The Commerce Clause

1. Advantages of strong national power

   1. Economies of scale

   2. Overcome collective action problems like regulatory races to the bottom

   3. Control externalities

   4. Vigorously protect civil rights

2. Advantages of strong state power

   1. Tailor laws to varying tastes and conditions

   2. Create competition between states

   3. State experimentation and innovation

   4. Reduction in agency and monitoring costs

3. Article I, Section 8

4. Necessary and Proper plus Commerce Clause

   1. Provides another basis of authority for Congress to regulate intrastate activities that do not have a substantial effect on interstate commerce

   2. Congress may regulate activity, even non-economic activity, if that regulation is a necessary part of a more general regulation of interstate commerce

   3. Main constraint: means chosen are “reasonably adapted” to the attainment of a legitimate end under the commerce power (McCulloch)

      1. If the end being regulated is not a constitutionally legitimate use of the commerce clause power, the means chosen are similarly constitutionally invalid

5. History

   1. Founding – 1890s: Commerce Clause rarely used by Congress by broadly defined by the Court

   2. 1890-1937: Commerce power increasingly used, Court defines Commerce power narrowly and employs 10th amendment as a separate basis for limiting Congressional action

   3. 1937-1990: Congress actively employs Commerce Clause to support non-economic legislation (civil rights); Courts interpret Commerce authority broadly; Tenth Amendment disappears

   4. 1995-present: Congress stays the course; Court starts to restrict Commerce Clause authority

6. Gibbons v. Ogden (1824) – NY state law gave two individuals the exclusive right to operate steamboats on waters within state jurisdiction. Caused friction between states because of fees for navigation privileges. Steamboat owner angry that this monopoly forced him to obtain a special operating permit from the state to navigate on its waters.

   1. Held: (Marshall) NY Law was inconsistent with congressional act regulating coasting trade. NY law invalid by virtue of the Supremacy Clause because regulation of navigation for purposes of conducting interstate commerce was a power reserved to and exercised by Congress. Commerce is more than just trade; includes navigation.

      1. Among the states can mean…

         1. “Between” – may only regulate trade going on between the states, not that which is within them

         2. “Intermingled with” – (Marshall) – must extend to or affect other states

         3. “In the midst of” – Webster’s definition – basically everything is in Congress’s power

      2. 10th is not an active limit on Commerce Clause authority

7. Limiting the definition of “commerce”

   1. United States v. E.C. Knight Co. (1894) – Sherman Anti-Trust Act of 1890 was a response to public conern in growth of giant combinations controlling transportation, industry, and commerce. EC Knight controlled over 98% of the sugar-refining business in the United States.

      1. Held: Sherman Act is constitutional, but it did not apply to manufacturing. (Fuller)

      2. Congress does not have power under Commerce Clause to outlaw a monopoly

      3. Direct/Indirect effect

         1. Commerce Clause authority does not extent to activities having an indirect effect on commerce – e.g. production, mining, manufacturing (because this is intrastate)

         2. Congress can only regulate the ‘final stage’

   2. Carter v. Carter Coal Co. (1935) – Act regulated prices, minimum wages, maximum hours, and fair practices in coal industry. Compliance voluntary but ta refunds were established as incentives. Carter, a stockholder, brought suit against his own company in an attempt to keep it from paying the tax for noncompliance.

      1. Held: Congress does not have power to fix prices of coal and give labor right to organize in the coal industry.

         1. Commerce is intercourse for the purpose of trade

8. Limiting definition of “among the states”

   1. Shreveport Rate Cases (Houston, E&W Railway Co. v. US) (1913) – operated rail lines between Shreveport, Louisiana and points in Texas. Texas Railroad mandated that higher rates be charged for friegned travlling between Louisiana and Texas, than on friegh travelling solely within Texas. But Interstate Commerce Commission found the interstate rates unreasonable and established aximum rates. Railroads challenged.

      1. Held: Congress has authority to regulate price discrimination that involves both intrastate and interstate commerce.

         1. Substantial Effects test: “such a close and substantial relation to interstate traffic that the control is essential or appropriate to the security of that traffic.”

         2. Since the price discrimination adversely affected interstate commerce, "it is immaterial…that the discrimination arises from intrastate rates as compared with interstate rates."

   2. ALA Schechter Poultry Corp. v. United States (1935)– Regulations promulgated under 1933 – price fixing & requirements rearding sale of whole chickens, including unhealthy ones. Schechters sold sick chickens. Chickens bought from outside NY, but slaughtered and sold within NY.

      1. Held: These transactions are not covered by the “among the states” language because it had come to a permanent rest within the State.

         1. Stream of commerce appraoch

         2. Reaffirmation of direct/indirect effects test – federalism concern

9. Invoking 10th – contradictory approach

   1. Hammer v. Dagenhart (1917) – Child Labor Act prohibited interstate shipment of goods produced by child labor. Father sued on behalf of his freedom to allow his 14 year old son to work in a textile mill. Childmade goods must comply with basic requirements (i.e. can’t work more than 6 days per week)

      1. Held:Violation of Commerce clause: production is something separate from interstate commerce. Can’t control shipment if effect is to control production.

         1. Violation of 10th: interferes with state’s police power to regulate production

            1. 10th as 1) marking out state domain into which the federal gov’t cannot interfere; 2) simple reaffirmation that Congress can only act within its enumerated powers

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