The Hood Company, a Massachusetts corporation, challenged the New York law that denied him a license to build an additional milk plant in New York on the ground that it would be contrary to the public policy and lead to a destructive competition in a market already adequately served.
When a state recognizes an article to be a subject of commerce, it cannot prohibit it from being a subject of interstate commerce; that the right to engage in interstate commerce is not the gift of a state, and that state cannot regulate or restrain it.
H.P. Hood, a Massachusetts corporation, has distributed milk and its products to people in Boston, which obtains about 90% of its milk from states other than Massachusetts. Dairies located in New York State have been among the sources of Boston’s supply. The area in which Hood has been denied an additional license to make interstate purchases has been developed as a part of the Boston milkshed from which the Hood and a competitor have shipped to Boston.The New York law forbids a dealer to buy milk from producers unless licensed to do so by the Commissioner of Agriculture and Markets. For the license, he must pay a substantial fee and furnish a bond to assure prompt payment to producers for milk. The Hood Company has met all the requirements but license for an additional plant was denied based on the provisions of the law that require him to be satisfied that the issuance of the license will not tend to a destructive competition in a market already adequately served and that the issuance of the license is in the public interest.
May New York deny additional facilities to acquire and ship milk in interstate commerce where the reasons are that such limitation upon interstate business will protect and advance local economic interests?
No, the statute violates the Commerce Clause and is not authorized by federal legislation pursuant to that Clause. Any restrictions, imposed for the purpose and with the practical effect of curtailing the volume of interstate commerce to aid local economic interests, burden interstate commerce and no such measures may be attempted. Under Baldwin, a State may shelter its people from threats to their health of safety and from fraud, even when those dangers emanate from interstate commerce, but it cannot burden or constrict the flow of such commerce solely for their economic advantage.
The central issue is whether the difference in degree between denying access to a market for failure to comply with sanitary regulations and denying it to prevent destructive competition is great enough to justify a different result.
In Foster Packing Co v. Haydel., the Court provided that a state is without power to prevent privately owned articles of trade from being shipped and sold in interstate commerce on the ground that they are required to satisfy local demands or because they are needed by the people of the State. There, the purpose of the Louisiana statute was not to retain the shrimp for the use of the people in Louisiana, but was to favor the canning of meat in the state. The Court invalidated state enactments attempting to promote local interests at the expense of interstate commerce. The New York State denied the license for a new plant to reduce the supply of milk coming from outside the state and consequently to reduce competitions. The statute thereby restricted and obstructed interstate commerce.