Nothing in the purposes animating the Commerce Clause prohibits a state, in the absence of congressional action, from participating in the market and exercising the right to favor its own citizens over others.
The state of South Dakota constructed a cement plant in response to a regional cement shortage. After several years, the plant began producing more cement than the state's residents could use, so it began selling the cement to out-of-state buyers. Reeves Inc. (buyer), a company from Wyoming, relied on the plant for 95% of its cement supplies. Eventually, the demand for cement rose, while production was slowed, thus resulting in a shortage. The state then reaffirmed its policy of supplying in-state customers first. The buyer then initiated an action against the state alleging that the policy violated the Commerce Clause.
Did the state’s preferential treatment of in-state buyers of concrete from a state-owned concrete plant constitute a violation of the commerce clause?
The court upheld the state's decision of giving preference on cement sales to in-state buyers. There was nothing in the Commerce Clause that prohibited a state, in the absence of Congressional action, from participating in the market and exercising such right to favor its own citizens. Here, the state was acting as a market participant where Congress had not taken any regulatory action. It was not a “market regulator,” thus capable of withdrawing from the interstate market in the scenario that its own state suffers from shortage. Thus, South Dakota can favor its in-state buyers over other states in terms of sales.