Commerce Clause

Events

Gibbons v Ogden

1824

• NY granted steamboat monopoly, but federal statute superceded.
• If a state and Congress both pass conflicting laws regulating interstate commerce, the federal law governs pursuant to Congress’s constitutional grant of power to regulate interstate commerce.

• The word “commerce” includes traffic, intercourse and navigation, as well as commodities associated with interstate commerce. With the exception of completely internal commerce, Congress may regulate all commercial activities occurring between states but within one state’s borders.

United States v EC Knight

1895

• In 1890, Congress enacted the Sherman Antitrust Act in an effort to prevent monopolies or restrictive trade agreements that would severely reduce economic competition among businesses.

• The American Sugar Refining Company controlled 98% of the industry.

• Manufacturing affects commerce incidentally and is not a part of it.

• Congress’s power to regulate commerce involves prescribing the rules by which commerce may be governed and is independent of the power to suppress monopoly.

• The power to police activities and provide for the health, safety, and welfare of state citizens is reserved to the states. Hence all regulation of manufacturing should come from state laws because manufacturing is a local activity.

• Congress may not use its Commerce Clause powers to regulate a purely local activity.

• the manufacturing refined sugar occurred entirely within the state and thus was a purely local activity.

• Even though the distribution of sugar occurred across state lines, its manufacture was confined within the borders of a particular state.

• Therefore, Congress’s attempt to regulate through the Sherman Antitrust Act was an unconstitutional abuse of its power.

Champion v Ames

1903

• Congress enacted the Federal Lottery Act of 1895 (FLA) which prohibited the buying and selling of lottery tickets across state lines. Champion brought foreign lottery tickets into America and shipped them across state lines.

• The trafficking of lottery tickets across state lines constitutes interstate commerce that may be prohibited entirely by Congress under the Commerce Clause of the Constitution.

• Congress alone can regulate all aspects of interstate commerce and can do so in whatever manner it deems appropriate.

• Congress’s power to regulate interstate commerce extends to allow it to prohibit certain items from being entered into the stream of interstate commerce.

The Shrevport Rate Case

1914

• Railway charged significantly higher rates for the transportation of goods from Shreveport to Texas cities than from Dallas and Houston to those same Texas cities.

• ICC sought to regulate this situation by fixing the maximum price that could be charged by the railway on its interstate routes to be comparable to its intrastate routes.

• Congress may regulate operations in all matters having a close and substantial relation to interstate traffic, to the efficiency of interstate service, and to the maintenance of conditions under which interstate commerce may be conducted upon fair terms.

Hammer v Dagenhaart

1918

• NOTE: THIS CASE WAS EXPRESSLY OVERTURNED SHORTLY AFTERWARDS.

• In response to increasing concerns over child labor conditions in mills and factories, Congress passed the Keating-Owen Act which prohibited goods made by children under a certain age from being sold in interstate commerce.

• Congress may not use its Commerce Clause power to regulate child labor in the states as this is a purely local matter.
• Production and Manufacturing does not qualify as interstate commerce.

Stafford v Wallace

1922

• In 1921, Congress enacted the Packers and Stockyards Act in an attempt to regulate activities of meat packers that were unfair, discriminatory, or deceptive and encouraged the formation of monopolies.

• Congress does not have to wait until after deleterious economic monopolies have developed to regulate particular industries.

• The Court found that business done in the stockyards was an essential part of interstate commerce and thus subject to national legislation.

Carter v Carter Coal

1936

• Congress passed the Bituminous Coal Conservation Act (BCCA) to create a national commission of coal miners, coal producers, and private citizens to help regulate the coal mining industry

• Act gave them the power to fix the minimum and maximum prices of coal at every mine in the United States.

• compliance with the BCCA was purely voluntary, Congress encouraged compliance by rewarding participating coal mines with a tax rebate for abiding by the BCCA’s provisions.
• Carter (plaintiff) sued his own company, Carter Coal Co. (defendant) to enjoin it from paying the required tax for noncompliance under the BCCA.

• In the Constitution, commerce is defined as “intercourse for the purposes of trade” between and among the several states. Commerce includes all aspects of trade relating to the sale and transportation of commodities. However, commerce has not been defined to include the manufacturing and production of commodities as it occurs within an individual state. 

• The manufacturing of coal at local mines and issues pertaining to the wages, hours, and organizing of local employees are local issues, affecting only the particular state in which these activities take place. Thus, the BCCA is an unconstitutional extension of Congress’s Commerce Clause power because it accords to a national commission the ability to regulate purely local issues

United States v Butler

1936

• In 1933, Congress enacted the Agricultural Adjustment Act (AAA) to allow the Secretary of Agriculture to set limits on the production of certain crops and tax farmers that produced in excess of those limits.
• No. Article I, § 8 vests in Congress the power to levy and collect taxes for the general welfare.
• The framers held differing views on the scope of this power.
• Madison believed the clause merely gives Congress the ability to tax and spend to carry out its other enumerated powers, whereas Hamilton believed the clause gives Congress a wholly separate enumerated power to tax and spend as long as it is in furtherance of the general welfare.
• Hamilton’s view is the correct one: Congress’s power to tax and spend is a separate power not confined by Congress’s other enumerated powers.
• However, this power is not without limits. Any congressional power to tax and spend is limited by Tenth Amendment state sovereignty concerns.
• The AAA violates state sovereignty by seeking to invade states’ rights to regulate and control their own agricultural production.
• Since Congress has no power to regulate and control agricultural production, it follows that Congress may not indirectly accomplish that end through its taxing and spending powers. The decision of the court of appeals is affirmed.

NLRB v. Jones & Laughlin Steel Corp.

1937

• Congress passed the National Labor Relations Act (NLRA) which created the National Labor Relations Board (NLRB) (defendant) to enforce federal fair labor practice standards, including the right of employees to unionize. 
• The power to regulate commerce includes the power to enact all appropriate legislation for its protection or advancement; to adopt measures to promote its growth and insure its safety; and to foster, protect, control, and restrain interstate commercial activities.
• Congress may regulate labor relations under its Commerce Clause power because labor relations have such a close and substantial relationship to interstate commerce that their control is essential to protect that commerce from burdens and obstructions.

Steward Machine Co. v. Davis

1937

In exercising its constitutional spending power, Congress may not enact a law that coerces the states contrary to the autonomy guaranteed to them under the Tenth Amendment.

United States v Darby

1941

• Congress may regulate the labor standards involved in the manufacture of goods for interstate commerce and may exclude from interstate commerce any goods produced under substandard labor conditions.

• Congress passed the Fair Labor Standards Act (FLSA) to prevent the introduction and shipment of goods produced under labor conditions that failed to meet federal standards from entering the stream of interstate commerce.

• While manufacturing is not itself interstate commerce, the shipment of manufactured goods between states falls within the definition of commerce and is thus capable of regulation by Congress under its plenary Commerce Clause powers.

• OVERRULES HAMMER v DAGENHART

Wickard v. Filburn

1942

• New deal program designed to limit wheat production in an effort to stabilize the national price wheat.

• Filburn (plaintiff), a small farmer, was penalized pursuant for producing wheat in excess of the Act's quotas for his personal consumption.

• Congress may regulate local activity if that activity exerts a substantial economic effect on interstate commerce.

Heart of Atlanta Motel, Inc. v. United States

1964

• In 1964, Congress passed the Civil Rights Act (CRA). Title II of the CRA forbids racial discrimination by places of public accommodation such as hotels and restaurants.

• Plaintiff advertises to and hosts primarily out-of-state guests.

• The motel practices a policy of refusing to rent rooms to African Americans 

• Under the Commerce Clause, Congress has the power to remove obstructions and restraints to interstate commerce.

• The unavailability to African Americans of adequate accommodations interferes significantly with interstate travel. Moreover, evidence shows that racial discrimination has a disruptive effect on commercial intercourse. 

• Congress may enact regulations that prevent racially discriminatory policies in hotel accommodations because of the negative effects of those policies on interstate commerce.

United States v Lopez

1995

• In 1990, Congress passed the Gun-Free School Zones Act (GFSZA), making it a federal offense "for any individual knowingly to possess a firearm in a place that the individual knows, or has reasonable cause to believe, is a school zone."

• Lopez (defendant), a student who brought a gun to his high school, was confronted by school authorities, arrested, and charged with violating the GFSZA. 

• Congress may regulate only three broad categories of activities: the channels of interstate commerce; the instrumentalities of, or persons or things in, interstate commerce; and activities that substantially affect or substantially relate to interstate commerce.

• Congress may not, pursuant to its Commerce Clause powers, pass a law that prohibits the possession of a gun near a school.

Gonzales v Raich

2005

• Diane Monson (plaintiffs) were California residents who both legally used marijuana to treat legitimate medical issues.

• Despite receiving approval from California state officials, federal agents seized and destroyed Raich’s marijuana plants.

• Congress has the power to regulate purely local activities that are part of an economic “class of activities” that have a substantial effect on interstate commerce.

• Congress may regulate the use and production of home-grown marijuana as this activity, taken in the aggregate, could rationally be seen as having a substantial economic effect on interstate commerce.

NFIB v. Sebelius

2012

(1) The individual mandate of the Act its a valid exercise of Congress’s power to tax and spend.

The Commerce Clause gives Congress broad power to regulate channels, instrumentalities, and people in interstate commerce, as well as intrastate activities with substantial effects on interstate commerce.

Congress may not compel individuals to participate in commercial activity under this provision.

The individual mandate does not regulate existing commercial activity. Instead, the mandate compels individuals to become active in commerce by purchasing a product on the ground that their failure to do so affects interstate commerce.

The mere possibility that individuals will participate in commercial activity at some point in the future is not enough to justify regulation under the commerce power.

Obesity has contributed more to rising healthcare costs than the uninsured, but the federal government cannot compel people to buy vegetables.

Next, the Necessary and Proper Clause gives Congress power to take actions incidental to the valid exercise of some enumerated power.

This clause alone, cannot justify the individual mandate. Nevertheless, It is reasonable to construe the individual mandate as increasing taxes on those who have a certain income, but choose to go without health insurance. Thus, the individual mandate is within Congress’s power to tax.

Interpretation

1st Era: Broad Commerce Clause / Narrow 10th Amendment

1820 - 1890

2nd Era: Narrowest CC / Broad 10th Am

1890 - 1937

Alternate theories running through the court concurrently

Substantial Economic Effect Test: Congress has the right to regulate all maters that have such a close and substantial relation to interstate commerce that control is essential or appropriate to the security of that traffic.

Stream of Commerce Theory: An act can be regulated by the CC not because it has a substantial effect on commerce, but rather because it can be seen as being within the stream of commerce.

3rd Era: Broadest CC / Narrow 10th Am

1937 - 1990

After all 1937 cases court will uphold laws based on the commerce power if it believes what is being regulated is economic activity, and that it substantially effects interstate commerce.

3 theories:

  1. substantial economic effects theory (now includes manufacturing)
  2. cumulative effects theory
  3. commerce-prohibiting protective technique

Carter Coal: regarding production: Direct logical relation between the production and the interstate commerce.

The Darby Bootstrap: congress may attack any problem (Even one of overwhelmingly local concern) by prohibiting all interested activity associated in any way with it; then, the local activity itself could be prohibited as a means of implementing the ban on interstate transaction.

Commerce Clause for Civil Rights

Narrow CC / Broad 10th

1990 - 2020

Today:
One. Channels
Two. Instrumentalities
Three. Articles moving in interstate commerce
Four. Substantially affecting commerce.

Substantial effect still required
The court will be more skeptical of commerce space regulation if the activity being regulated is essentially non-economic in nature.
Congress cannot help one is not already acted in the commercial mortgage enter that market.

When Congress is engaged in a broad regulation of a commercial activity the court has generally allowed Congress to regulate purely noncommercial and intrastate instances of that activity if it reasonably believes that failure to regulate these instances would jeopardize the success of the overall regulatory scheme. Gonzales