Brief Fact Summary. South Dakota built a state-owned cement plant, which for many years sold to private buyers, but later gave preferences to in-state buyers. The Plaintiff, Reeves Inc., (Plaintiff) a long time buyer sued under the United State Constitution’s (Constitution) Commerce Clause.
Synopsis of Rule of Law. States that are “market participants” in the buying and selling of goods, as opposed to “market regulator”, are not bound by the Constitution’s Commerce Clause and can favor their in-state businesses.
It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.View Full Point of Law
Issue. May a State give preference to in-state buyers?
Held. Yes, a State acting as a “market participant” may favor their in-state buyers. There is no indication of a constitutional plan to limit the ability of the state itself to operate freely in the market.
Dissent. Justice Lewis Powell (J. Powell) dissents because he thinks this is exactly the type of economic protectionism that the Constitution’s Commerce Clause was intended to prevent.
Discussion. When a state becomes a “market participant”, as is the case here because they are selling cement, their commercial activities are not bound by the Commerce Constitution’s Clause and may favor in-state interests. The Constitution’s Commerce Clause is applicable to State taxes and other regulatory measures that impede interstate commerce.