The New York legislature created a three-member commission to set the price of milk, purportedly to ensure “the strength and vigor of the race.” The Milk Control Board declared it a crime to sell milk for less than 9 cents per quart. Leo Nebbia was charged and convicted of violating the law after selling two quarts of milk and a loaf of bread. He brought suit under the Equal Protection Clause and the Due Process Clause of the Fourteenth Amendment.
The Court upheld the law. The Court formally abdicated its responsibility to carefully scrutinize economic regulations, stating that “The courts are without authority either to declare (economic) policy, or when it is declared by the legislature, to override it.” The Court ignored evidence that, like many dairy-related laws passed during this time period, the price-setting law was a fairly obvious piece of economic protectionism driven by entrenched dairy interests who didn’t want price competition. It left only a narrow opening for plaintiffs, stating that such regulations can be “neither arbitrary nor discriminatory.” It remained possible, in theory, to overcome the presumption of constitutionality by showing that regulations had no “reasonable relation to a proper legislative purpose.” But plaintiffs would bear the burden of proof.
This case made the rational basis test the standard in economic liberty cases—a highly deferential test with no textual or historical foundation, advocated by Progressive jurists to justify more government than the Constitution allowed. The limitations that the Court had created doctrinally to ensure that economic regulations were limited to businesses “affected by a public interest” were obliterated.