The "negative" aspect of the Commerce Clause prohibits economic protectionism, that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors. Thus, state statutes that clearly discriminate against interstate commerce are routinely struck down unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism.
Petitioner milk buyers, a creamery and a dairy, purchased raw milk outside of Massachusetts, but did business in Massachusetts. After milk prices plummeted, respondent Massachusetts Department of Food and Agriculture issued a pricing order that taxed all the raw milk sold by out of state dealers to Massachusetts retailers. This amounted to about 97 percent of the state's supply. The resulting revenue was then disbursed as a subsidy to Massachusetts dairy farmers. Petitioners filed an action to challenge the pricing order as a violation of the Commerce Clause. The state's supreme court upheld the pricing order. On appeal, the Court reversed.
Is the challenged state department order violative of the Commerce Clause?
Negative Commerce Clause jurisprudence had long forbidden state tariffs because they discriminated against interstate commerce by burdening out-of-state competitors to the benefit of in-state businesses. The Court explained that a state could not use its legitimate powers to tax and to subsidize state businesses to effect the illegitimate aim of imposing what was in effect a tariff. The Court held that the order violated the Commerce Clause because, like a tariff, it benefited in-state economic interests by burdening out-of-state competitors, such as the milk buyers.