• Last updated on November 11, 2022

Overturning a state law that conferred a monopoly on existing businesses, the Supreme Court confirmed its commitment to free-market competition.

Responding to a surplus of ice producers throughout the state, an Oklahoma statute of 1925 forbade issuance of new licenses to sell ice except when a necessity could be shown in a particular community. The effect of the law was to prevent the establishment of new ice companies. When Liebmann, an Oklahoma businessman, began to sell ice in Oklahoma City without a license, the New State Ice Company used the statute to put him out of business. The Supreme Court, voting six to two, found that the license requirement was an unconstitutional violation of the substantive liberty protected by the due processDue process, substantive clause of the Fourteenth Amendment. Justice George Sutherland,Sutherland, George;New State Ice Co. v. Liebmann[New State Ice Co. v. Liebmann] an articulate defender of economic freedom, emphasized that the effect of the statute was to shut out new enterprises and to confer a monopoly on existing companies. In a long dissent, Justice Louis D. BrandeisBrandeis, Louis D.;New State Ice Co. v. Liebmann[New State Ice Co. v. Liebmann] responded that state legislatures should have discretion to determine whether there was a need to eliminate destructive competition. It was necessary, moreover, to allow legislatures to experiment in order “to meet changing social and economic needs.”Monopolistic practicesBusiness, regulation of;New State Ice Co. v. Liebmann[New State Ice Co. v. Liebmann]Monopolistic practices

Although New State Ice was never directly overturned, it soon disappeared as the Court moved in the direction favored by Brandeis, recognizing a broad legislative authority to regulate business. At the end of the twentieth century, communities commonly restricted the numbers of licenses issued for the sale of alcoholic beverages or for the operation of taxi services. Nevertheless, the decision remained controversial. Proponents of free-market economics view the Oklahoma law as a prime example of the kind of unnecessary legislation that protects vested interests and stifles competition.[case]New State Ice Co. v. Liebmann[New State Ice Co. v. Liebmann]


Due process, substantive

Ferguson v. Skrupa

Categories: History