West Lynn Creamery v. Healy

Facts

Between 1980 and 1990, Massachusetts dairy farmers began to lose market share to lower cost dairy farmers in neighboring States. In response, Massachusetts passed a statute that required milk dealers to pay a monthly “premium payment” based on the amount of fluid milk products sold into a fund. Then the State distributed money from that fund to in-state dairy farmers (producers) to help them compete against out of state farmers. West Lynn Creamery is a milk dealer licensed to do business in Massachusetts. It purchased raw milk and then processed, packaged and sold it to wholesalers, retailers and other milk dealers. About 97% of the raw milk it purchased is produced by out-of-state farmers. As a result the tax on Massachusetts farmers is returned to them, but the tax on the milk from out-of-state farmers is not. The net effect was to raise the after-tax price paid by the dealers such that Massachusetts farmers who produce at a higher cost can sell at or below the price charged by lower cost out of state producers. The goal of the statute is met because local goods would constitute a larger share and goods with an out of state source would lose their market share. The out-of-state producers cannot lower their price further because the government sets minimum milk prices. The Creamery sued in Massachusetts state court and lost.