In the 1942 case of Penn Dairies, Inc. v. Milk Control Commission of Pennsylvania, the U.S Supreme Court was tasked with determining whether a state could regulate milk prices for federal entities within its borders. The Milk Control Commission had set minimum prices that dairies were required to charge all customers in Pennsylvania, including federal agencies such as military bases and post offices. Penn Dairies argued that this regulation violated the Supremacy Clause of the Constitution because it interfered with federal procurement policies aimed at obtaining goods at competitive market rates. The Supreme Court ruled in favor of the Milk Control Commission, holding that states have broad powers under their police power to protect public health and welfare which includes setting price controls on essential commodities like milk even if those regulations affect transactions involving federal entities operating within their jurisdiction. This decision affirmed states' rights to enact economic regulations affecting intra-state commerce unless they directly conflict with specific Congressional legislation or policy.

In the dissenting opinion for Penn Dairies, Inc. v. Milk Control Commission of Pennsylvania, Justice Frank Murphy argued that the majority's decision was a departure from established principles of constitutional law and an intrusion into state sovereignty. He contended that states have inherent power to regulate their internal commerce in order to protect public welfare and health; this includes setting minimum prices for milk within their borders as Pennsylvania did here. The federal government’s procurement of goods does not exempt it from obeying these laws unless Congress explicitly provides such exemption, which it had not done so in this case. Therefore, he believed that the Supremacy Clause should not be interpreted so broadly as to invalidate state regulations merely because they affect federal activities indirectly or incidentally.