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
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.
"Dormant" Commerce Clause
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 Inc. v. Healy, 512 U.S. 186 (1994), the Supreme Court struck down a Massachusetts state tax on milk products, as the tax impeded interstate commercial activity by discriminating against non-Massachusetts
The Meaning Of "Commerce"
The meaning of the word "commerce" is a source of controversy, as the Constitution does not explicitly define the word. Some argue that it refers simply to trade or exchange, while others claim that the Framers of the Constitution 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.
In Gibbons v. Ogden, 22 U.S. 1 (1824), the Supreme Court held that intrastate activity could be regulated under the Commerce Clause, provided that the activity is part of a larger interstate commercial scheme. In Swift and Company v. United States, 196 U.S. 375 (1905), the Supreme Court held that Congress had the authority to regulate local commerce, as long as that activity could become part of a continuous “current” of commerce that involved the interstate movement of goods and services.
From about 1905 until about 1937, the Supreme Court used a narrow version of the Commerce Clause. However, beginning with NLRB v. Jones & Laughlin Steel Corp, 301 U.S. 1 (1937), the Court recognized broader grounds upon which the Commerce Clause could be used to regulate state activity. Most importantly, the Supreme Court held 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. Decisions such as NLRB v. Jones, United States v. Darby, 312 U.S. 100 (1941) and Wickard v. Filburn, 317 U.S. 111 (1942) demonstrated the Court's willingness to give an enequivocally broad interpretation of the Commerce Clause. 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.
Shift To A Stricter Interpretation
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 Supreme Court attempted to curtail Congress's broad legislative mandate under the Commerce Clause by returning to a more conservative interpretation of the clause in United States v. Lopez, 514 U.S. 549 (1995). In Lopez, the 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, arguing that possession of a firearm in a school zone would lead to violent crime, thereby affecting general economic conditions. The Supreme Court rejected the government's argument, holding that Congress only has the power to regulate the channels of commerce, the instrumentalities of commerce, and action that substantially affects interstate commerce. The Court 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.”
In Gonzales v. Raich, 545 U.S. 1 (2005), however, the Court did return to its more liberal construction of the Commerce Clause in relation to intrastate production. In Gonzales, the Court upheld federal regulation of intrastate marijuana production.
Recently, the Supreme Court addressed the Commerce Clause in NFIB v. Sebelius, 567 US. 519 (2012). In Sebelius, the Court addressed the individual mandate in the Affordable Care Act (AFA), which sought to require uninsured individuals to secure health insurance in an attempt to stabilize the health insurance market. Focusing on Lopez's requirement that Congress regulate only commercial activity, the Court held that the individual mandate could not be enacted under the Commerce Clause. The Court stated 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.
- ACADEMIC TOPICS
- law and economics
- the Constitution
- trade regulation
- commercial activities
- consumer protection
- oil & gas
- financial services
- food & drug
- business law
- commercial law
- constitutional law
- wex articles