucky’s price-gouging laws when
they propose a price for their goods. But that is not inevitable, nor is it the direct result of the
statute’s express terms. Rather, it is dependent on Amazon’s decision in how it structures its
marketplace, which is not enough to limit the Attorney General’s authority to enforce the
Commonwealth’s consumer protection laws to protect Kentuckians against price gouging. The
dormant commerce clause prevents a state from “project[ing] its legislation” into another state,
Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 521 (1935), but it does not invalidate a state law
when some private third-party has done the projecting of its own accord.
All of this means that it would take a sweeping expansion of what has been a jealously
circumscribed, narrow doctrine for the Guild to prevail. The Guild argues for that expansion by
focusing on the Supreme Court’s instruction that we must consider a law’s “practical effect,”
Healy, 491 U.S. at 336, to the exclusion of the Court’s limitation of the extraterritoriality
doctrine to state laws that “directly,” Healy, 491 U.S. at 336, and “inevitabl[y]” control wholly
out-of-state commerce, Pharm. Research & Mfrs. of Am., 538 U.S. at 669. Although there is
some ambiguity in the Court’s articulations of the extraterritoriality doctrine, it makes little sense
No. 20-5723 Online Merchants Guild v. Cameron Page 24
to read the Court’s “practical effect” language so broadly when it has held state laws invalid
under the doctrine in only three cases over the last century or so, and exclusively in the price-
affirmation context. Indeed, courts and commentators—recognizing that in a modern economy
just about every state law will have some “practical effect” on extraterritorial commerce—have
cautioned against approaches like the one that the Guild advocates here. See Epel, 793 F.3d at
1173–75 (Gorsuch, J.); Am. Beverage, 735 F.3d at 378–79 (Sutton, J., concurring); see generally
Brannon P. Denning, Extraterritoriality and the Dormant Commerce Clause: A Doctrinal Post-
Mortem, 73 La. L. Rev. 979 (2013). As then-Judge, now-Justice Gorsuch explained in a 2015
opinion, approaches like the Guild’s “risk serious problems of overinclusion” and would threaten
a wide range of state health-and-safety and laws. Epel, 793 F.3d at 1175. Here, the Guild would
have us apply the extraterritoriality doctrine in a manner that would draw into question not just
Kentucky’s price-gouging laws, but a bevy of heretofore uncontroversial state consumer
protection laws that might apply in the context of eCommerce. But the extraterritoriality
doctrine is designed in part to ensure the “autonomy of the individual States within their
respective spheres,” Healy, 491 U.S. at 336, and it does not preclude Kentucky from enforcing
its price-gouging laws against Kentucky-based third-party sellers on Amazon in relation to sales
to Kentucky consumers. See Baldwin, 294 U.S. at 528 (cautioning that its invalidation of a
price-affirmation law did not undermine the validity of other consumer protection laws).
In sum, the extraterritoriality doctrine “isn’t just a couple cases about beer,” Appellee’s
Br. at 30, but neither is it the 100-proof menace that the district court made it out to be. The
extraterritoriality doctrine is a powerful but precise instrument—invalidating state laws as per se
unconstitutional in the narrow instances where a state expressly or inevitably exceeds its
authority and seeks to control wholly out-of-state commerce, but otherwise inapplicable—and
we decline the Guild’s invitation to expand it here. Because the effect on out-of-state commerce
of Kentucky’s price-gouging laws is entirely dependent upon Amazon’s independent
decisionmaking with regard to the structure of its online marketplace, the application of those
laws to Kentucky-based third-party sellers on Amazon in connection with sales to Kentucky
consumers is unlikely to offend the extraterritoriality doctrine of the dormant commerce clause.
The district court erred in concluding otherwise.
No. 20-5723 Online Merchants Guild v. Cameron Page 25
***
The Guild insists that if we disagree with the district court’s extraterritoriality analysis,
we should uphold its preliminary injunction based on alternative grounds not addressed by the
district court. Specifically, the Guild contends that Kentucky’s price-gouging laws also offend
the dormant commerce clause because they are discriminatory and because they unduly burden
interstate commerce under the Pike balancing test. The Guild also raises vagueness, First
Amendment, Due Process, and Equal Protection challenges. We decline to address the Guild’s
alternative arguments, which are underdeveloped here, and we leave them for the district court’s
consideration in the first instance. See Cavin v. Michigan Dep’t of Corr., 927 F.3d 455, 459 (6th
Cir. 2019) (“As a court of review, not of first view, we will remand the case to the district court
to resolve the point in the first instance.”) (internal quotation marks and citation omitted).8
B. The Remaining Preliminary Injunction Factors
With likelihood of success resolved, we turn briefly to the remaining preliminary
injunction factors. “When a party seeks a preliminary injunction on the basis of a potential
constitutional violation, ‘the likelihood of success on the merits often will be the determinative
factor.’” Obama for Am., 697 F.3d at 436 (quoting Jones v. Caruso, 569 F.3d 258, 265 (6th Cir.
2009)). That is the case here. First, the district court concluded that the Guild would suffer
irreparable injury based in large part on its conclusion that Kentucky’s price-gouging laws are
unconstitutional. Online Merchants Guild, 468 F. Supp. 3d at 903 (“When constitutional rights
are threatened or impaired, irreparable injury is presumed.” (alteration omitted) (quoting Obama
for Am., 697 F.3d at 436)). Insofar as the price-gouging laws are likely constitutional, this
consideration no longer favors a preliminary injunction. See Obama for Am., 697 F.3d at 436.
Second, Kentucky would be irreparably harmed by its inability to enforce constitutional price-
gouging laws. See Maryland v. King, 567 U.S. 1301, 1303 (2012) (Roberts, C.J., in chambers).
Thus, the balance of harms does not favor a preliminary injunction. As for the public interest,
8In addressing the Guild’s remaining dormant commerce clause claims, and in particular its claim that
Kentucky’s price-gouging laws unduly burden interstate commerce under Pike, the district court should consider our
precedent establishing that a state has a significant interest in consumer protection, see Int’l Dairy, 622 F.3d at 649–
50, and suggesting that the possibility of uncompelled decisions of private parties to exit a given market is not a
significant burden on interstate commerce, see Am. Express, 730 F.3d at 634.
No. 20-5723 Online Merchants Guild v. Cameron Page 26
this factor favors the state when a challenged law is likely constitutional. See Daunt v. Benson,
956 F.3d 396, 422 (6th Cir. 2020).
III. CONCLUSION
For the foregoing reasons, we VACATE the district court’s preliminary injunction and
REMAND for further proceedings. The district court abused its discretion in granting the
preliminary injunction by improperly applying the governing law and concluding that the
equities favored injunctive relief.