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The state of South Dakota operated a cement plant. A substantial percentage of the plant's production was sold to buyers outside the state. One such customer was Reeves, Inc., a concrete distributor in Wyoming that obtained over 90 percent of its cement from the state-run plant. In 1978, for economic reasons, the South Dakota plant began supplying in-state customers before honoring other commitments. Reeves, Inc. challenged South Dakota's "hoarding" of resources.

Did South Dakota's preferential system violate the Commerce Clause?

In a 5-to-4 decision, the Court reaffirmed its holding in Hughes v. Alexandria Scrap Corp. and found that "'[n]othing 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 Court found that South Dakota was acting as a "market participant" rather than a "market regulator," and was capable of withdrawing from the interstate market if an in-state shortage arose. The Court rejected arguments that cement was a "natural resource" to which South Dakota had sought to limit outside access.