The provision of the U.S. Constitution that gives Congress exclusive power over trade activities among the states and with foreign countries and Indian tribes.
Article 1, Section 8, Clause 3, of the Constitution empowers Congress "to regulate Commerce with foreign Nations, and among several States, and with the Indian Tribes." The term commerce as used in the Constitution means business or commercial exchanges in any and all of its forms between citizens of different states, including purely social communications between citizens of different states by telegraph, telephone, or radio, and the mere passage of persons from one state to another for either business or pleasure.
Intrastate, or domestic, commerce is trade that occurs solely within the geographic borders of one state. As it does not move across state lines, intrastate commerce is subject to the exclusive control of the state.
Interstate commerce, or commerce among the several states, is the free exchange of commodities between citizens of different states across state lines. Commerce with foreign nations occurs between citizens of the United States and citizens or subjects of foreign governments and, either immediately or at some stage of its progress, is extraterritorial. Commerce with Indian tribes refers to traffic or commercial exchanges involving both the United States and American Indians.
The Commerce Clause was designed to eliminate an intense rivalry between the groups of those states that had tremendous commercial advantage as a result of their proximity to a major harbor, and those states that were not near a harbor. That disparity was the source of constant economic battles among the states. The exercise by Congress of its regulatory power has increased steadily with the growth and expansion of industry and means of transportation.
Power to Regulate
The Commerce Clause authorizes Congress to regulate commerce in order to ensure that the flow of interstate commerce is free from local restraints imposed by various states. When Congress deems an aspect of interstate commerce to be in need of supervision, it will enact legislation that must have some real and rational relation to the subject of regulation. Congress may constitutionally provide for the point at which subjects of interstate commerce become subjects of state law and, therefore, state regulation.
Although the U.S. Constitution places some limits on state power, the states enjoy guaranteed rights by virtue of their reserved powers pursuant to the tenth amendment. A state has the inherent and reserved right to regulate its domestic commerce. However, that right must be exercised in a manner that does not interfere with, or place a burden on, interstate commerce, or else Congress may regulate that area of domestic commerce in order to protect interstate commerce from the unreasonable burden. Although a state may not directly regulate, prohibit, or burden interstate or foreign commerce, it may incidentally and indirectly affect it by a bona fide, legitimate, and reasonable exercise of its police powers. States are powerless to regulate commerce with Indian tribes.
Although Congress has the exclusive power to regulate foreign and interstate commerce, the presence or absence of congressional action determines whether a state may act in a particular field. The nature of the subject of commerce must be examined in order to decide whether Congress has exclusive control over it. If the subject is national in character and importance, thereby requiring uniform regulation, the power of Congress to regulate it is plenary, or exclusive.
It is for the courts to decide the national or local character of the subject of regulation, by balancing the national interest against the state interest in the subject. If the state interest is slight compared with the national interest, the courts will declare the state statute unconstitutional as an unreasonable burden on interstate commerce.
The U.S. Supreme Court, in the case of Southern Pacific Co. v. Arizona, 325 U.S. 761, 65 S. Ct. 1515, 89 L. Ed. 1915 (1945), held that an Arizona statute that prohibited railroads within the state from having more than 70 cars in a freight train, or 14 cars in a passenger train, was unconstitutional. The purpose of the legislation, deemed a safety measure, was to minimize accidents by reducing the lengths of trains passing through the state. Practically speaking, however, the statute created an unreasonable burden on interstate commerce, as trains entering and leaving the state had to stop at the borders to break up a 100-car freight train into two trains and to put on additional crews, thus increasing their operating costs. The Court held that the means used to achieve safety was unrealistic and that the increase in the number of trains and train operators actually enhanced the likelihood of accidents. It balanced the national interest in the free flow of interstate commerce by a national railway system, against the state interest of a dubious safety measure. It decided that the value of the operation of a uniform, efficient railway system significantly outweighed that of a state law that has minimal effect.
However, where there is an obvious compelling state interest to protect, state regulations are constitutional. Restrictions on the width and weight of trucks passing through a state on its highways are valid, because the state, pursuant to its police power, has a legitimate interest in protecting its roads.
Where the subject is one in which Congress or the state may act, a state may legislate unless Congress does so. Thereafter, a valid federal regulation of the subject supersedes conflicting state legislative enactments and decisions and actions of state judicial or administrative bodies.
If Congress has clearly demonstrated its intent to regulate the entire field, then the state is powerless to enact subsequent legislation even if no conflict exists between state and federal law. This type of congressional action is known as federal preemption of the field. Extensive federal regulation in a particular area does not necessarily result in federal preemption of the field. In determining whether a state may regulate a given field, a court evaluates the purpose of the federal regulations and the obligations imposed, the history of state regulation in the field, and the legislative history of the state statute. If Congress has not preempted the field, then state law is valid, provided that it is consistent with, or supplements, the federal law.
State health, sanitary, and quarantine laws that interfere with foreign and interstate commerce no more than is necessary in the proper exercise of the state's police power are also valid as long as they do not conflict with federal regulations on the subject. Such laws must have some real relation to the objects named in them, in order to be upheld as valid exercises of the police power of the state. A state may not go beyond what is essential for self-protection by interfering with interstate transportation into or through its territory.
A state may not burden interstate commerce by discriminating against it or persons engaged in it or the citizens or property originating in another state. However, the regulation of interstate commerce need not be uniform throughout the United States. Congress may devise a national policy with due regard for varying and fluctuating interests of different regions.
Acts Constituting Commerce
Whether any transaction constitutes interstate or intrastate commerce depends on the essential character of what is done and the surrounding circumstances. The courts take a commonsense approach in examining the established course of business in order to distinguish where interstate commerce ends and local commerce begins. If activities that are intrastate in character have such a substantial effect on interstate commerce that their control is essential to protect commerce from being burdened, Congress may not be denied the power to exercise that control.
In 1995, for the first time in nearly 60 years, the U.S. Supreme Court held that Congress had exceeded its power to regulate interstate commerce. In United States v. Lopez, 514 U.S. 549, 115 S. Ct. 1624, 131 L. Ed. 2d 626 (1995), the Court ruled 5–4 that Congress had exceeded its Commerce Clause power in enacting the Gun-Free School Zones Act of 1990 (18 U.S.C.A. § 921), which prohibited the possession of firearms within 1,000 feet of a school.
In reaching its decision, the Court took the various tests used throughout the history of the Commerce Clause to determine whether a federal statute is constitutional, and incorporated them into a new standard that specifies three categories of activity that Congress may regulate under the clause: (1) the channels of interstate commerce, (2) persons or things in interstate commerce or instrumentalities of interstate commerce, and (3) activities that have "a substantial relation to interstate commerce … i.e., those activities that substantially affect interstate commerce." The Court then applied this new standard to the 1990 Gun-Free School Zones Act and found that the statute could be evaluated under the third category of legislation allowed by the Commerce Clause. But the Court noted that the act was a criminal statute that had nothing to do with commerce and that it did not establish any jurisdictional authority to distinguish it from similar state regulations. Because the statute did not "substantially affect interstate commerce," according to the Court, it went beyond the scope of the Commerce Clause and was an unconstitutional exercise of Congress's legislative power.
The Court stressed that federal authority to regulate interstate commerce cannot be extended to the point that it obliterates the distinction between what is national and what is local and creates a completely centralized government. Although recognizing the great breadth of congressional regulatory authority, the Court in Lopez attempted to create a special protection for the states by providing for heightened scrutiny of federal legislation that regulates areas of traditional concern to the states.
In a novel application of the Commerce Clause, a federal court decided in United States v. Bishop Processing Co., 287 F. Supp. 624 (D.C. Md. 1968), that the movement of air pollution across state lines from Maryland to Delaware constituted interstate commerce that is subject to congressional regulation. The plaintiff, the United States, sought an injunction under the federal Clean Air Act (42 U.S.C.A. §§ 7401 et seq. ) to prevent the operation of the Maryland Bishop Processing Company, a fat-rendering plant, until it installed devices to eliminate its emission of noxious odors. The defendant plant owners argued, among other contentions, that Congress was powerless to regulate their business because it was clearly an intrastate activity. The court disagreed. Foul-smelling air pollution adversely affects business conditions, depresses property values, and impedes industrial development. These factors interfere with interstate commerce, thereby bringing the plant within the scope of the provisions of the federal air-pollution law.
The power of Congress to regulate commerce also extends to contracts that substantially relate to interstate commerce. For example, Congress may regulate the rights and liabilities of employers and employees, as labor disputes adversely affect the free flow of commerce. Otherwise, contracts that do not involve any property or activities that move in interstate commerce are not ordinarily part of interstate commerce.
Congress acts within its power when it regulates transportation across state lines. The essential nature of the transportation determines its character. Transportation that begins and ends within a single state is intrastate commerce and is generally not within the scope of the Commerce Clause. If part of the journey passes through an adjoining state, then the transportation is interstate commerce, as long as the travel across state lines is not done solely to avoid state regulation. Commerce begins with the physical transport of the product or person and ends when either reaches the destination. Every aspect of a continuous passage from a point in one state to a point in another state is a transaction of interstate commerce. A temporary pause in transportation does not automatically deprive a shipment of its interstate character. For a sale of goods to constitute interstate commerce, interstate transportation must be involved. Once goods have arrived in one state from another state, their local sale is not interstate commerce.
Interstate commerce also includes the transmission of intelligence and information—whether by telephone, telegraph, radio, television, or mail—across state lines. The transmission of a message between points within the same state is subject to state regulation.
Agencies and Instrumentalities of Commerce
Congress, acting pursuant to the Commerce Clause, has the exclusive power to regulate the agencies and instrumentalities of interstate and foreign commerce, such as private and common carriers. A bridge is an instrumentality of interstate commerce when it spans navigable waters or is used by travelers and merchandise passing across state lines. Navigable waters are instrumentalities of commerce that are subject to the control of federal and state legislation. A bridge over a navigable stream located in a single state is also subject to concurrent control by the state.
An office used in an interstate business is an instrumentality of interstate commerce. Railroads and tracks, terminals, switches, cars, engines, appliances, equipment used as components of a system engaged in interstate traffic, and vessels (including ferries and tugs) are also subject to federal regulation. Warehouses, grain elevators, and other storage facilities also might be considered instrumentalities of interstate commerce. Although local in nature, wharves are related to commerce and are subject to control by Congress, or by the state if Congress has not acted.
The interstate commerce act of 1887, which Congress enacted to promote and facilitate commerce by ensuring equitable interaction between carriers and the public, provided for the creation of the interstate commerce commission. As designated by statute, the commission had jurisdiction and supervision of such carriers and modes of transportation as railroads, express-delivery companies, and sleepingcar companies. Concerning the transportation of persons and property, the commission had the power to enforce the statutory requirement that a certificate of public convenience and necessity be obtained before commencing or terminating a particular transportation service. The commission adopted reasonable and lawful rules and regulations to implement the policies of the law that it administered. The ICC was abolished by Congress in 1995 after Congress deregulated the trucking industry.
Business Affecting Commerce
Not every private enterprise that is carried on chiefly or in part by means of interstate shipments is necessarily so related to the interstate commerce as to come within the regulating power of Congress. The original construction of a factory building does not constitute interstate commerce, even though the factory is used after its construction for the manufacture of goods that are to be shipped in interstate commerce and even though a substantial part of the material used in the building was purchased in different states and transported in interstate commerce to the location of the plant.
Under some circumstances, however, businesses—such as advertising firms, hotels, restaurants, companies that engage in the leasing of personal property, and companies in the entertainment and sports industries—may be regulated by the federal government. A business that operates primarily intrastate activities, such as local sporting or theatrical exhibits, but makes a substantial use of the channels of interstate trade, develops an interstate character, thereby bringing itself within the ambit of the Commerce Clause.
Discrimination as a Burden on Commerce
A state has the power to regulate intrastate commerce in a field where Congress has not chosen to legislate, as long as there is no injustice or unreasonable discrimination in favor of intrastate commerce as against interstate commerce. In a Colorado case, out-of-state students at the University of Colorado sued the state board of regents to recover the higher costs of the tuition paid by them as compared to tuition paid by in-state residents. They contended that their classification as out-of-state students—which violated, among other things, the Commerce Clause—constituted unreasonable discrimination in favor of in-state students. The court held that the statutes that classified students who apply for admission to the state university into in-state and out-of-state students did not violate the Commerce Clause because the classification was reasonable. A state statute affecting interstate commerce is not upheld merely because it applies equally to, and does not discriminate between, residents and nonresidents of the state, as it can otherwise unduly burden interstate commerce.
Discrimination must be more than merely burdensome; it must be unduly or unreasonably burdensome. One state required a licensed foreign corporation with retail stores in the state to collect a state sales tax on the sales it made from its mail-order houses located outside the state to customers within the state. The corporation contended that this statute discriminated against its operations in interstate commerce. Other out-of-state mail-order houses that were not licensed as foreign corporations in the state did not have to collect tax on their sales within the state. The court decided that the state could impose this burden of tax collection on the corporation because the corporation was licensed to do business in the state and it enjoyed the benefits flowing from its state business. Such a measure was not an unreasonable burden on interstate commerce.
A state may not prohibit the entry of a foreign corporation into its territory for the purpose of engaging in foreign or interstate commerce, nor can it impose conditions or restrictions on the conduct of foreign or interstate business by such corporations. When intrastate business is involved, it may do so.
Similarly, a private person who conducts a business that has a significant effect on interstate commerce in a discriminatory manner is not beyond the reach of lawful congressional regulation.
racial discrimination in the operation of public accommodations, such as restaurants and lodgings, affects interstate commerce by impeding interstate travel and is prohibited by the civil rights act of 1964 (codified in scattered sections of 42 U.S.C.A.). In Heart of Atlanta Motel v. United States, 379 U.S. 241, 85 S. Ct. 348, 13 L. Ed. 2d 258 (1964), a local motel owner had refused to accept black guests. He argued that since his motel was a purely local operation, Congress exceeded its authority in legislating as to whom he should accept as guests. The U.S. Supreme Court held that the authority of Congress to promote interstate commerce encompasses the power to regulate local activities of interstate commerce, in both the state of origin and the state of destination, when those activities would otherwise have a substantial and harmful effect upon the interstate commerce. The Court concluded that in this case, the federal prohibition of racial discrimination by motels serving travelers was valid, as interstate travel by blacks was unduly burdened by the established discriminatory conduct.
State Taxation of Nondomiciliary Corporations
In February 2000, the U.S. Supreme Court added another layer to its sometimes complicated Commerce Clause jurisprudence when it held that the Commerce Clause forbids states from taxing income received by nondomiciliary corporations for unrelated business activities that constitute a discrete business enterprise. Hunt-Wesson, Inc. v. Franchise Tax Bd. of Cal., 528 U.S. 458, 120 S.Ct. 1022, 145 L. Ed. 2d 974 (2000)
Hunt-Wesson Inc., a California-based corporation, was the successor in interest to the Beatrice Companies Inc., the original taxpayer in the case. During the years in question, Beatrice was domiciled in Illinois but was engaged in the food business in California and throughout the world. For the purposes of this lawsuit, Beatrice's unitary operations consisted only of those corporate family business units engaged in its global food business. From 1980 to 1982, Beatrice also owned foreign subsidiaries that were not part of its food operations, but that formed a discrete business enterprise. For the purposes of this lawsuit, the parties stipulated that these foreign subsidiaries were part of the company's non-unitary business operations.
These non-unitary foreign subsidiaries paid dividends to Beatrice of $27 million for 1980, $29 million for 1981, and $19 million for 1982, income that both parties agree was not subject to California tax under the Commerce Clause. In the operation of its unitary business, Beatrice took out loans and incurred interest expenses of $80 million for 1980, $55 million for 1981, and $137 million for 1982. None of those loans was related to borrowings of Beatrice's non-unitary subsidiaries that made the dividend payments to Beatrice.
On its franchise tax returns, Beatrice claimed deductions for its non-unitary interest expenses in calculating its net income apportioned to California. Following an audit, the California Franchise Tax Board applied the "interest offset" provision in California Revenue and Taxation Code Section 24344. Under that section, multistate corporations may take a deduction for interest expenses, but only to the extent that the expenses exceed their out-of-state income arising from the unrelated business activity of a discrete business enterprise; that is, the non-unitary income that the parties agree that California could not otherwise tax. The Section 24344 interest offset resulted in the tax board reducing Beatrice's interest-expenses deduction on a dollar-for-dollar basis by the amount of the constitutionally exempt dividend income that Beatrice received from its non-unitary subsidiaries.
Beatrice responded by filing suit in California state court to challenge the constitutionality of the law. The trial court struck down Section 24344 on the ground that it allowed the state to indirectly tax non-unitary business income that the Commerce Clause prohibits from being taxed directly. The California Court of Appeals reversed, and Hunt-Wesson, having intervened in the lawsuit as Beatrice's successor-in-interest, appealed.
In a unanimous opinion written by Justice stephen breyer, the U.S. Supreme Court struck down California Revenue and Taxation Code Section 24344. In reducing an out-of-state company's tax deduction for interest expenses by an amount that is equal to the interest and dividends that the company receives from the unrelated business activities of its foreign subsidiaries, Breyer wrote, Section 24344 enables California to circumvent the federal Constitution.
States may tax a proportionate share of the income of a nondomiciliary corporation that carries out a particular business both inside and outside the state, Breyer observed. But states may not, without violating the Commerce Clause, tax nondomiciliary corporations for income earned from unrelated business activities that constitute a discrete business enterprise. Thus, what California called a deduction limitation would amount to an impermissible tax under the Commerce Clause.
License and Privilege Tax
A state may not impose a tax for the privilege of engaging in, and carrying on, interstate commerce, but it might be permitted to require a license if doing so does not impose a burden on interstate commerce. A state tax on the use of an instrumentality of commerce is invalid, but a tax may be imposed on the use of goods that have traveled in interstate commerce, such as cigarettes. A state may not levy a direct tax on the gross receipts and earnings derived from interstate or foreign commerce, but it may tax receipts from intrastate business or use the gross receipts as the measurement of a legitimate tax that is within the state's authority to levy.
A state may tax the sale of gasoline or other motor fuels that were originally shipped from another state, after the interstate transaction has ceased. As long as the sale is made within the state, it is immaterial that the gasoline to fulfill the contract is subsequently acquired by the seller outside the state and shipped to the buyer. The state may tax the sale of this fuel to one who uses it in interstate commerce, as well as the storage or withdrawal from storage of imported motor fuel, even though it is to be used in interstate commerce.
Although radio and television broadcasting may not be burdened by state-privilege taxes as far as they involve interstate commerce, broadcasting involving intrastate activity may be subject to local taxation.
A state may impose a nondiscriminatory tax for the use of its highways by motor vehicles in interstate commerce if the charge bears a fair relation to the cost of the construction, maintenance, and regulation of its highways.
The Commerce Clause does not prohibit a state from imposing a tax on a natural resource that is produced within its borders and that is sold primarily to residents of other states. In Commonwealth Edison Co. v. Montana, 453 U.S. 609, 101 S. Ct. 2946, 69 L. Ed. 2d 884 (1981), the U.S. Supreme Court upheld a 30 percent severance tax levied by Montana on the production of coal, the bulk of which was exported for sale to other states. The amount of the tax was challenged as an unconstitutional burden on interstate commerce. The Court reasoned that the Commerce Clause does not give the residents of one state the right to obtain resources from another state at what they consider a reasonable price, for that right would enable one state to control the development and depletion of natural resources in another state. If that right were recognized, state and federal courts would be forced to formulate and to apply a test for determining what is a reasonable rate of taxation on legitimate subjects of taxation, tasks that rightfully belong to the legislature.
Crimes Involving Commerce
Congress may punish any conduct that interferes with, obstructs, or prevents interstate and foreign commerce, whether it occurs within one state or involves a number of states. The mann act—which outlaws the transportation any woman or girl in interstate or foreign commerce for the purpose of prostitution, debauchery, or other immoral acts—is a constitutional exercise of the power of Congress to regulate commerce (18 U.S.C.A. §§ 2421–2424 ). The counterfeiting of notes of foreign corporations and bills of lading is a crime against interstate commerce. Under federal statutes, the knowing use of a common carrier for the transportation of obscene matter in interstate or foreign commerce for the purpose of its sale or distribution is illegal. This prohibition applies to the importation of obscene matter even though it is for the importer's private, personal use and possession and not for commercial purposes.
The Anti-Racketeering Act (18 U.S.C.A. § 1951 ) makes racketeering by robbery or personal violence that interferes with interstate commerce a federal offense. The provisions of the consumer credit protection act (15 U.S.C.A. § 1601 et seq. ) prohibiting extortion have been upheld, as extortion is deemed to impose an undue burden on interstate commerce. Anyone who transports stolen goods of the value of $5,000 or more in interstate or foreign commerce is subject to criminal prosecution pursuant to the National Stolen Property Act (18 U.S.C.A. § 2311 et seq. ).
Cauthorn, Kim. 1995. "Supreme Court Interprets Scope of Congressional Authority under Interstate Commerce Clause." Houston Lawyer 33 (July–August).
McJohn, Stephen M. 1995. "The Impact of United States v. Lopez: The New Hybrid Commerce Clause." Duquesne Law Review 34.
Prentice, E. Parmalee and John G. Egan. 1981. The Commerce Clause of the Federal Constitution. Littleton, Colo.: F.B. Rothman.
Ramaswamy, M. 1948. The Commerce Clause in the Constitution of the United States. New York: Longmans, Green.
"Commerce Clause." West's Encyclopedia of American Law. . Encyclopedia.com. (October 15, 2017). http://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/commerce-clause
"Commerce Clause." West's Encyclopedia of American Law. . Retrieved October 15, 2017 from Encyclopedia.com: http://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/commerce-clause
COMMERCE CLAUSE. The judicial history of the commerce clause of the U.S. Constitution (Article I, section 8, paragraph 3) can be divided into three eras: the first 150 years after the Constitution went into effect in 1789; the 1937–1995 period; and 1995 and beyond. Gibbons v. Ogden (1824) defined the first era. In that case, Chief Justice John Marshall wrote for the Supreme Court that commerce encompassed "every species of commercial intercourse" and that if Congress had legislated in the area, federal power was plenary. Such breadth did not make the unimplemented power exclusive, however, and it was ultimately the Court, under Chief Justice Roger B. Taney, that resolved the issue of the extent of state power in the absence of federal legislation. After several indecisive attempts, Justice Benjamin R. Curtis (Cooley v. Board of Wardens of Port of Philadelphia ) set forth a "selective exclusiveness" formula, holding that when Congress was silent, the states might act, unless the specific subject required "uniform national control." The ruling left the clause itself the most important basis for judicial review in limitation of state power prior to ratification of the Fourteenth Amendment (1868). Of the approximately 1,400 cases that reached the Supreme Court under the clause before 1900, the overwhelming proportion found the Court curbing state legislation for invading an area proper to federal commerce concern. A classic example was the case of Wabash, St. Louis, and Pacific Railway Company v. Illinois (1886), denying the right of a state to regulate that part of an interstate railroad journey that was entirely within its borders on the ground that Congress's power was exclusive. Congress responded with the Interstate Commerce Act of 1887, granting the federal government positive supervisory power over the railroads. Congressional extension of such authority limited the ability of the courts to negate it by interpretation (until after 1900), and commerce power in the transportation field was mostly nominal.
Positive federal use of the clause grew rapidly from the 1890s on. The Sherman Antitrust Act (1890) found constitutional justification in the clause, as it seemed to afford broad federal authority to prohibit combinations in restraint of trade and general market monopolization. The Court, however, relying on a distinction between production and distribution, held the statute inapplicable to a sugar monopoly that had acquired nearly complete control over the manufacture of refined sugar (United States v. E. C. Knight Company ). "Commerce succeeds to manufacture, and is not part of it," stated Chief Justice Melville W. Fuller: "Commerce among the states does not begin until goods commence their final movement from the state of their origin to that of their destination." Over the next forty years, the Court applied the same restrictive principle to the control of mining, fishing, farming, oil production, and the generation of hydroelectric power. Similarly, the Court, in E. C. Knight, evolved another restrictive formula, the "direct effect" doctrine, which again ensured legal limits on federal use of the clause: only if a local activity directly affected interstate commerce was federal control valid.
Regulation-minded progressive leaders of the early twentieth century sought to evoke judicial rulings that would expand the sweep of the clause. In Swift v. United States (1905), Justice Oliver Wendell Holmes Jr. responded. "Commerce among the States is not a technical legal conception, but a practical one, drawn from the course of business," he argued, setting forth a "stream of commerce" concept according to which the purchase of cattle, while a local process, became a federally regulatable one when it was part of an interstate commercial transaction. In the Minnesota Rate Cases (1913) and the Shreveport Rate Case (1914), the Court went further. In the former, Justice Charles Evans Hughes made clear that "direct" regulation of foreign or interstate commerce by the states was out of the question. In the latter, he took the next step, stating that "wherever interstate and intra-state activities are so related that the government of the one involves the control of the other, it is Congress, and not the States that is entitled to prescribe the final and dominant rule." But the social reform climate of the Progressive Era also intervened to affect expansion of the commerce power. When the Court sought to extend application of the Sherman Antitrust Act to labor organizations (Loewe v. Lawlor ), Congress acted to retract such coverage in the Clayton Antitrust Act (1914).
The Progressives sought to use the clause in another novel way. In the effort to evolve a national police power, the clause was made the basis for legislation prohibiting lottery tickets, impure food and drugs, adulterated meat, transportation of women across state lines for immoral purposes, and, ultimately, child labor. The Court generally sustained such use, holding that Congress could validly close the channels of interstate commerce to items that were dangerous or otherwise objectionable. The Court made an exception with regard to child labor and returned to limiting federal power. In this case, the Court drew a much-criticized distinction between prohibiting the use of the facilities of interstate commerce to harmful goods, on the one hand, and using the commerce clause to get at the conditions under which goods entering that commerce were produced, on the other (Hammer v. Dagenhart ).
The 1920s found similar interpretive strands continued. The movement of stolen cars (and ultimately inter-state shipment of stolen goods in general) was prohibited (Brooks v. United States ). And whereas child-labor restrictions were again overthrown, federal authority was further extended in other areas through the widening of the "stream of commerce" concept to the regulation of the business of commission men and of livestock in the nation's stockyards. It became possible to regulate not only the "stream" but the "throat" through which commerce flowed (Stafford v. Wallace ). In Railroad Commission of Wisconsin v. Chicago, Burlington and Quincy Railroad Company (1922), federal altering of intrastate rail rates was affirmed, the Court holding that the nation could not exercise complete effective control over inter-state commerce without incidental regulation of intrastate commerce.
On this broad judicial view of the clause, New Dealers of the early 1930s based the National Industrial Recovery Act (1933) and other broad measures, such as the Bituminous Coal Act (1935). Judicial response to these acts was not only hostile but entailed a sharp return to older formulas—especially the "production-distribution" and "direct effect" distinctions of the 1895 E. C. Knight case (Schechter Poultry Corporation v. United States ). Charging that the Court had returned the country to a "horse-and-buggy" definition of interstate commerce, Franklin D. Roosevelt—especially after that body persisted in its narrow views on commerce (Carter v. Carter Coal Company )—tried to "pack" the Court in hopes of inducing it to embrace broad commerce precedents. The success he achieved was notable. Starting with National Labor Relations Board v. Jones and Laughlin Steel Corporation in 1937, the Court not only rejected the whole battery of narrow commerce formulas (a process it extended in United States v. Darby Lumber Company ) but also validated the clause as the principal constitutional base for later New Deal programs, authorizing broad federal control of labor relations, wages and hours, agriculture, business, and navigable streams. In 1946, Justice Frank Murphy stated: "The federal commerce power is as broad as the economic needs of the nation" (North American Company v. Securities and Exchange Commission). The 1960s demonstrated that it was also as broad as the social needs of the nation. In the Civil Rights Act of 1964, Congress banned racial discrimination in all public accommodations. The constitutional foundations for the statute were the commerce clause and the equal protection clause of the Fourteenth Amendment. In Heart of Atlanta Motel, Inc. v. United States (1964), the Supreme Court found the commerce clause alone fully adequate to support the statute.
United States v. Lopez (1995) signaled that a more conservative Supreme Court may be ready to usher in a new era of commerce clause jurisprudence. In Lopez, the Court, in an opinion written by Chief Justice William H. Rehnquist, declared unconstitutional a 1990 congressional statute that had made it a federal crime to possess a gun on school property. The chief justice emphasized "first principles" and federalism and concluded that the possession of a gun in a local school zone was not an economic activity that might, through repetition elsewhere, "substantially affect" interstate commerce. Rather, he argued, the statute in question was an attempt by Congress to exercise a nonexistent national police power over a subject—criminal law—that was primarily of state and local concern. Significantly, Lopez marked only the second occasion since 1937 that the Court had held that Congress had exceeded its authority under the commerce clause, and the other occasion—National League of Cities v. Usery (1976)—had been overruled less than a decade after it had been decided (Garcia v. San Antonio Metro Transit Authority ).
The conservative Court's reluctance to permit Congress to exercise broad legislative authority under the commerce clause was again in evidence at the dawn of the twenty-first century. In United States v. Morrison (2000), the Court, in another opinion by Chief Justice Rehnquist, struck down the federal Violence Against Women Act on the ground that Congress lacked authority under the commerce clause to enact it because it did not involve economic or interstate activity. Importantly, though, both Lopez and Morrison were five-to-four decisions, so the final chapter on Congress's authority under the commerce clause has yet to be written.
Benson, Paul R., Jr. The Supreme Court and the Commerce Clause, 1937–1970. New York: Dunellen, 1970.
Epstein, Richard. "Constitutional Faith and the Commerce Clause." Notre Dame Law Review 71 no. 2 (January 1996): 167–193.
Frankfurter, Felix. The Commerce Clause under Marshall, Taney, and Waite. Chapel Hill: University of North Carolina Press, 1937.
Ramaswamy, M. The Commerce Clause in the Constitution of the United States. New York: Longman's Green, 1948.
See alsoCarter v. Carter Coal Company ; Constitution of the United States ; Cooley v. Board of Wardens of Port of Philadelphia ; Gibbons v. Ogden ; Interstate Commerce Laws ; National Labor Relations Board v. Jones and Laughlin Steel Corporation ; Schechter Poultry Corporation v. United States ; Sherman Antitrust Act ; Shreveport Rate Case ; Stafford v. Wallace ; United States v. E. C. Knight Company .
"Commerce Clause." Dictionary of American History. . Encyclopedia.com. (October 15, 2017). http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/commerce-clause
"Commerce Clause." Dictionary of American History. . Retrieved October 15, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/commerce-clause