SUPREME COURT OF THE UNITED STATES

No. 95–1232

GENERAL MOTORS CORPORATION, PETITIONER v. ROGER W. TRACY, TAX COMMISSIONER

OF OHIO

on writ of certiorari to the supreme court

of ohio

[February 18, 1997]

Justice Stevens, dissenting.

In Ohio, as in other States, regulated utilities selling natural gas—referred to by the Court as "LDCs"— operate in two markets, one that is monopolistic and one that is competitive.

In the first, they sell a "noncompetitive bundled gas product," ante, at 32, to small consumers who have no practical alternative source of supply. The LDCs' dominant position in that market justifies detailed regulation of their activities in order to protect consumers from the risk of exploitation by a seller with monopoly power. See ante, at 14–20. The basic purpose of that regulation is to protect consumers, not to subsidize the LDCs.

The second market in which LDCs sell natural gas is a competitive market in which large customers like the General Motors Corporation have alternative sources of supply. Although Ohio possesses undoubted power to regulate the activities of all sellers in that market, Panhandle Eastern Pipe Line Co. v. Michigan Pub. Serv. Comm'n, 341 U. S. 329 (1951), it has not done so in any manner relevant here. The purchasers in this competitive market do not need the protections afforded by the state regulation of the monopolistic market, see ante, at 23, and the benefits provided by these regulations will thus not affect a competitive consumer's choice of seller. Customers like GMC are not "captive to the need for bundled benefits," ante, at 22. Nor do the burdens imposed by the regulations have a significant impact on LDCs' activities within this market. Thus, while the gas sold by LDCs on the competitive market may be subject to the same regulations as the gas sold in the non-competitive market, the different impact of the regulations on the economic decisions of both consumers and sellers makes it appropriate to characterize all gas sold in that market as "unbundled gas," see ante, at 20. Although the physical composition of the gas sold in the two markets is identical, I agree with what I understand the Court to be assuming, namely that as a matter of economics "bundled gas" and "unbundled gas" should be viewed as different products. See ante, at 20, 22–24.

It is not uncommon for a firm with a monopolistic position in one market also to sell a second product in a competitive market. See, e.g., International Business Machines Corp. v. United States, 298 U. S. 131 (1936). Even regulated monopolies such as electric utilities may distribute goods, such as light bulbs, in a competitive market. See, e.g., Cantor v. Detroit Edison Co., 428 U. S. 579 (1976). There is no reason why an LDC might not develop a product line, such as thermostats or gas furnaces, to sell in the competitive market for such products. I do not believe that the fact that the LDC is heavily regulated in the "bundled gas" market would justify granting it a special preference in the market for thermostats or gas furnaces. Nor do I discern a significant relevant difference between competition in "unbundled gas" and competition in thermostats or gas furnaces.

It may well be true that without a discriminatory tax advantage in the competitive market, the LDCs would lose business to interstate competitors and therefore be forced to increase the rates charged to small local consumers. This circumstance may require the States to find new, and nondiscriminatory, methods for accommodating the needs of small consumers for regular and reasonably priced natural gas service. As the Court recognizes, speculation about the "real-world economic effects" of a decision like this one is beyond our institutional competence. See ante, at 31. Such speculation is not, therefore, a sufficient justification for a tax exemption that discriminates against interstate commerce. Bacchus Imports, Ltd. v. Dias, 468 U. S. 263 (1984).

Accordingly, while I agree with Parts II and IV of the Court's opinion, I respectfully dissent from the judgment.