Reeves, Inc. v. Stake

447 U.S. 429, 100 S. Ct. 2271, 65 L. Ed. 2d 244, 1980 U.S. LEXIS 40

• Court: Supreme Court of the United States
• Decided: June 19, 1980
• Docket: 79-677
• Status: Published

Opinions

Mr. Justice Blackmun

delivered the opinion of the Court.

The issue in this case is whether, consistent with the Commerce Clause, U. S. Const., Art. I, § 8, cl. 3, the State of South Dakota, in a time of shortage, may confine the sale of the cement it produces solely to its residents.

I

In 1919, South Dakota undertook plans to build a cement plant. The project, a product of the State’s then prevailing Progressive political movement, was initiated in response to recent regional cement shortages that “interfered with and delayed both public and private enterprises,” and that were “threatening the people of this state.” Eakin v. South Dakota State Cement Comm’n, 44 S. D. 268, 272, 183 N. W. 651, 652 (1921).¹ In 1920, the South Dakota Cement Commission anticipated “[t]hat there would be a ready market for the. entire output of the plant within the state.” Report of State Cement Commission 9 (1920). The plant, however, located at Rapid City, soon produced more cement than South Da-kotans could use. Over the years, buyers in no less than nine nearby States purchased cement from the State’s plant. App. 26. Between 1970 and 1977, some 40% of the plant’s output went outside the State.

The plant’s list of out-of-state cement buyers included petitioner Reeves, Inc. Reeves is a ready-mix concrete² distributor organized under Wyoming law and with facilities in Buffalo, Gillette, and Sheridan, Wyo. Id,., at 15. From the beginning of its operations in 1958, and until 1978, Reeves purchased about 95% of its cement from the South Dakota plant. Id., at 15 and 22. In 1977, its purchases were $1,172,000. Id., at 17. In turn, Reeves has supplied three northwestern Wyoming counties with more than half their ready-mix concrete needs. Id., at 15. For 20 years the relationship between Reeves and the South Dakota cement plant was amicable, uninterrupted, and mutually profitable.

As the 1978 construction season approached, difficulties at the plant slowed production. Meanwhile, a booming construction industry spurred demand for cement both regionally and nationally. Id., at 13. The plant found itself unable to meet all orders. Faced with the same type of “serious cement shortage” that inspired the plant’s construction, the Commission “reaffirmed its policy of supplying all South Dakota customers first and to honor all contract commitments, with the remaining volume allocated on a first come, first served basis.” Ibid3

Reeves, which had no pre-existing long-term supply contract, was hit hard and quickly by this development. On June 30, 1978, the plant informed Reeves that it could not continue to fill Reeves’ orders, and on July 5, it turned away a Reeves truck. Id., at 17-18. Unable to find another supplier, id., at 21, Reeves was forced to cut production by 76% in mid-July. . Id., at 20.

On July 19, Reeves brought this suit against the Commission, challenging the plant’s policy of preferring South Dakota buyers, and seeking injunctive relief. Id., at 3-10. After conducting a hearing and receiving briefs and affidavits, the District Court found no substantial issue of material fact and permanently enjoined the Commission’s practice. The court reasoned that South Dakota’s “hoarding” was inimical to the national free market envisioned by the Commerce Clause. Id., at 27-30.

The United States Court of Appeals for the Eighth Circuit reversed. Reeves, Inc. v. Kelley, 586 F. 2d 1230, 1232 (1978). It concluded that the State had “simply acted in a proprietary capacity,” as permitted by Hughes v. Alexandria Scrap Corp., 426 U. S. 794 (1976). Petitioner sought certiorari. This Court granted the petition, vacated the judgment, and remanded the case for further consideration in light of Hughes v. Oklahoma, 441 U. S. 322 (1979). Reeves, Inc. v. Kelley, 441 U. S. 939 (1979). On remand, the Court of Appeals distinguished that case.⁴ Again relying on Alexandria Scrap, the court abided by its previous holding. Reeves, Inc. v. Kelley, 603 F. 2d 736 (1979). We granted Reeves’ petition for certiorari to consider once again the impact of the Commerce Clause on state proprietary activity. 444 U. S. 1031 (1980).⁵

II

A

Alexandria Scrap concerned a Maryland program designed to remove abandoned automobiles from the State’s roadways and junkyards. To encourage recycling, a “bounty” was offered for every Maryland-titled junk car converted into scrap. Processors located both in and outside Maryland were eligible to collect these subsidies. The legislation, as initially enacted in 1969, required a processor seeking a bounty to present documentation evidencing ownership of the wrecked car. This requirement however, did not apply to “hulks,” inoperable automobiles over eight years old. In 1974, the statute was amended to extend documentation requirements to hulks, which comprised a large majority of the junk cars being processed. Departing from prior practice, the new law imposed more exacting documentation requirements on out-of-state than in-state processors. By making it less remunerative for suppliers to transfer vehicles outside Maryland, the reform triggered a “precipitate decline in the number of bounty-eligible hulks supplied to appellee’s [Virginia] plant from Maryland sources.” 426 U. S., at 801. Indeed, “[t]he practical effect was substantially the same as if Maryland had withdrawn altogether the availability of bounties on hulks delivered by unlicensed suppliers to licensed non-Maryland processors.” Id., at 803, n. 13; see id., at 819 (dissénting opinion).

Invoking the Commerce Clause, a three-judge District Court struck down the legislation. 391 F. Supp. 46 (Md. 1975). It observed that the amendment imposed “substantial burdens upon the free flow of interstate commerce,” id., at 62, and reasoned that the discriminatory program was not the least disruptive means of achieving the State’s articulated objective. Id., at 63. See generally Pike v. Bruce Church, Inc., 397 U. S. 137, 142 (1970).⁶

This Court reversed. It recognized the persuasiveness of the lower court’s analysis if the inherent restrictions of the Commerce Clause were deemed applicable. In the Court’s view, however, Alexandria Scrap did not involve “the kind of action with which the Commerce Clause is concerned.” 426 U. S., at 805. Unlike prior cases voiding state laws inhibiting interstate trade, “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,” id., at 806, “as a purchaser, in effect, of a potential article of interstate commerce,” and has restricted “its trade to its own citizens or businesses within the State.” Id., at 808.⁷

Having characterized Maryland as a market participant, rather than as a market regulator, the Court found no reason to “believe the Commerce Clause was intended to require independent justification for [the State’s] action.” Id., at 809. The Court couched its holding in unmistakably broad terms. “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.” Id., at 810 (footnote omitted).⁸

B

The basic distinction drawn in Alexandria Scrap between States as market participants and States as market regulators makes good sense and sound law. As that case explains, the Commerce Clause responds principally to state taxes and regulatory measures impeding free private trade in the national marketplace. Id., at 807-808, citing. H. P. Hood & Sons v. Du Mond, 336 U. S. 525, 539 (1949) (referring to “home embargoes,” “customs duties,” and “regulations” excluding imports). There is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market. See L. Tribe, American Constitutional Law 336 (1978) (“the commerce clause was directed, as an historical matter, only at regulatory and taxing actions taken by states in their sovereign capacity”). The precedents comport with this distinction.⁹

Restraint in this area is also counseled by considerations of state sovereignty,¹⁰ the role of each State “ 'as guardian and trustee for its people,’ ” Heim v. McCall, 239 U. S. 175, 191 (1915), quoting Atkin v. Kansas, 191 U. S. 207, 222-223 (1903),¹¹ and "the long recognized right of trader or manufacturer, engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal.” United States v. Colgate & Co., 250 U. S. 300, 307 (1919).¹² Moreover, state proprietary activities may be, and often are, burdened with the same restrictions imposed on private market participants.¹³ Evenhandedness suggests that, when acting as proprietors, States should similarly share existing freedoms from federal constraints, including the inherent limits of the Commerce Clause. See State ex rel. Collins v. Senatobia Blank Book & Stationery Co., 115 Miss. 254, 260, 76 So. 258, 260 (1917); Tribune Printing & Binding Co. v. Barnes, 7 N. D. 591, 597, 75 N. W. 904, 906 (1898). Finally, as this case illustrates, the competing considerations in cases involving state proprietary action often will be subtle, complex, politically charged, and difficult to assess under traditional Commerce Clause analysis. Given these factors, Alexandria Scrap wisely recognizes that, as a rule, the adjustment of interests in this context is a task better suited for Congress than this Court.

III

South Dakota, as a seller of cement, unquestionably fits the “market participant” label more comfortably than a State acting to subsidize local scrap processors. Thus, the general rule of Alexandria Scrap plainly applies here.¹⁴ Petitioner argues, however, that the exemption for marketplace participation necessarily admits of exceptions. While conceding that possibility, we perceive in this case no sufficient reason to depart from the general rule.

In finding a Commerce Clause violation, the District Court emphasized “that the Commission . . . made an election to become part of the interstate commerce system.” App. 28. The gist of this reasoning, repeated by petitioner here, is that one good turn deserves another. Having long exploited the interstate market, South Dakota should not be permitted to withdraw from it when a shortage arises. This argument is not persuasive. It is somewhat self-serving to say that South Dakota has “exploited” the interstate market. An equally fair characterization is that neighboring States long have benefited from South Dakota's foresight and industry. Viewed in this light, it is not surprising that Alexandria Scrap rejected an argument that the 1974 Maryland legislation challenged there was invalid because cars abandoned in Maryland had been processed in neighboring States for five years. As in Alexandria Scrap, we must conclude that “this chronology does not distinguish the case, for Commerce Clause purposes, from one in which a State offered [cement] only to domestic [buyers] from the start.” 426 IT. S., at 809.¹⁵

Our rejection of petitioner’s market-exploitation theory fundamentally refocuses analysis. It means that to reverse we would have to void a South Dakota “residents only” policy even if it had been enforced from the plant’s very first days. Such a holding, however, would interfere significantly with a State’s ability to structure relations exclusively with its own citizens. It would also threaten the future fashioning of effective and creative programs for solving local problems and distributing government largesse. See n. 1, supra. A healthy regard for federalism and good government renders us reluctant to risk these results.

“To stay experimentation in things social and economic is a grave responsibility. Denial of the right to experiment may be fraught with serious consequences to the Nation. It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” New State Ice Co. v. Liebmann, 285 U. S. 262, 311 (1932) (Brandéis, J., dissenting).

B

Undaunted by these considerations, petitioner advances four more arguments for reversal:

First, petitioner protests that South Dakota’s preference for its residents responds solely to the “non-governmental ob-jectiv[e]” of protectionism. Brief for Petitioner 25. Therefore, petitioner argues, the policy is per se invalid. See Philadelphia v. New Jersey, 437 U. S. 617, 624 (1978).

We find the label “protectionism” of little help in this context. The State’s refusal to sell to buyers other than South Dakotans is “protectionist” only in the sense that it limits benefits generated by a state program to those who fund the state treasury and whom the State was created to serve. Petitioner’s argument apparently also would characterize as “protectionist” rules restricting to state residents the enjoyment of state educational institutions, energy generated by a state-run plant, police and fire protection, and agricultural improvement and business development programs. Such policies, while perhaps “protectionist” in a loose sense, reflect the essential and patently unobjectionable purpose of state government — to serve the citizens of the State.¹⁶

Second, petitioner echoes the District Court’s warning:

“If a state in this union, were allowed to hoard its commodities or resources for the use of their own residents only, a drastic situation might evolve. For example, Pennsylvania or Wyoming might keep their coal, the northwest its timber, and the mining states their minerals. The result being that embargo may be retaliated by embargo and commerce would be halted at state lines.” App. 29.

See, e. g., Baldwin v. Montana Fish & Game Comm’n, 436 U. S. 371, 385-386 (1978). This argument, although rooted in the core purpose of the Commerce Clause, does not fit the present facts. Cement is not a natural resource, like coal, timber, wild game, or minerals. Cf. Hughes v. Oklahoma, 441 U. S. 322 (1979) (minnows); Philadelphia v. New Jersey, supra (landfill sites); Pennsylvania v. West Virginia, 262 U. S. 553 (1923) (natural gas); West v. Kansas Natural Gas Co., 221 U. S. 229 (1911) (same); Note, 32 Rutgers L. Rev. 741 (1979). It is the end product of a complex process whereby a costly physical plant and human labor act on raw materials. South Dakota has not sought to limit access to the State's limestone or other materials used to make cement. Nor has it restricted the ability of private firms or sister States to set up plants within its borders. Tr. of Oral Arg. 4. Moreover, petitioner has not suggested that South Dakota possesses unique access to the materials needed to produce cement.¹⁷ Whatever limits might exist on a State’s ability to invoke the Alexandria Scrap exemption to hoard resources which by happenstance are found there, those limits do not apply here.

Third, it is suggested that the South Dakota program is infirm because it places South Dakota suppliers of ready-mix concrete at a competitive advantage in the out-of-state market; Wyoming suppliers, such as petitioner, have little chance against South Dakota suppliers who can purchase cement from the State’s plant and freely sell beyond South Dakota’s borders.

The force of this argument is seriously diminished, if not eliminated, by several considerations. The argument necessarily implies that the South Dakota scheme would be unobjectionable if sales in other States were totally barred. It therefore proves too much, for it would tolerate even a greater measure of protectionism and stifling of interstate commerce than the challenged system allows. See K. S. B. Technical Sales Corp. v. North Jersey Dist. Water Supply Comm’n, 75 N. J. 272, 298, 381 A. 2d 774, 787 (1977) (“It would be odd indeed to find that when a state becomes less parochial . . . its purpose becomes suspect under the Commerce Clause”). Cf. Pike v. Bruce Church, Inc., 397 U. S., at 142 (“And the extent of the burden that will be tolerated will of course depend ... on whether [the state interest] could be promoted as well with a lesser impact on interstate activities”). Nor is it to be forgotten that Alexandria Scrap approved a state program that “not only . . . effectively protect [ed] scrap processors with existing plants in Maryland from the pressures of competitors with nearby out-of-state plants, but [that] implicitly offer [ed] to extend similar protection to any competitor . . . willing to erect a scrap processing facility within Maryland’s boundaries.” 391 F. Supp., at 63. Finally, the competitive plight of out-of-state ready-mix suppliers cannot be laid solely at the feet of South Dakota. It is attributable as well to their own States’ not providing or attracting alternative sources of supply and to the suppliers’ own failure to guard against shortages by executing long-term supply contracts with the South Dakota plant.

In its last argument, petitioner urges that, had South Dakota not acted, free market forces would have generated an appropriate level of supply at free market prices for all buyers in the region. Having replaced free market forces, South Dakota should be forced to replicate how the free market would have operated under prevailing conditions.

This argument appears to us to be simplistic and speculative. The very reason South Dakota built its plant was because the free market had failed adequately to supply the region with cement. See n. 1, supra. There is no indication, and no way to know, that private industry would have moved into petitioner’s market area, and would have ensured a supply of cement to petitioner either prior to or during the 1978 construction season. Indeed, it is quite possible that petitioner would never have existed — far less operated successfully for 20 years — had it not been for South Dakota cement.¹⁸

C

We conclude, then, that the arguments for invalidating South Dakota’s resident-preference program are weak at best. Whatever residual force inheres in them is more than offset by countervailing considerations of policy and fairness. Reversal would discourage similar state projects, even though this project demonstrably has served the needs of state residents and has helped the entire region for more than a half century. Reversal also would rob South Dakota of the intended benefit of its foresight, risk, and industry.¹⁹ Under these circumstances, there is no reason to depart from the general rule of Alexandria Scrap.

The judgment of the United States Court of Appeals is affirmed.

It is so ordered.

1 It was said that the plant was built because the only cement plant in the State “had been operating successfully for a number of years until it had been bought by the so-called trust and closed down.” Report of South Dakota State Cement Commission 6 (1920). In its report advocating creation of a cement plant, the Commission noted both the substantial profits being made by private producers in the prevailing market, and the fact that producers outside the State were “now supplying all the cement used in” South Dakota. Under the circumstances, the Commission reasoned, it would not be to the “capitalists [’] . . . advantage to build a new plant within the state.” Id., at 8. This skepticism regarding private industry’s ability to serve public needs was a hallmark of Progressivism. See, e. g., R. Hofstadter, The Age of Reform 227 (1955) (“In the Progressive era the entire structure of business . . . became the object of a widespread hostility”). South Dakota, earlier a bastion of Populism, id., at 50, became a leading Progressivist State. See R. Nye, Midwestern Progressive Politics 217-218 (1959); G. Mowry, Theodore Roosevelt and the Progressive Movement 155, and n. 125 (1946). Roosevelt carried South Dakota in the election of 1912, id., at 281, n. 69, and Robert La Follette-on a platform calling for public ownership of railroads and waterpower, see K. MacKay, The Progressive Movement of 1924, pp. 270-271 (app. 4) (1906)-ran strongly (36.9%) in the State in 1924. Congressional Quarterly’s Guide to U. S. Elections 287 (1975).

The backdrop against which the South Dakota cement project was initiated is described in H. Schell, History of South Dakota 268-269 (3d ed. 1975):

“Although a majority of the voters [in 1918] had seemingly subscribed to a state-ownership philosophy, it was a question how far the Republican administration at Pierre would go in fulfilling campaign promises. As [Governor] Norbeclc entered upon his second term, he again urged a state hail insurance law and advocated steps toward a state-owned coal mine, cement plant, and state-owned stockyards. He also recommended an appropriation for surveying dam sites for hydroelectric development. The lawmakers readily enacted these recommendations into law, except for the stockyards proposal. . . .

“. . . In retrospect, [Norbeck’s] program must be viewed as a part of the Progressives’ campaign against monopolistic prices. There was, moreover, the fervent desire to make the services of the state government available to agriculture. . . . These were basic tenets of the Progressive philosophy of government-.”

2 “[C]ement is a finely ground manufactured mineral product, usually gray in color. It is mixed with water and sand, gravel, crushed stone, or other aggregates to form concrete, the rock-like substance that is the most widely used construction material in the world.” Portland Cement Association, The U. S. Cement Industry, An Economic Report 5 (2d ed. 1978). “Ready-mixed concrete is the term applied to ordinary concrete that is mixed at a central depot instead of on the construction site, and is distributed in special trucks.” 4 Encyclopedia Britannica 1077 (1974).

3 It is not clear when the State initiated its policy preferring South Dakota customers. The record, however, shows that the policy was in place at least by 1974. App. 24.

4 We now agree with the Court of Appeals that Hughes v. Oklahoma does not bear on analysis here. That case involved a State’s attempt “ ‘to prevent privately owned articles of trade from being shipped and sold in interstate commerce.’ ” Philadelphia v. New Jersey, 437 U. S. 617, 627 (1978), quoting Foster-Fountain Packing Co. v. Haydel, 278 U. S. 1, 10 (1928). Thus, it involved precisely the type of activity distinguished by the Court in Alexandria Scrap. See 426 U. S., at 806-806.

5 During the pendency of this litigation, economic conditions have permitted South Dakota to discontinue enforcement of its resident-preference policy. We agree with the parties, however, that the case has not become moot. During at least three construction seasons within as many decades the cement plant has been unable, or nearly unable, to satisfy demand. See, e. g., Twelfth Biennial Report of the South Dakota State Cement Commission (1948); App. 23 (affidavit of C. A. Reeves). Under these circumstances, “(1) the challenged action was in its duration too short to be fully litigated prior to its cessation or expiration, and (2) there [is] a reasonable expectation that the same complaining party [will] be subjected to the same action again.” Weinstein v. Bradford, 423 U. S. 147, 149 (1975).

6 Maryland sought to justify its reform as an effort to reduce bounties paid to out-of-state processors on Maryland-titled cars abandoned outside Maryland. The District Court concluded that Maryland could achieve this goal more satisfactorily by simply restricting the payment of bounties to only those cars abandoned in Maryland.

7 The Court invoked this rationale after explicitly reiterating the District Court’s finding that the Maryland program imposed “ ‘substantial burdens upon the free flow of interstate commerce.’ ” 426 U. S., at 804. Moreover, the Court was willing to accept the Virginia processor’s characterization of the Maryland program as “reducing in some manner the flow of goods in interstate commerce.” Id., at 805. Given this concession, we are unable to accept the dissent’s description of Alexandria Scrap as a case in which “we found no burden on commerce,” post, at 451, “concluded that the subsidies . . . erected no barriers to trade,” post, at 452, and determined that the Maryland program did not “cut off,” ibid., or “impede the flow of interstate commerce,” post, at 450. Indeed, even the dissent in the present case recognizes that the Maryland subsidy program “divert[ed] Maryland ‘hulks’ to in-state processors.” Post, at 451. To be sure, Alexandria Scrap rejected the argument that “the bounty program constituted an impermissible burden on interstate commerce.” Ibid, (emphasis added). It did so, however, solely because Maryland had “entered into the market itself.” 426 U. S., at 806. Thus, the two-step analysis distilled by the dissent from Alexandria Scrap, see post, at 451-453, collapses into a single inquiry: whether the challenged “program constituted direct state participation in the market.” Post, at 451. The dissent agrees that that question is to be answered in the affirmative here. Ibid.

8 The dissent’s central criticisms of the result reached here seem to be that the South Dakota policy does not emanate from “the power of governments to supply their own needs,” and that it threatens “ ‘the natural functioning of the interstate market.’ ” Post, at 450. The same observations, however, apply with equal force to the subsidy program challenged in Alexandria Scrap.

9 Alexandria Scrap does not stand alone. In American Yearbook Co. v. Askew, 339 F. Supp. 719 (MD Fla. 1972), a three-judge District Court upheld a Florida statute requiring the State to obtain needed printing services from in-state shops. It reasoned that “state proprietary functions” are exempt from Commerce Clause scrutiny. Id., at 725. This Court affirmed summarily. 409 U. S. 904 (1972). Numerous courts have rebuffed Commerce Clause challenges directed at similar preferences that exist in “a substantial majority of the states.” Note, 58 Iowa L. Rev. 576 (1973). City of Phoenix v. Superior Court, 109 Ariz. 533, 535, 514 P. 2d 454, 456 (1973) (citing American Yearbook to reaffirm Schrey v. Allison Steel Mfg. Co., 75 Ariz. 282, 255 P. 2d 604 (1953)); Denver v. Bossie, 83 Colo. 329, 266 P. 214 (1928); In re Gemmill, 20 Idaho 732, 119 P. 298 (1911); People ex rel. Holland v. Bleigh Constr. Co., 61 Ill. 2d 258, 274-275, 335 N. E. 2d 469, 479 (1975) (citing American Yearbook) ; State ex rel. Collins v. Senatobia Blank Book & Stationery Co., 115 Miss. 254, 76 So. 258 (1917); Allen v. Labsap, 188 Mo. 692, 87 S. W. 926 (1905); Hersey v. Neilson, 47 Mont. 132, 131 P. 30 (1913); Tribune Printing & Binding Co. v. Barnes, 7 N. D. 591, 75 N. W. 904 (1898). See also Dixon-Paul Printing Co. v. Board of Public Contracts, 117 Miss. 83, 77 So. 908 (1918); Luboil Heat & Power Corp. v. Pleydell, 178 Misc. 562, 564, 34 N. Y. S. 2d 587, 591 (Sup. 1942). The only clear departure from this pattern, People ex rel. Treat v. Coler, 166 N. Y. 144, 59 N. E. 776 (1901), drew a strong dissent, and has been uniformly criticized in later decisions. See, e. g., State ex rel. Collins v. Senatobia Blank Book & Stationery Co., supra; Allen v. Labsap, supra.

One other case merits comment. In Bethlehem Steel Corp. v. Board of Commissioners, 276 Cal. App. 2d 221, 80 Cal. Rptr. 800 (1969), the court struck down a California statute requiring the State to contract only with persons who promised to use or supply materials produced in the United States. In Opinion No. 69-253, 53 Op. Cal. Atty. Gen. 72 (1970), the State’s Attorney General reasoned that Bethlehem, Steel similarly prohibited, under the “foreign commerce” Clause, statutes giving a preference to California-produced goods. We have no occasion to explore the limits imposed on state proprietary actions by the “foreign commerce” Clause or the constitutionality of “Buy American” legislation. Compare Bethlehem Steel Corp., supra, with K. S. B. Technical Sales Corp. v. North Jersey Dist. Water Supply Comm’n, 75 N. J. 272, 381 A. 2d 774 (1977). We note, however, that Commerce Clause scrutiny may well be more rigorous when a restraint on foreign commerce is alleged. See Japan Line, Ltd. v. County of Los Angeles, 441 U. S. 434 (1979).

10 See American Yearbook Co. v. Askew, 339 F. Supp., at 725 (“ad hoc” inquiry into burdening of interstate commerce “would unduly interfere with state proprietary functions if not bring them to a standstill”). Considerations of sovereignty independently dictate that marketplace actions involving “integral operations in areas of traditional governmental functions” — such as the employment of certain state workers — may not be subject even to congressional regulation pursuant to the commerce power. National League of Cities v. Usery, 426 U. S. 833, 852 (1976). It follows easily that the intrinsic limits of the Commerce Clause do not prohibit state marketplace conduct that falls within this sphere. Even where “integral operations” are not implicated, States may fairly claim some measure of a sovereign interest in retaining freedom to decide how, with whom, and for whose benefit to deal. The Supreme Court, 1975 Term, 90 Harv. L. Rev. 1, 56, 63 (1976).

11 See Foster-Fountain Packing Co. v. Haydel, 278 U. S., at 13 (“As the representative of its people, the State might have retained the shrimp for consumption and use therein”); Toomer v. Witsell, 334 U. S. 385, 409 (1948) (concurring opinion) (state power to provide for own citizens by developing food supply distinguished from interference with private transactions in food products); Helvering v. Gerhardt, 304 U. S. 405, 427 (1938) (concurring opinion) (“The genius of our government provides that, within the sphere of constitutional action, the people . . . have the power to determine as conditions demand, what services and functions the public welfare requires”).

12 When a State buys or sells, it has the attributes of both a political entity and a private business. Nonetheless, the dissent would dismiss altogether the “private business” element of such activity and focus solely on the State’s political character. Post, at 450. The Court, however, heretofore has recognized that “\V\ike private individuals and businesses, the Government enjoys the unrestricted power to produce its own supplies, to determine those with whom it will deal, and to fix the terms and conditions upon which it will make needed purchases.” Perkins v. Lukens Steel Co., 310 U. S. 113, 127 (1940) (emphasis added). While acknowledging that there may be limits on this sweepingly phrased principle, we cannot ignore the similarities of private businesses and public entities when they function in the marketplace.

13 See, e. g., National League of Cities v. Usery, 426 U. S., at 854, n. 18; New York v. United States, 326 U. S. 572 (1946); United States v. California, 297 U. S. 175 (1936). See also Lafayette v. Louisiana Power & Light Co., 435 U. S. 389 (1978).

14 The criticism received by Alexandria Scrap in part has been directed at its application of the proprietary immunity to state subsidy programs. See Note, 18 B. C. Ind. & Com. L. Rev. 893, 924-925 (1977). But see The Supreme Court, 1975 Term, 90 Harv. L. Rev., at 60-61. We have no occasion here to inquire whether subsidy programs unlike that involved in Alexandria Scrap warrant characterization as proprietary, rather than regulatory, activity. Cf. 18 B. C. Ind. & Com. L. Rev., at 913-915.

15 Alexandria Scrap explained:

“It is trae that the state money initially was made available to licensed out-of-state processors as well as those located within Maryland, and not until the 1974 amendment was the financial benefit channeled, in practical effect, to domestic processors. But this chronology does not distinguish the case, for Commerce Clause purposes, from one in which a State offered bounties only to domestic processors from the start. Regardless of when the State’s largesse is first confined to domestic processors, the effect upon the flow of hulks resting within the State is the same: they will tend to be processed inside the State rather than flowing to foreign processors. But no trade barrier of the type forbidden by the Commerce Clause, and involved in previous eases, impedes their movement out of State. They remain within Maryland in response to market forces, including that exerted by money from the State.” 426 U. S., at 809-810. (Footnote omitted.)

16 Petitioner would distinguish Alexandria Scrap as involving state legislation designed to advance the nonprotectionist goal of environmentalism. This characterization is an oversimplification. The challenged feature of the Maryland program — the discriminatory documentation requirement — was not aimed at improving the environment; indeed by decreasing the profit margin a hulk supplier could expect to receive if he delivered to the most accessible recycling plant, it is likely that the amendment somewhat set back the goal of encouraging hulk processing. The stated justification for the discriminatory regulation — reducing payments to out-of-state processors for recycling of hulks abandoned outside Maryland— was not even mentioned by the Court in rebuffing the Virginia processor’s Commerce Clause challenge. Indeed, the central point of the Court’s analysis was that demonstration of an “independent justification” was unnecessary to sustain the State’s program. See Note, 18 B. C. Ind. & Com. L. Rev., at 927-928. At bottom, the discrimination challenged in Alexandria Scrap was motivated by the same concern underlying South Dakota’s resident-preference policy — a desire to channel state benefits to the residents of the State supplying them. If some underlying “commendable as well as legitimate” purpose, 426 U. S., at 809, is also required, it is certainly present here. In establishing the plant, South Dakota sought the most unstartling governmental goal: improvement of the quality of life in that State by generating a supply of a previously scarce product needed for local construction and governmental improvements. A cement program, to be sure, may be a somewhat unusual or unorthodox way in which to utilize state funds to improve the quality of residents’ lives. But “[a] State’s project is as much a legitimate governmental activity whether it is traditional, or akin to private enterprise, or conducted for profit. ... A State may deem it as essential to its economy that it own and operate a railroad, a mill, or an irrigation system as it does to own and operate bridges, street lights, or a sewage disposal plant. What might have been viewed in an earlier day as an improvident or even dangerous extension of state activities may today be deemed indispensable.” New York v. United States, 326 U. S., at 591 (dissenting opinion).

17 Nor has South Dakota cut off access to its own cement altogether, for the policy does not bar resale of South Dakota cement to out-of-state purchasers. Although the out-of-state buyer in the secondary market will undoubtedly have to pay a markup not borne by South Dakota competitors, this result is not wholly unjust. There should be little question that South Dakota at least could exact a premium on out-of-state purchases to compensate it for the State’s investment and risk in the plan. If one views the added markup paid by out-of-state buyers to South Dakota middlemen as the rough equivalent of this “premium,” the challenged program equates with a permissible result. The “bottom line” of the scheme closely parallels the result in Alexandria Scrap: out-of-state concrete suppliers are not removed from the market altogether; to compete successfully with in-state competitors, however, they must achieve additional efficiencies or exploit natural .advantages such as their location to offset the incremental advantage channeled by the State’s own market behavior to in-state concrete suppliers.

18 Petitioner also seeks to distinguish Alexandria Scrap on the ground that there, unlike here, the State “created” the relevant market. See 426 U. S., at 814-817 (concurring opinion). It is clear, however, that Alexandria Scrap could not, and did not, rest on the notion that Maryland had created the interstate market in hulks. Id., at 809, n. 18. See id., at 824-826, n. 6 (dissenting opinion); Note, 18 B. C. Ind. & Com. L. Rev., at 927; The Supreme Court, 1975 Term, 90 Harv. L. Rev., at 62, n. 27; Note, 34 Wash. & Lee L. Rev. 979, 995 (1977).

19 The risk borne by South Dakota in establishing the cement plant is not to be underestimated. As explained in n. 1, supra, the cement plant was one of several projects through which the Progressive state government sought to deal with local problems. The fate of other similar projects illustrates the risk borne by South Dakota taxpayers in setting up the cement plant at a cost of some $2 million. Thus, “[t]he coal mine was sold in early 1934 for $5,500 with an estimated loss of nearly $175,000 for its fourteen years of operation. The 1933 Legislature also liquidated the state bonding department and the state hail insurance project. The total loss to the taxpayers from the latter venture was approximately $265,000.” H. Schell, History of South Dakota 286 (3d ed. 1975).