South Dakota built and operated a state cement plant, and for many years sold substantial amounts of cement to buyers in other States, including Reeves, a Wyoming ready-mix concrete distributor that bought about 95% of its cement from the South Dakota plant. In 1978, production problems and strong demand created a cement shortage, and the State reaffirmed a policy of supplying South Dakota customers first, honoring contract commitments, and allocating the remainder on a first-come, first-served basis. Reeves had no long-term supply contract, was denied further deliveries, could not find another supplier, and sharply reduced production. Reeves then sued, arguing that South Dakota's resident-preference policy violated the Commerce Clause.
Issue
Whether the Commerce Clause permits South Dakota, when acting as the producer and seller of cement through a state-owned plant, to confine sales during a shortage to its own residents. More specifically, the question is whether a State acting as a market participant rather than a market regulator may favor in-state buyers.
Rule
In the absence of congressional action, the Commerce Clause does not prohibit a State from participating in the market as a proprietor and favoring its own citizens over others. The dormant Commerce Clause is principally directed at state taxes and regulatory measures burdening private interstate trade, not at a State's own market participation.
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One of 10 multiple-choice questions for this case. Pick an answer to see why.
The State of Kansas owns and operates Sun Prairie Steelworks, a state-run mill in Wichita that manufactures structural beams. After a sudden shortage, the mill announces that for the next six months it will sell beams only to Kansas customers, while private steel mills remain free to sell to anyone. An Oklahoma contractor that had regularly bought from the state mill sues under the dormant Commerce Clause.
Who is most likely to prevail?
Explanation. The majority rule is that, in the absence of congressional action, the dormant Commerce Clause does not bar a State from participating in the market as a proprietor and favoring its own citizens. Kansas is selling steel it manufactures through a state-owned mill, so it is acting as a market participant rather than regulating private commerce. The Court rejected both the per se protectionism argument and the idea that prior interstate sales waive the doctrine. (Derived from Reeves, Inc. v. William Stake (n.d.).)