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C, Commerce Power.

Edited By: Kermit L. Hall, James W. Ely Jr., Joel B. Grossman

From: The Oxford Companion to the Supreme Court of the United States (2nd Edition)

Edited By: Kermit L. Hall

From: Oxford Constitutions (http://oxcon.ouplaw.com). (c) Oxford University Press, 2021. All Rights Reserved. Subscriber: null; date: 28 October 2021

Commerce Power.

A strong impetus for calling the Constitutional Convention of 1787 was the need for national controls over the nation’s commerce, which had become chaotic as many states had erected barriers to interstate trade in an effort to protect business enterprise for its own citizens. Thus, little discussion surrounded the adoption of clause 3 in Article I, section 8 of the Constitution, which empowered Congress “to regulate Commerce with foreign nations, among the several States, and with the Indian Tribes.” Unlike the rules governing domestic commerce, those dealing with the Indian tribes and with foreign nations have occasioned relatively minor controversy over the years. Court decisions have upheld virtually all legislation dealing with *Native Americans, including the prohibition of the sale of intoxicating liquors on tribal reservations. Similarly, congressional power over foreign commerce has been held to be complete and exclusive, including authority to set tariffs, regulate shipping, aviation, communications, and to prohibit imports and establish embargoes against unfriendly foreign countries.

However, the phrase, “to regulate Commerce … among the several States,” generated more litigation between 1789 and 1950 than any other clause in the Constitution and eventually became the single most important source of national power. Chief Justice John *Marshall set the stage for the future commercial development of the nation in *Gibbons v. Ogden (1824) when, in the Supreme Court’s initial interpretation of the Commerce Clause, he spoke in broad, expansive language in holding New York’s grant of a monopoly of steam navigation on its waters to be in conflict with a federal statute. Marshall maintained that commerce was not simply traffic but “intercourse” and included navigation (pp. 189–190). Moreover, the federal power, said Marshall, is “complete in itself” and “acknowledges no limitations, other than are prescribed in the Constitution” (pp. 196–197). The word “among,” Marshall went on, means “intermingled with” and thus commerce among the states does not stop at state boundaries but “may be introduced into the interior” (p. 194). Nevertheless Marshall recognized state autonomy, declaring that the clause did not comprehend that commerce which is completely within a state and “which does not extend to or affect other states” (p. 194). Thus he rejected exclusive national authority over all internal commerce. Maintaining the same constitutional posture in *Willson v. Blackbird Creek Marsh Co. (1829), Marshall observed that the Commerce Clause in its “dormant state” without supporting federal law was not a bar to state regulations of navigable waterways.

Conflicts with State Powers.

Until the passage of the Interstate Commerce Act of 1887 and the *Sherman Antitrust Act of 1890, the national government rarely resorted to the Commerce Clause as authority for national regulations of any kind. Thus, litigation reaching the Court for roughly the first century after the adoption of the Constitution involved allegations that state regulatory laws constituted unconstitutional burdens on interstate commerce.

Before the *Civil War, rulings growing out of such conflicts approached sheer confusion until the justices arrived at a formula in *Cooley v. Port Wardens of Philadelphia in 1852. Upholding a state regulation of harbor pilots, the Court adopted the doctrine of *”selective exclusiveness.” In brief, the doctrine states that when the subject matter of the commerce requires a national uniform rule, only Congress may regulate; if, however, the commerce is of a local nature and Congress has not acted, the states may regulate. While the Court finally had a formula to buttress its decisions—and the Cooley case has never been overruled—as the justices soon realized, it could not be applied automatically.

Application of the Cooley rule by the Supreme Court frequently triggered action by Congress. For example, when the railroad industry was in its infancy, the states began to protect the public from exploitation by enacting regulatory measures including the fixing of rates. In Peik v. Chicago and Northwestern Railway Co. (1877), the Supreme Court upheld a Wisconsin law fixing rates on common carriers operating within the state. Even though the state’s regulations might indirectly affect carriers outside its borders, unless Congress intervened, the states were free to act. Within ten years the Court reversed its position, holding in *Wabash, St. Louis & Pacific Railway Co. v. Illinois (1886) that if a railroad was a part of an interstate network, a state might not regulate rates even for the part of the line that lay within its borders. Hence the railroads would be totally unregulated unless Congress filled the breach. It did so with the passage of the Interstate Commerce Act of 1887.

In the first case to arise under the Sherman Antitrust Act, United States v. *E. C. Knight Co. (1895), the government attempted to dissolve a monopoly of sugar processing, charging the American Sugar Refining Company was illegally restraining trade across state lines. The fact that (p. 194) an article was manufactured for export to another state, said the Court, did not make it part of interstate commerce. Within a few years, however, the justices began to retreat from a rigid transportation/manufacturing distinction when in *Swift & Co. v. United States (1905) they agreed unanimously that a price-fixing arrangement among meat packers, although done locally, was indeed a restraint on commerce. Promulgating the “stream of commerce” theory, Justice Oliver Wendell *Holmes, writing for the Court, emphasized that the movement of cattle from one state to another for meat processing and subsequent shipment of meat to other parts of the country constituted a “typical, constantly recurring course,” a current or stream of commerce, and the effect of local price-fixing upon interstate commerce was not “accidental, secondary, remote or merely probable” (pp. 396, 399). By the end of the 1920s the Court had relied on this doctrine to uphold an increasing number of national regulatory measures over business enterprise.

National Police Power.

As the nation expanded and problems began to spill over state borders, pressures increased for congressional action to deal with matters that could no longer be effectively handled at the state level. Since the Constitution nowhere permitted Congress to legislate in behalf of the public health, morals, safety, or welfare, it could do so only by indirection, by relying on a specified power that might be tied to the regulatory measure. It was the Commerce Clause that became the primary vehicle for such regulations. In *Champion v. Ames (1903), the Supreme Court constructed a new theory to uphold a federal statute that prohibited the transport of lottery tickets across state lines. Heretofore Congress could protect the free flow of commerce by keeping the channels free from obstruction but under the new theory articles not harmful to the commerce and harmful intrinsically, but injurious in their general effects, might be prohibited.

From the lottery case it was but a short step to other national police measures such as the *Mann Act of 1910, which made it a crime to transport women across state lines for immoral purposes (upheld in Hoke v. United States, 1913), and the Automobile Theft Act of 1915, which made it a federal offense knowingly to drive a stolen automobile across a state line (upheld in Brooks v. United States, 1925). By barring the use of the channels of interstate commerce to immoral transactions and criminal activities, Congress was able to protect the public from evils that were beyond the competence of the individual states. But in 1918 the Supreme Court once again adhered to the distinction between manufacturing and commerce. With the purpose of outlawing child labor, Congress enacted a statute in 1916 prohibiting the shipment in interstate commerce of products made in factories or mines by children under the age of fourteen. In *Hammer v. Dagenhart (1918), the Court declared that Congress had exceeded its authority. It was permissible to prohibit harmful transactions or adulterated food and drugs from commerce, but it was another matter to prohibit goods, harmless in themselves, that posed no obstruction to commerce. The evil of child labor, declared the Court, involved manufacturing, not commerce, was local in nature, and was thus an inappropriate subject for congressional cognizance.

The New Deal.

After the decision in the Dagenhart case, Congress refrained for some fifteen years from regulating local business activity, but with the near collapse of the nation’s economy in the early thirties and the subsequent election of an administration dedicated to economic recovery, the Congress, pursuing the initiative of President Franklin D. *Roosevelt, resurrected the Commerce Clause. In a series of laws the president and Congress attempted to bring some order to what had been industrial chaos, but until 1937 a majority of the justices maintained the distinction between commerce and manufacturing, between activities that had a direct versus an indirect effect on commerce. As a result much of the early New Deal legislation was consigned to oblivion. After suffering several defeats at the hands of a conservative Supreme Court, President Roosevelt proposed to increase the size of the Court, popularly called the *”court-packing plan,” which would have moderated the conservatism by adding justices of the president’s political and constitutional persuasion. Although the plan was defeated, the threat of interference with judicial integrity may have had the desired effect on judicial propensities, for beginning in 1937 a majority of the justices discarded much of the earlier doctrines restrictive of expansion of national power based on the Commerce Clause.

In a series of cases, the Court abandoned all the old distinctions between manufacturing and commerce, between direct and indirect effects and burdens. Among the most prominent were *National Labor Relations Board v. Jones & Laughlin Steel Corporation (1937), sustaining the National Labor Relations Act of 1935, a law that guaranteed collective bargaining to all employees engaged in the production of goods for interstate commerce; United States v. *Darby Lumber Company (1941), upholding the Fair Labor Standards Act of 1938, which barred the use of interstate commerce to goods made by workers who were not paid a minimum wage of forty cents an hour and guaranteed a forty-hour work week, specifically overruling (p. 195) Hammer v. Dagenhart; and *Wickard v. Filburn (1942), upholding the Agricultural Adjustment Act of 1938, which regulated agricultural production affecting interstate commerce.

Commerce Power Today.

During the fifty years following the post–New Deal era, Congress expanded national regulation into myriad aspects of the national life, using the Commerce Clause as the constitutional base, all with the Supreme Court’s approval. One of the most significant areas of national intervention was that of racial discrimination. In 1964 Congress enacted a *Civil Rights Act banning racial discrimination in hotels, motels, restaurants, theaters, and motion picture houses throughout the country, now based on the Commerce Clause rather than the *Fourteenth Amendment. In *Heart of Atlanta Motel, Inc. v. United States (1964) and *Katzenbach v. McClung (1964), the Supreme Court found that racial discrimination had a deleterious effect on interstate commerce and was a proper object for congressional attention.

In *National League of Cities v. Usery (1976), the Court struck down legislation based on the Commerce Clause for the first time in forty years when it held that the minimum wage–maximum hour requirements of the amended Fair Labor Standards Act of 1938 could not be extended to state and local government employees. Such requirements, said the Court, involved a congressional intrusion into an “attribute of state sovereignty” (p. 845).

Less than a decade later the Court overruled the Usery case in *Garcia v. San Antonio Metropolitan Transit Authority (1985), holding that that Fair Labor Standards Act of 1938 was binding on the states. It appeared that the concept of “dual sovereignty” as a means of maximizing state powers (states’ rights) and minimizing those of the national government no longer had judicial approval. But such was not to be the case.

After William J. *Rehnquist became chief justice in 1986, the Court tended to block congressional action taken under the Commerce Clause as an interference with state sovereignty. Discussing the issues in some depth are the various opinions written in United States v. Lopez (1995), in which the Court invalidated the federal Gun-Free School Zones Act, which made it a crime to possess a firearm within a certain distance of a school. Speaking for the majority of five, Chief Justice Rehnquist summarized the case law that historically had arisen under the Commerce Clause. His opinion noted that since the Jones & Laughlin Steel case in 1937, the Court had followed the rule that a congressional regulation was constitutional if it dealt with the “channels” or “instrumentalities” of commerce and other activities that “substantially affect” interstate commerce. In this instance the Court concluded that no sufficient connection existed between the possession of guns near schools and interstate commerce. For the first time since 1936 the Court had now invalidated a federal statute on the ground that Congress had exceeded its authority under the commerce power. Similarly, in United States v. *Morrison (2000) the justices struck down remedy provisions of the Violence Against Women Act as beyond congressional power under the Commerce Clause.

Dormant Commerce Power.

First alluded to by John Marshall in Willson v. Blackbird Marsh Co. (1829) and refined in the Cooley case (1852), the concept of the Commerce Clause in its “dormant” state, that is, the clause standing alone without supporting legislation, has been a major restraint on the states’ police (regulatory) and taxing powers. Dormant commerce jurisprudence encourages the national market by foreclosing state laws that interfere with commerce among the states.

Historically the Court has not been consistent in deciding when state regulation of commerce, sans congressional legislation, is constitutionally acceptable. In Southern Pacific Co. v. Arizona (1945) the Court invalidated an Arizona law prohibiting the operation within its borders of a railroad train of more than fourteen passenger or seventy freight cars. Noting that in Arizona over 90 percent of freight and passenger traffic was interstate and that the company was forced to incur additional cost, the Court concluded that a serious impediment to the free flow of commerce was apparent. A few years earlier, however, in South Carolina State Highway Department v. Barnwell Brothers (1938) the Court upheld a state law that prohibited trucks with loads in excess of twenty thousand pounds and widths over ninety inches from using the state highways, reasoning that in absence of an act of Congress the state might protect the roads which it built and maintained.

In the Warren years (1953–1969) the dormant Commerce Clause revived scant attention, but during Chief Justice Warren Burger’s tenure (1969–1986)the Court dealt with the issue in several significant cases. In Philadelphia v. New Jersey (1978) the Supreme Court concluded that a New Jersey law prohibiting the importation of liquid or solid waste overtly blocked the flow of interstate commerce and thus was invalid under the dormant Commerce Clause. However, the principle of state autonomy prevailed in Reeves Inc. v. Stake (1980). The Court upheld a South Dakota statute that gave priority to state residents to purchase products of a state-owned cement manufacturing plant. In this case the justices distinguished between a state as a market participant and a state as a market regulator.

(p. 196) Illustrative of the Court’s current posture on state taxing power and dormant Commerce Clause issues is the opinion in Oklahoma Tax Commission v. Jefferson Lines, Inc. (1995). In Jefferson Lines the Court sustained Oklahoma’s unapportioned sales tax on a bus ticket for travel that originates in Oklahoma, but terminates in another state. On the other hand, in C & A Carbone, Inc. v. Town of Clarkstown (1994), the justices struck down a local law granting monopoly privileges to a single waste processing center on the ground that the law discriminated against interstate commerce by preventing out-of-state waste processors from entering a local market. In Camps Newfound/Owatonna, Inc. v. Town of Harrison (1997), the Court ruled that Maine’s charitable property tax exemption law that applied to non-profit firms performing benevolent and charitable functions, but excluded entities serving primarily non-Maine residents, was unconstitutional under the dormant Commerce Clause. Whether viewed as a positive authority for federal regulatory measures or as a negative restraint on state police and taxing powers, the Commerce Clause has been and continues to be a significant constitutional vehicle for maintaining a workable balance in the state and national power spheres that compose the federal system.

Edward S. Corwin, The Commerce Power Versus States Rights (1936). Richard A. Epstein, “The Proper Scope of the Commerce Clause,” Virginia Law Review 73 (1987): 1387–1455. Felix Frankfurter, The Commerce Clause Under Marshall, Taney and Waite (1937). Earl M. Maltz, The Chief Justiceship of Warren Burger, 1969–1986 (2000). R. S. Myers, “The Burger Court and the Commerce Clause: An Evaluation of the Role of State Sovereignty,” Notre Dame Law Review 60 (1985): 1056–1093.

Robert J. Steamer