Court Opinion

ID: 9427989
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:22:31.721215+00
Date Added: 2024-06-11T17:23:11.034890
License: Public Domain

Mr. Justice Powell,
with whom Mr. Justice Brennan, Mr. Justice White, and Mr. Justice Stevens join, dissenting.
The South Dakota Cement Commission has ordered that in times of shortage the state cement plant must turn away out-of-state customers until all orders from South Dakotans are filled. This policy represents precisely the kind of economic protectionism that the Commerce Clause was intended to prevent.1 The Court, however, finds no violation of the Commerce Clause, solely because the State produces the cement. I agree with the Court that the State of South Dakota may provide cement for its public needs without violating the Commerce Clause. But I cannot agree that South Dakota may withhold its cement from interstate commerce in order to benefit private citizens and businesses within the State.
I
The need to ensure unrestricted trade among the States created a major impetus for the drafting of the Constitution. “The power over commerce . . . was one of the primary objects for which the people of America adopted their government. . . .” Gibbons v. Ogden, 9 Wheat. 1, 190 (1824). Indeed, the Constitutional Convention was called after an earlier convention on trade and commercial problems proved inconclusive. C. Beard, An Economic Interpretation of the *448Constitution 61-63 (1935); S. Bloom, History of the Formation of the Union Under the Constitution 14-15 (1940). In the subsequent debate over ratification, Alexander Hamilton emphasized the importance of unrestricted interstate commerce:
“An unrestrained intercourse between the States themselves will advance the trade of each, by an interchange of their respective productions. . . . Commercial enterprise will have much greater scope, from the diversity in the productions of different States. When the staple of one fails ... it can call to its aid the staple of another.” The Federalist, No. 11, p. 71 (J. Cooke ed., 1961) (A. Hamilton); see id., No. 42, p. 283 (J. Madison).
The Commerce Clause has proved an effective weapon against protectionism. The Court has used it to strike down limitations on access to local goods, be they animal, Hughes v. Oklahoma, 441 U. S. 322 (1979) (minnows); vegetable, Pike v. Bruce Church, Inc., 397 U. S. 137 (1970) (cantaloupes); or mineral, Pennsylvania v. West Virginia, 262 U. S. 553 (1923) (natural gas). Only this Term, the Court held unconstitutional a Florida statute designed to exclude out-of-state investment advisers. Lewis v. BT Investment Managers, Inc., ante, p. 27. As we observed in Hughes v. Alexandria Scrap Corp., 426 U. S. 794, 803 (1976), “this Nation is a common market in which state lines cannot be made barriers to the free flow of both raw materials and finished goods in response to the economic laws of supply and demand.”
This case presents a novel constitutional question. The Commerce Clause would bar legislation imposing on private parties the type of restraint on commerce adopted by South Dakota. See Pennsylvania v. West Virginia, supra; cf. Great A&P Tea Co. v. Cottrell, 424 U. S. 366 (1976); Foster-Fountain Packing Co. v. Haydel, 278 U. S. 1 (1928).2 Conversely, *449a private business constitutionally could adopt a marketing policy that excluded customers who come from another State. This case falls between those polar situations. The State, through its Commission, engages in a commercial enterprise and restricts its own interstate distribution. The question is whether the Commission’s policy should be treated like state regulation of private parties or like the marketing policy of a private business.
The application of the Commerce Clause to this case should turn on the nature of the governmental activity involved. If a public enterprise undertakes an “integral operatio[n] in areas of traditional governmental functions,” National League of Cities v. Usery, 426 U. S. 833, 852 (1976), the Commerce Clause is not directly relevant. If, however, the State enters *450the private market and operates a commercial enterprise for the advantage of its private citizens, it may not evade the constitutional policy against economic Balkanization.
This distinction derives from the power of governments to supply their own needs, see Perkins v. Lukens Steel Co., 310 U. S. 113, 127 (1940); Atkin v. Kansas, 191 U. S. 207 (1903), and from the purpose of the Commerce Clause itself, which is designed to protect “the natural functioning of the interstate market,” Hughes v. Alexandria Scrap Corp., supra, at 806. In procuring goods and services for the operation of government, a State may act without regard to the private marketplace and remove itself from the reach of the Commerce Clause. See American Yearbook Co. v. Askew, 339 F. Supp. 719 (MD Fla.), summarily aff’d, 409 U. S. 904 (1972). But when a State itself becomes a participant in the private market for other purposes, the Constitution forbids actions that would impede the flow of interstate commerce. These categories recognize no more than the “constitutional line between the State as government and the State as trader.” New York v. United States, 326 U. S. 572, 579 (1946); see United States v. California, 297 U. S. 175 (1936); Ohio v. Helvering, 292 U. S. 360 (1934); South Carolina v. United States, 199 U. S. 437 (1905).
The Court holds that South Dakota, like a private business, should not be governed by the Commerce Clause when it enters the private market. But precisely because South Dakota is a State, it cannot be presumed to behave like an enterprise “ 'engaged in an entirely private business.’ ” See ante, at 439, quoting United States v. Colgate & Co., 250 U. S. 300, 307 (1919). A State frequently will respond to market conditions on the basis of political rather than economic concerns. To use the Court’s terms, a State may attempt to act as a “market regulator” rather than a “market participant.” See ante, at 436. In that situation, it is a pretense to equate the State with a private economic actor. State action burdening interstate trade is no less state action because it is *451accomplished by a public agency authorized to participate in the private market.
II
The threshold issue is whether South Dakota has undertaken integral government operations in an area of traditional governmental functions, or whether it has participated in the marketplace as a private firm. If the latter characterization applies, we also must determine whether the State Commission’s marketing policy burdens the flow of interstate trade. This analysis highlights the differences between the state action here and that before the Court in Hughes v. Alexandria Scrap Corp.
A
In Alexandria Scrap, a Virginia scrap processor challenged a Maryland program to pay bounties for every junk car registered in Maryland that was converted into scrap. The program imposed more onerous documentation standards on non-Maryland processors, thereby diverting Maryland “hulks” to in-state processors. The Virginia plaintiff argued that this diversion burdened interstate commerce.
As the Court today notes, Alexandria Scrap determined that Maryland’s bounty program constituted direct state participation in the market for automobile hulks. Ante, at 435. But the critical question — the second step in the opinion’s analysis — was whether the bounty program constituted an impermissible burden on interstate commerce. Recognizing that the case did not fit neatly into conventional Commerce Clause theory, 426 U. S., at 807, we found no burden on commerce.
The Court first observed:
“Maryland has not sought to prohibit the flow of hulks, or to regulate the conditions under which it may occur. Instead, it has entered into the market itself to bid up their price. There has been an impact upon the interstate flow of hulks only because . . . Maryland effectively *452has made it more lucrative for unlicensed suppliers to dispose of their hulks in Maryland. . . Id., at 806.
We further stated “that the novelty of this case is not its presentation of a new form of ‘burden’ upon commerce, but that appellee should characterize Maryland’s action as a burden which the Commerce Clause was intended to make suspect.” Id., at 807. The opinion then emphasized that “no trade barrier of the type forbidden by the Commerce Clause, and involved in previous cases, impedes th[e] movement [of hulks] out of State.” Id., at 809-810. Rather, the hulks “remain within Maryland in response to market forces, including that exerted by money from the State.” Id., at 810. The Court concluded that the subsidies provided under the Maryland program erected no barriers to trade. Consequently, the Commerce Clause did not forbid the Maryland program.
B
Unlike the market subsidies at issue in Alexandria Scrap, the marketing policy of the South Dakota Cement Commission has cut off interstate trade.3 The State can raise such a bar when it enters the market to supply its own needs. In order to ensure an adequate supply of cement for public uses, the State can withhold from interstate commerce the cement needed for public projects. Cf. National League of Cities v. Usery, supra.
The State, however, has no parallel justification for favoring private, in-state customers over out-of-state customers.4 *453In response to political concerns that likely would be inconsequential to a private cement producer, South Dakota has shut off its cement sales to customers beyond its borders. That discrimination constitutes a direct barrier to trade “of the type forbidden by the Commerce Clause, and involved in previous cases....” Alexandria Scrap, 426 U. S., at 810. The effect on interstate trade is the same as if the state legislature had imposed the policy on private cement producers. The Commerce Clause prohibits this severe restraint on commerce.
Ill
I share the Court’s desire to preserve state sovereignty. But the Commerce Clause long has been recognized as a limitation on that sovereignty, consciously designed to maintain a national market and defeat economic provincialism. The Court today approves protectionist state policies. In the absence of contrary congressional action,5 those policies now can be implemented as long as the State itself directly participates in the market.6
By enforcing the Commerce Clause in this case, the Court would work no unfairness on the people of South Dakota. They still could reserve cement for public projects and share in whatever return the plant generated. They could not, how*454ever, use the power of the State to furnish themselves with cement forbidden to the people of neighboring States.
The creation of a free national economy was a major goal of the States when they resolved to unite under the Federal Constitution. The decision today cannot be reconciled with that purpose.

 By “protectionism,” I refer to state policies designed to protect private economic interests within the State from the forces of the interstate market. I would exclude from this term policies relating to traditional governmental functions, such as education, and subsidy programs like the one at issue in Hughes v. Alexandria Scrap Corp., 426 U. S. 794 (1976). See infra, at 451-453.

 The Court attempts to distinguish prior decisions that address the Commerce Clause limitations on a State’s regulation of natural resource *449exploitation. E. g., Hughes v. Oklahoma, 441 U. S. 322 (1979); Pennsylvania v. West Virginia, 262 U. S. 553 (1923). The Court contends that cement production, unlike the activities involved in those cases, “is the end product of a complex process whereby a costly physical plant and human labor act on raw materials.” Ante, at 444. The Court’s distinction fails in two respects. First, the principles articulated in the natural resources eases also have been applied in decisions involving agricultural production, notably milk processing. E. g., H. P. Hood & Sons v. Du Mond, 336 U. S. 525 (1949); Pike v. Bruce Church, Inc., 397 U. S. 137 (1970). More fundamentally, the Court’s definition of cement production describes all sophisticated economic activity, including the exploitation of natural resources. The extraction of natural gas, for example, could hardly occur except through a “complex process whereby a costly physical plant and human labor act on raw materials.”
The Court also suggests that the Commerce Clause has no application to this case because South Dakota does not “posses [s] unique access to the materials needed to produce cement.” Ante, at 444. But in its regional market, South Dakota has unique access to cement. A cutoff in cement sales has the same economic impact as a refusal to sell resources like natural gas. Customers can seek other sources of supply, or find a substitute product, or do without. Regardless of the nature of the product the State hoards, the consumer has been denied the guarantee of the Commerce Clause that he “may look to . . . free competition from every producing area in the Nation to protect him from exploitation by any.” H. P. Hood & Sons v. Du Mond, supra, at 539.

 One distinction between a private and a governmental function is whether the activity is supported with general tax funds, as was the case for the reprocessing program in Alexandria Scrap, or whether it is financed by the revenues it generates. In this case, South Dakota’s cement plant has supported itself for many years. See Tr. of Oral Arg. 27. There is thus no need to consider the question whether a state-subsidized business could confine its sales to local residents.

 The consequences of South Dakota’s “residents-first” policy were devastating to petitioner Reeves, Inc., a Wyoming firm. For 20 years, *453Reeves had purchased about 95% of its cement from the South Dakota plant. When the State imposed its preference for South Dakota residents in 1978, Reeves had to reduce its production by over 75%. Ante, at 432-433. As a' result, its South Dakota competitors were in a vastly superior position to compete for work in the region.

 The Court explicitly does not exclude the possibility that, under the Commerce Clause, Congress might legislate against protectionist state policies. See ante, at 435-436.

 Since the Court’s decision contains no limiting principles, a State will be able to manufacture any commercial product and withhold it from citizens of other States. This prerogative could extend, for example, to pharmaceutical goods, food products, or even synthetic or processed energy sources.