336 U.S. 525 (1949), 92, H. P. Hood & Sons, Inc. v. Du Mond

Docket Nº:No. 92
Citation:336 U.S. 525, 69 S.Ct. 657, 93 L.Ed. 865
Party Name:H. P. Hood & Sons, Inc. v. Du Mond
Case Date:April 04, 1949
Court:United States Supreme Court

Page 525

336 U.S. 525 (1949)

69 S.Ct. 657, 93 L.Ed. 865

H. P. Hood & Sons, Inc.


Du Mond

No. 92

United States Supreme Court

April 4, 1949

Argued December 13-14, 1948




Petitioner, a distributor of milk in Massachusetts operating three receiving plants licensed under the Agriculture & Markets Law of New York, applied to the New York Commissioner for a license for an additional plant. The application was denied on the grounds that the proposed expansion of petitioner's facilities would reduce the supply of milk for local markets and would result in destructive competition in a market already adequately served.

Held: The New York law, so applied, violates the Commerce Clause of the Federal Constitution. Pp. 526-545.

1. A State may not promote its own local economic advantages by curtailing the volume of interstate commerce. Pp. 530-539.

2. The fact that petitioner is licensed to operate its existing plants without condition or limitation as to the quantities of milk it may purchase does not justify denial of the license for an additional plant. Pp. 539-540.

3. The State's denial of the license on the grounds assigned is not consistent with nor authorized by the Federal Agricultural Marketing Agreement Act. Pp. 540-545.

297 N.Y. 209, 78 N.E.2d 476, reversed.

Petitioner's application for an extension of its license under the New York Agriculture & Markets Law was denied by the State Commissioner, whose action was affirmed by the New York Court of Appeals over objections to its validity under the Commerce Clause of the Federal Constitution. 297 N.Y. 209, 78 N.E.2d 476. This Court granted certiorari. 335 U.S. 808. Reversed, p. 545.

Page 526

JACKSON, J., lead opinion

MR. JUSTICE JACKSON delivered the opinion of the Court.

This case concerns the power of the State of New York to deny additional facilities to acquire and ship milk in interstate commerce where the grounds of denial are that such limitation upon interstate business will protect and advance local economic interests.

H. P. Hood & Sons, Inc., a Massachusetts corporation, has long distributed milk and its products to inhabitants of Boston. That city obtains about 90% of its fluid milk from states other than Massachusetts. Dairies located in New York State since about 1900 have been among the sources of Boston's supply, their contribution having varied, but, during the last ten years, approximating 8%. 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 both the Hood Company and a competitor have shipped to Boston.

The state courts have held, and it is conceded here, that Hood's entire business in New York, present and proposed, is interstate commerce. This Hood has conducted for some time by means of three receiving depots, where it takes raw milk from farmers. The milk is not processed in New York but is weighed, tested and, if necessary, cooled, and, on the same day, shipped as fluid milk to Boston. These existing plants have been operated under license from the State, and are not in question here, as the State has licensed Hood to continue them. The controversy concerns a proposed additional plant for the same kind of operation at Greenwich, New York.1

Page 527

Article 21 of the Agriculture and Markets Law of New York2 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. Under § 258, the Commissioner may not grant a license unless satisfied

that the applicant is qualified by character, experience, financial responsibility and equipment to properly conduct the proposed business.3

The Hood Company concededly has met [69 S.Ct. 660] all the foregoing tests, and license for an additional plant was not denied for any failure to comply with these requirements.

Page 528

The Commissioner's denial was based on further provisions of this section which 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.

Upon the hearing pursuant to the statute, milk dealers competing with Hood as buyers in the area opposed licensing the proposed Greenwich plant. They complained that Hood, by reason of conditions under which it sold in Boston, had competitive advantages under applicable federal milk orders, Boston health regulations, and OPA ceiling prices. There was also evidence of a temporary shortage of supply in the Troy, New York market during the fall and winter of 1945-46. The Commissioner was urged not to allow Hood to compete for additional supplies of milk or to take on producers then delivering to other dealers.

The Commissioner found that Hood, if licensed at Greenwich, would permit its present suppliers, at their option, to deliver at the new plant, rather than the old ones, and, for a substantial number, this would mean shorter hauls and savings in delivery costs. The new plant also would attract twenty to thirty producers, some of whose milk Hood anticipates will or may be diverted from other buyers. Other large milk distributors have plants within the general area and dealers serving Troy obtain milk in the locality. He found that Troy was inadequately supplied during the preceding short season.

In denying the application for expanded facilities, the Commissioner states his grounds as follows:

If applicant is permitted to equip and operate another milk plant in this territory, and to take on producers now delivering to plants other than those which it operates, it will tend to reduce the volume of milk received at the plants which lose those producers,

Page 529

and will tend to increase the cost of handling milk in those plants.

If applicant takes producers now delivering milk to local markets such as Troy, it will have a tendency to deprive such markets of a supply needed during the short season.

There is no evidence that any producer is without a market for his milk. There is no evidence that any producers not now delivering milk to applicant would receive any higher price, were they to deliver their milk to applicant's proposed plant.

The issuance of a license to applicant which would permit it to operate an additional plant would tend to a destructive competition in a market already adequately served, and would not be in the public interest.4

Denial of the license was sustained by the Court of Appeals5 over constitutional objections duly urged under the Commerce Clause,6 and, because of the importance of the questions involved, we brought the case here by certiorari.7

Production and distribution of milk are [69 S.Ct. 661] so intimately related to public health and welfare that the need for regulation to protect those interests has long been recognized, and is, from a constitutional standpoint, hardly controversial. Also, the economy of the industry is so eccentric that economic controls have been found at once necessary and difficult. These have evolved detailed, intricate and comprehensive regulations, including price-fixing. They have been much litigated, but were generally sustained by this Court as within the powers of

Page 530

the State over its internal commerce as against the claim that they violated the Fourteenth Amendment.8 Nebbia v. New York, 291 U.S. 502; Hegeman Farms Corp. v. Baldwin, 293 U.S. 163; Borden's Co. v. Ten Eyck, 297 U.S. 251. But see Mayflower Farms v. Ten Eyck, 297 U.S. 266. As the states extended their efforts to control various phases of export and import also, questions were raised as to limitations on state power under the Commerce Clause of the Constitution.

Pennsylvania enacted a law including provisions to protect producers which were very similar to those of this New York Act. A concern which operated a receiving plant in Pennsylvania from which it shipped milk to the New York City market challenged the Act upon grounds thus defined by this Court:

The respondent contends that the act, if construed to require it to obtain a license, to file a bond for the protection of producers, and to pay the farmers the prices prescribed by the Board, unconstitutionally regulates and burdens interstate commerce.

Milk Board v. Eisenberg Co., 306 U.S. 346, 350. This Court specifically limiting its judgment to the Act's provisions with respect to license bond and regulation of prices to be paid to producers, id. at 352, considered their effect on interstate commerce "incidental and not forbidden by the Constitution, in the absence of regulation by Congress." Id. at 353.

The present controversy begins where the Eisenberg decision left off. New York's regulations, designed to assure producers a fair price and a responsible purchaser, and consumers a sanitary and modernly equipped handler, are not challenged here but have been complied with. It is only additional restrictions, imposed for the avowed purpose and with the practical effect of curtailing

Page 531

the volume of interstate commerce to aid local economic interests, that are in question here, and no such measures were attempted or such ends sought to be served in the Act before the Court in the Eisenberg case.9

Our decision in a milk litigation most relevant to the present controversy deals with the converse of the present situation. Baldwin v. Seelig, 294 U.S. 511. In that case, New York placed conditions and limitations on the local sale of milk imported from Vermont designed in practical effect to exclude it, while here its order proposes to limit the local facilities for purchase of additional milk so as to withhold milk from export. The State agreed then, as now, that the Commerce...

To continue reading