Commerce Clause

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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, among states, and with the Indian tribes.”

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 Constitution does not explicitly define the word “commerce” leading to wide debate as to what powers section 8, Clause 3 grants congress. 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. 

Courts have generally taken a broad interpretation of the commerce clause for much of United States history. In 1824’s Gibbons v. Ogden, 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 1905’s Swift and Company v. United States, 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.

For a brief period between 1905 and 1937, the Supreme Court narrowed their interpretation of the Commerce Clause in what has now become known as the Lochner era. Courts during this era experimented with the idea that the Commerce Clause does not empower congress to pass laws which impede an individual’s right to enter a business contract.

However, beginning with NLRB v. Jones & Laughlin Steel Corp in 1937, the Court began to recognize 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, and Wickard v. Filburn demonstrated the Court's newfound willingness to give an unequivocally broad interpretation of the Commerce Clause. From the NLRB decision in 1937 until 1995, the Supreme Court did not invalidate a single law on the basis of overstepping the Commerce Clause’s grant of power.

In United States v. Lopez (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 Lopez, the defendant 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 on grounds 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.”

Nonetheless, Lopez did not indicate a full return to the Lochner era conception of the Commerce Clause. For example, in Gonzales v. Raich, the Court returned to its more liberal construction of the Commerce Clause in relation to intrastate production when it upheld federal regulation of intrastate marijuana production.

In 2012, the Supreme Court again addressed the Commerce Clause in NFIB v. Sebelius. In Sebelius, the Court addressed the individual mandate in the Affordable Care Act (ACA), which required uninsured individuals to secure health insurance or pay a monetary penalty 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 ACA was not the regulation of commercial activity so much as inactivity and was, accordingly, impermissible under the Commerce Clause. Nonetheless, the individual mandate was allowed to stand because it could reasonably be characterized as a tax. 

While most discussion surrounding the Commerce Clause revolves around the federal government, it indirectly also affects state governments through what’s known as the 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 is the prevention of protectionist state policies that favor state citizens or businesses at the expense of non-citizens conducting business within that state. For example, in West Lynn Creamery Inc. v. Healy the Supreme Court struck down a Massachusetts state tax on milk products because the tax impeded interstate commercial activity by discriminating against non-Massachusetts citizens and businesses. 

[Last updated in July of 2022 by the Wex Definitions Team]