New York established price
controls for milk at 9 cents per quart. Nebbia sold some milk for less,
and was fined. He appealed.
At the time, the retail
price of milk was below the production cost, so New York milk producers
were going out of business.
Nebbia argued that price
controls were an unconstitutional interference with the freedom of
contract included within the Due
Process Clause of the 14th
Amendment.
The US Supreme Court upheld
the price control law.
The US Supreme Court found
that government can interfere with freedom of contract only to serve a valid police purpose of protecting public health, public safety or
public morals.
In this case, the Court
found that milk is essential to good health, and can't be stored or
shipped easily, so there was a public health issue because New York
needed to ensure that local farmers would continue to produce milk for
the people.
"In the absence of
other constitutional restrictions, a State is free to adopt whatever
economic policy may reasonably be deemed to promote public welfare, and
to enforce that policy by legislation adapted to its purpose...If the
laws passes are neither arbitrary nor discriminatory, the requirements
of due process are
satisfied."
