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H. P. Hood & Sons, Inc. v. Du Mond

Supreme Court of the United States · Constitutional Law

Constitutional LawCommerce ClauseDormant Commerce ClauseCommerce ClauseDormant Commerce Clauseinterstate milk shipmentsstate licensingeconomic protectionism

Facts

H.P. Hood & Sons, a Massachusetts corporation, bought raw milk from New York producers at licensed receiving depots, weighed, tested, cooled if necessary, and shipped it the same day as fluid milk to Boston; the parties conceded that Hood's New York business, present and proposed, was entirely interstate commerce. Hood sought a license for an additional receiving plant at Greenwich, New York, and it satisfied the statutory requirements of character, experience, financial responsibility, and equipment. The Commissioner denied the license not for any deficiency in those respects, but because the new plant would divert producers from other plants, increase competitors' handling costs, and tend to deprive local markets such as Troy of milk needed during the short season. The Commissioner concluded that the license would tend to destructive competition in an adequately served market and would not be in the public interest.

Issue

May a state, consistent with the Commerce Clause, deny a license for additional facilities used solely in interstate commerce when the denial is based on protecting local economic interests by limiting competition and retaining supplies for local markets? Does federal milk regulation authorize or validate such a state restriction?

Rule

The Commerce Clause forbids a state, in the absence of congressional authorization, from using its licensing or police powers to retard, burden, or constrict interstate commerce for the economic advantage of local interests. A state may regulate even local incidents of interstate commerce for legitimate health, safety, fraud-prevention, or similar permissible ends, but not to suppress competition or withhold goods from interstate markets to favor local consumers or businesses.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Prairie Crest Grain, an Illinois distributor, buys corn from farmers in Indiana and ships it the same day to processors in Ohio. Indiana requires a license for grain receiving stations, and Prairie Crest satisfies all requirements for finances, equipment, and recordkeeping. The state agriculture director denies a license for a new station near Fort Wayne solely because local feed mills would lose supply and existing in-state buyers would face higher handling costs if farmers switched sellers.

If Prairie Crest challenges the denial under the Commerce Clause, what is the strongest argument that the denial is unconstitutional?

Explanation. The majority rule is that a state may not use its licensing power to retard, burden, or constrict interstate commerce for the economic advantage of local interests. Here, the stated reasons are protection of local buyers and local supply, not health, safety, sanitation, or fair dealing. A state cannot do indirectly through licensing local receiving facilities what it could not do directly by blocking exports.