Commerce Clause

The commerce clause in Article I, Section 8 of the US Constitution grants to Congress the power to “[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Its significance to American governance has been immense: much of the reach of the American national government over economic and social activity, and the relationship of the federal government to state and local authorities, has rested on the interpretation of this short clause.

ORIGINS AND PROBLEMS

The commerce clause's place in the Constitution of 1789 reflected the desire to create a more unified commercial republic out of the disorder of the Confederation governing the former colonies in the wake of the Revolutionary War. The absence in the Articles of Confederation of a power to regulate commercial activity allowed local interests to frustrate an already precarious economy. Competition and protectionism among the states hampered economic development and undercut trade both among the states and with foreign nations. States often imposed taxes on imports, paid at the border, which helped both state coffers to grow and local producers to prosper. At a minimum, the commerce clause was a tool to limit discriminatory state practices. At the same time, British merchant ships plied American waters while Britain closed its ports (and those of its colonies) to American vessels. Congress lacked the authority to regulate foreign trade as leverage in opening up markets.

A “more perfect union,” as the Preamble to the Constitution puts it, meant vesting the national government with power over areas of common interest, especially commerce and foreign affairs. Yet the Constitution left the definition and interpretation of those powers to future generations. The three most important questions are: What is commerce? When is it “among the several states” ? Are there limits to what Congress may do under the banner of “regulation” ? Narrow or broad answers to those questions would set the reach of federal authority over matters of local interest.

More fundamentally, the authors of the Constitution left unsettled how national and state authorities would coexist in a federal system. One possibility was that the clause grants to the federal government exclusive authority over all commercial activity related to national markets, thus categorically barring state regulation. Another solution would be to divide economic activity into certain zones or types of activity over which state and federal governments each possess exclusive control. Alternatively, the federal and state governments could possess simultaneous (or “concurrent” ) authority, with the federal government trumping, or preempting, the states only when the two are in direct conflict.

THE GIBBONS DECISION

The problems surrounding the commerce clause reached the United States Supreme Court early in the nation's history. Under the leadership of Chief Justice John Marshall, the Court favored interpretations of the Constitution that empowered the federal government, created a national market, and increased the confidence of investors. In Gibbons v. Ogden, 22 U.S. 1 ( 1824 ), the Court considered whether New York could grant to Aaron Ogden, a former governor of New Jersey, a monopoly license to operate a ferry in its waters. Under a 1793 statute of Congress regulating coastal navigation, Ogden's former business partner, Thomas Gibbons, received a competing license to operate on the route between New Jersey and New York.

Rejecting New York's claim of authority, the Supreme Court unsurprisingly recognized the supremacy of Gibbons's license from the US government to cross into New York waters. More controversially, however, Marshall's landmark opinion laid out a broad understanding of the federal government's power. Ferry navigation in coastal waters was easily a proper subject for Congress to regulate; for Marshall, commerce included “traffic” and “the interchange of commodities,” but also reached to “commercial intercourse.” Nor was the power limited to activity at state borders. Commerce “among the several states” meant “intermingled with” and included activities that “may be introduced into the interior” (22. U.S. at 194). Once the power given to Congress is identified, it “may be exercised to its utmost extent, and acknowledges no limitations other than are prescribed in the Constitution” (22 U.S. at 196).

CHANGING ECONOMY

In the early years of the nation, the state had a fairly limited role in shaping economic life. But as technological and economic development gained pace, and new regulations were attempted, litigation over the meaning of the commerce clause provided a significant portion of the Supreme Court's work through the nineteenth century. The Court's reading of the commerce clause had an increasingly significant impact on both national and state-level governance.

Changes in technology and the economy during the nineteenth century profoundly changed people's attitudes toward government regulation and resulted in new tensions between national regulation and local control. Whereas manufacturing and trade in the eighteenth century had been overwhelmingly small-scale and directed at local markets, revolutions in transportation (canals and railroads), communication (including the telegraph), and energy (steam and oil) created new economies of scale and opened up opportunities for enterprises and problems that crossed state lines. Changes in law, too, allowed the development of massive corporations and trusts. Powerful alliances of farmers and wage laborers began to form in opposition to the concentration of economic and political power, and they called for national action against shared concerns.

Although states first sought to block exploitative rates and practices by emerging industries, such as railroads, in cases such as Wabash, St. Louis & Pacific Railway Company v. Illinois, 118 U.S. 557 ( 1886 ), courts applying dormant commerce clause principles blocked many such attempts. Congress later stepped in with one of the first major regulatory statutes, the Interstate Commerce Act of 1887, and then the Sherman Antitrust Act of 1890, a law limiting anticompetitive business practices. The Supreme Court upheld these regulations, and others, even when the object being regulated appeared to be “local” or largely intrastate. At times, the justices determined that the goods being transported were part of a “stream of commerce” that would be directly affected by local activities ( Swift & Co. v. United States, 196 U.S. 375 [1905] ). In other cases, federal regulations survived scrutiny because Congress could use its commerce power to block the interstate transport of goods considered to be immoral or injurious, such as lottery tickets ( Champion v. Ames, 188 U.S. 321 [1903] ) and prostitutes ( Hoke v. United States, 227 U.S. 308 [1913] ).

Through this period, however, the courts drew lines attempting to preserve a distinction between national and local affairs, and preventing Congress from regulating issues high on the agenda of Progressive politicians. Distinguishing commerce from manufacturing, labor conditions and the rights of workers were judged beyond federal authority. In Hammer v. Dagenhart, 247 U.S. 251 ( 1918 ), the Court struck down a law banning from interstate commerce goods produced with child labor. Unlike lottery tickets and prostitutes, the judges decided that these goods were not intrinsically harmful; the harm occurring in factories involved manufacturing, beyond Congress's oversight. The net effect of the Court's decisions sometimes left challenging social issues immune to both federal and state regulation.

NEW DEAL REVOLUTION

Pressure mounted for federal government policies to address problems that appeared everywhere or had a national impact, even when the activities occurred apparently within state borders. The tension reached its peak during the New Deal period of the 1930s. President Franklin Delano Roosevelt and large Democratic majorities in Congress, elected in the midst of the Great Depression, passed a series of major laws seeking to regulate wide swaths of the economy, including labor rights, agricultural production, and the markets for many goods. Adhering to the distinction between manufacturing and commerce, and a distinction between “direct” and “indirect” effects on commerce, the Supreme Court struck down most of this legislation as unconstitutional.

Against the backdrop of President Roosevelt's “Court-packing plan” to place additional like-minded judges on the high bench, in 1937 the Supreme Court abruptly abandoned its precedents and allowed Congress wide flexibility to regulate under the commerce clause. In National Labor Relations Board v. Jones & Laughlin Steel Corp., 301 U.S. 1 ( 1937 ), the Court upheld the Wagner Act of 1935, which guaranteed the right to unionize for collective bargaining. The question for the Court was now whether local activities have “such a close and substantial relation to interstate commerce” (301 U.S. at 2) that national control is necessary. Four years later, in a decision allowing Congress to impose minimum wages and maximum working hours ( Darby Lumber Corporation v. United States, 312 U.S. 100 [1941] ), the Court explicitly overruled the Hammer decision.

1942 ), illustrates the impact of the Court's turnabout. In Wickard, the Court (now filled with judges appointed by Roosevelt) upheld a law imposing production quotas on a wheat farmer, Roscoe Filburn, even though the wheat he produced never left his farm in rural Ohio. Congress could regulate local activities seemingly out of commerce that in the aggregate substantially affected the economy.

Under this interpretation of the commerce clause, for most of the remainder of the twentieth century Congress was unchallenged when it sought to regulate a wide variety of social ills, from violations of civil rights to environmental degradation.

CONTEMPORARY DEBATES

Beneath the seemingly broad consensus about the meaning of the commerce clause that stood for decades, in the 1970s and 1980s conservative opposition to government regulation coalesced around the commerce clause as the legal device enabling federal power. As the Republican Party regained its competitive political position, new appointees to the Supreme Court sought ways to limit congressional authority. In National League of Cities v. Usery, 426 U.S. 833 ( 1976 ), Justice William Rehnquist ruled that the Tenth Amendment to the US Constitution limited Congress in its use of the commerce power to set labor standards for employees of state and local governments. That precedent was short-lived, however, and was overturned in 1985.

A number of important decisions, beginning with United States v. Lopez, 514 U.S. 549 ( 1995 ), suggested that the Supreme Court was ready to once again impose meaningful limits on Congress's use of the commerce power. In Lopez, a 5–4 majority struck down the Gun-Free School Zones Act, which made it a federal crime to carry a gun in or near a school. Five years later, in United States v. Morrison, 529 U.S. 598 ( 2000 ), the Court likewise struck down part of the Violence Against Women Act, which allowed victims of gender-based crime to sue their attackers in federal court. In passing those laws, Congress had followed the approach—though, as some argue, it had become lax in making the case—of using the commerce power to authorize regulation of any activity that in the aggregate had a substantial effect on economic activity. In these cases a majority of the Court reasoned that, unlike Wickard, the activity in question (firearm possession and sexual assault) was criminal and noneconomic in nature and hence lay beyond the reach of Congress's commerce power.

In the first decade of the twenty-first century, the Court took few further steps to limit the commerce power. Contemporary debates over Lopez, Morrison, and other such decisions have replayed the historic debates about a broad or narrow reading of the commerce power and highlighted anew the clash over the proper method of interpreting the Constitution. In addition to the question of what the commerce clause meant in its so-called original understanding—when the Constitution was adopted—there have been separate debates about the proper role of judges in deferring to the democratic branches when regulations are issued, and about the extent to which judges should follow the precedents established during the New Deal period. Generally, defenders of broad interpretations of the commerce clause argue that a narrower scope for the power is incompatible with the needs of a modern society and complex national economy. Even those critical of the legal revolution ushered in by the New Deal Court may be reluctant to strike down the many mechanisms of modern governance that have been allowed by a flexible understanding of the Constitution.

THE NFIB V. SEBELIUS DECISION

Many of these issues returned to the Supreme Court in a challenge to the Patient Protection and Affordable Care Act of 2010—known as the ACA or, colloquially, Obamacare. At the heart of its many provisions, the ACA requires Americans to purchase health insurance or else pay a fine. By requiring everyone to engage in the health insurance market, the authors of the legislation reasoned, healthcare costs (an area unquestionably vital to the national economy) could be controlled. Critics of the law challenged Congress's authority to require people to purchase a product against their will, viewing it as an extreme incursion into individual freedom. As a result of the highly partisan debate around the ACA, the timing that saw constitutional challenges to the law reach the Supreme Court just ahead of a presidential election, and the law's status as one of the most important pieces of domestic legislation in decades, the case National Federation of Independent Business v. Sebelius, 567 U.S. ___ ( 2012 ), became the most significant test of the commerce clause since the New Deal.

Although a landmark in the political struggle over the power of the federal government, the NFIB decision resolved little about the meaning and limits of the commerce clause. The ACA's approach to the problem— requiring people to participate in commerce—is uncommon, and alternative means can be used in future laws. Further, echoing deep partisan differences in American politics, for a number of decades the Supreme Court has been closely divided on central constitutional questions regarding the proper role of government. Thus, while litigants continue to raise new commerce clause challenges to congressional enactments, whether the New Deal revolution will be substantially undone depends on the slowly changing membership of the Court. However, as the result in NFIB suggests, even if the scope of the commerce power is narrowed, Congress has other constitutional provisions, such as the taxing power used in the ACA, on which to ground what conservatives consider to be overly intrusive means of modern governance. To that extent, the evolution of the commerce clause says just as much about the role of the federal judiciary in governance as it does about the power of Congress.

SEE ALSO Article I, United States Constitution ; Federal Powers: General ; Gibbons v. Ogden ; National Federation of Independent Business v. Sebelius ; New Deal Constitutional Revolution .

BIBLIOGRAPHY

Barnett, Randy E. “The Original Meaning of the Commerce Clause.” University of Chicago Law Review 68 (2001): 101–47.

Chen, James. “The Story of Wickard v. Filburn: Agriculture, Aggregation, and Congressional Power over Commerce.” In Constitutional Law Stories, 2nd ed., edited by Michael C. Dorf. New York: Foundation Press Thomson/West, 2009.

Friedman, Barry, and Daniel T. Deacon. “A Course Unbroken: The Constitutional Legitimacy of the Dormant Commerce Clause.” Virginia Law Review 97, no. 8 (2011): 1877–1938.

Johnson, Herbert A. Gibbons v. Ogden: John Marshall, Steamboats, and the Commerce Clause. Lawrence: University Press of Kansas, 2010.

Leuchtenburg, William E. The Supreme Court Reborn: The Constitutional Revolution in the Age of Roosevelt. New York: Oxford University Press, 1995.

Persily, Nathaniel, Gillian E. Metzger, and Trevor W. Morrison, eds. The Health Care Case: The Supreme Court's Decision and Its Implications. Oxford, UK: Oxford University Press, 2013.

Pushaw, Robert J., Jr., and Grant S. Nelson. “A Critique of the Narrow Interpretation of the Commerce Clause.” Northwestern University Law Review 96 (2002): 695–719.

Patrick Schmidt
Macalester College