Commerce Clause

    The Commerce Clause refers to Article 1, Section 8, Clause 3 of the U.S. Constitution, which gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”

    The Constitution enumerates certain powers for the federal government. The Tenth Amendment provides that any powers that are not delegated to Congress by the Constitution are reserved for the states. Congress has often used the Commerce Clause to justify exercising legislative power over the activities of states and their citizens, leading to significant and ongoing controversy regarding the balance of power between the federal government and the states.

    The Commerce Clause has historically been viewed as both a grant of congressional authority and as a restriction on the regulatory authority of the States. The “dormant” Commerce Clause refers to the prohibition, implicit in the Commerce Clause, against states passing legislation that discriminates against or excessively burdens interstate commerce. Of particular importance here, is the prevention of protectionist state policies that favor state citizens or businesses at the expense of non-citizens conducting business within that state. In West Lynn Creamery, for example, the Supreme Court found that a Massachusetts state tax on milk products, in conjunction with a subsidy program for in-state dairy farmers, functionally violated the dormant commerce clause as it impeded interstate commercial activity by discriminating against non-Massachusetts citizens. 

    The meaning of the word "commerce" is a source of much of the controversy.  The Constitution does not explicitly define the word.  Some argue that it refers simply to trade or exchange, while others claim that the founders intended to describe more broadly commercial and social intercourse between citizens of different states. Thus, the interpretation of "commerce" affects the appropriate dividing line between federal and state power. Moreover, what constitutes "interstate" commercial activity has also been subject to consistent debate.

The Supreme Court provided one of the earliest and most foundational expositions on the Commerce Clause in Gibbons v. Ogden, 22 U.S. 1 (1824). There, the Court found that intrastate activity could be regulated under the Commerce Clause where it was part of a larger interstate commercial scheme. Later, in 1905, the Court used the Commerce Clause to halt price fixing in the Chicago meat industry, when it ruled that Congress had authority to regulate the local meat market under the Sherman Anti-Trust Act. In Swift and Company v. United States, it found that business done even at a purely local level could become part of a continuous “current” of commerce that involved the interstate movement of goods and services.

    Despite these decisions, the Supreme Court pursued a more restrictive approach to the Commerce Clause in the late nineteenth and early twentieth century. This more stringent approach coincided with the Lochner Era, which saw a large number of federal regulations invalidated. In Kidd v. Pearson, for example, the Court employed a narrow construction of of "interstate," finding that the intrastate manufacturing of liquor was not subject to the Commerce Clause and could therefore be regulated at the state level, even where the liquor was to be exported. Even during this restrictive period, however, the Court did exhibit a willingness to uphold Congressional regulation substantiated on the basis of "morality." While the "commercial" nature of these regulations were debatable, the Court, nonetheless, upheld federal legislation governing activities like prostitution and the distribution of lottery tickets.

    The early period of the New Deal in many ways typified this restrictive approach to the Commerce Clause. After the Great Depression, the federal government sought to expand its regulatory reach into realms—such as regulation of in-state industrial production and worker hours and wages—that would not necessarily be considered “commerce” under the more traditional definitions set forth in Gibbons and Swift. As a result, prior to 1937, the Court frustrated many of these regulatory efforts by striking down New Deal legislation as applied to certain plaintiffs. In Hammer v. Dagenhart the Court struck down federal child labor regulations declaring that they fell outside th ambit of the Commerce Clause and "invad[ed] the powers reserved to the States." Later, in Schechter Poultry Corp. v. US the Court found that the National Industrial Recovery Act was unconstitutional as applied to a poultry seller who bought and sold chicken only within the state of New York. The Court also found the Bituminous Coal Conservation Act unconstitutional in Carter v. Carter Coal Corp. There, the Court distinguished the production of coal from interstate commercial activity and found that federal regulation of this activity overstepped the boundaries of Congress's constitutional mandate. These cases represent the Court's attempt to limit the reach of Congress pursuant to the Commerce Clause. The Court largely felt that by allowing the federal government to regulate activity that had only an "indirect" effect on interstate commerce, Congress's regulatory authority would become functionally boundless. This analytical approach is representative of a proximate cause-like analysis the Court began to develop during this era. Exemplified in Shreveport, the Court sought to assess whether the federally regulated activity had "a close and substantial relation" to interstate commerce. 

    The willingness of the Supreme Court to strike down federal legislation, during a period of regulatory expansion, created an antagonistic relationship between the Judiciary and the political branches of government. Following his convincing reelection, President Roosevelt responded to these attacks on his legislation by proposing what is known as the “Court-packing plan.” This plan proposed the appointment of additional justices to help, what Roosevelt classified as, an overburdened Supreme Court. The plan, which was largely unpopular and viewed as a political machination, would have allowed Roosevelt to create a liberal majority that would support his legislative endeavors. 

    Although the plan was defeated, the composition of the Court soon changed and the proposal was credited with stimulating a change in the Court’s view on New Deal legislation. Beginning with the landmark case of NLRB v. Jones & Laughlin Steel Corp., the Court recognized broader grounds upon which the Commerce Clause could be used to regulate state activity—most importantly, that activity was commerce if it had a “substantial economic effect” on interstate commerce or if the “cumulative effect” of one act could have an effect on such commerce. 301 U.S. 1 (1937). Shortly thereafter, the Court began to embrace a wholesale shift towards a deferential approach to federal regulation under the Commerce Clause. Decisions like Darby and Wickard demonstrated the Court's willingness to embrace regulation of transparently intrastate activity. Recognizing the development of a dynamic and integrated national economy, the Court employed a broad interpretation of the Commerce Clause, reasoning the even local activity will likely affect the larger interstate commercial economic scheme.

    This reasoning marked a shift in American jurisprudence and regulation. Under this broader conception of the Commerce Clause, Congress had license to enact far-reaching legislation in a variety of contexts, even those that were ostensibly unrelated to commerce. The Civil Rights Act of 1964, for example, which outlawed segregation and prohibited discrimination against African-Americans, was passed under the Commerce Clause. The Act allowed the federal government to charge non-state actors with Equal Protection violations, which it had been unable to do up to that point because of the Fourteenth Amendment’s limited application to state actors. In Heart of Atlanta Motel v. United States, Title II of the Civil Rights Act, which prohibits, among other things, discriminatory refusal of accommodation, was challenged as an impermissible application of the Commerce Clause. The Court rejected this challenge, declaring that Congress may "prohibit racial discrimination by motels serving travelers" because such discrimination, even if local, is a restraint on interstate commerce.  The Court also rejected a Commerce Clause challenge to Title II in Katzenbach v. McClung. There, the Court determined that a restaurant serving interstate travelers or food that had traveled across state lines was subject to regulation passed under the Commerce Clause. The Court noted "that racial discrimination in restaurants had a direct and adverse effect on the free flow of interstate commerce." 

    From the NLRB decision in 1937 until 1995, the Supreme Court did not invalidate a single law on the basis of the Commerce Clause. In 1995, the Rehnquist Court attempted to curtail Congress's broad legislative mandate under the Commerce Clause by returning to a more conservative interpretation of the clause in Lopez v. United States. In Lopez defendant in this case was charged with carrying a handgun to school in violation of the federal Gun Free School Zones Act of 1990. The defendant argued that the federal government had no authority to regulate firearms in local schools, while the government claimed that this fell under the Commerce Clause since possession of a firearm in a school zone would lead to violent crime, thereby affecting general economic conditions. The Chief Justice rejected the government's argument and held that Congress only has the power to regulate the channels of commerce, the instrumentalities of commerce, and action that substantially affects interstate commerce. He declined to further expand the Commerce Clause, writing that “[t]o do so would require us to conclude that the Constitution's enumeration of powers does not presuppose something not enumerated, and that there never will be a distinction between what is truly national and what is truly local. This we are unwilling to do.” The Lopez holding was later affirmed when the Court overturned the Violence Against Women Act for its reliance on the Commerce Clause in making domestic violence against women a federal crime.

    Taken together, Lopez and Morrison emphasize a distinction between economic and non-economic activity, with the Court hesitating to allow federal regulation of the latter in deference to traditional state authority. Additionally, these two cases reveal the Court's hesitancy to uphold legislation that relies heavily on inference to show a connection with interstate commerce. In Gonzales v. Raich, however, the Court did return to its more liberal construction of the Commerce Clause in relation to intrastate production. There, the Court upheld federal regulation of intrastate marijuana production. Reminiscent of the Wickard decision, Raich reasons that even intrastate production of a good our commodity will likely affect an interstate commercial scheme.

    Recently, the Supreme Court provided a formative exposition on the Commerce Clause when treating the constitutionality of the Affordable Care Act (AFA). In NFIB v. Sebelius, the Court addressed the individual mandate in the AFA, which requires uninsured individuals secure health insurance in an attempt to stabilize the health insurance market.  Focusing on Lopez's requirement that Congress regulate only commercial activity, Chief Justice Roberts reasoned that the individual mandate could not be enacted under the Commerce Clause. Chief Justice Roberts contended that requiring the purchase of health insurance under the AFA was not the regulation of commercial activity so much as inactivity and was, accordingly, impermissible under the Commerce Clause. In concurrence, Justice Ginsburg disagreed with this approach calling it "retrogressive." In looking more comprehensively at the larger scheme of American health insurance, Justice Ginsburg found the creation of the individual mandate to be a valid exercise of Congressional legislative authority.

 

See constitutional clauses.

Last updated in June of 2016 by Emanuel Francone.