The Commerce Clause refers to Congress’s ability to regulate commerce among the several states. The interpretation for this clause has had its ups and downs. Early on, the court expanded the interpretation of the clause allowing Congress to use it widely for any type of navigation that passes over state lines but limiting it from doing anything with intrastate commerce (See Gibbons v. Ogden).
However, in Hammer v. Dagenhart, the court limited this expansion saying that the court was unable to affect the manufacture of commerce that happens to go over state lines.
But future cases have continued to expand this doctrine starting in 1937 with the New Deal and NLRB v. Jones & Laughlin Steel Corp. Today, the courts follow the substantial economic effect test (See Jones; Wickard v. Filburn). This test states that Congress has the power to regulate local commerce if the aggregation has a substantial economic effect on interstate commerce.
As a result, the commerce clause has allowed Congress to pass nearly any statute they want drawing on that authority. With this authority, Congress has been able to federally regulate child labor, wage laws, and more.
Wickard v. Filburn was an expansion that occurred during the New Deal period. At this time, Congress was doing all they could to mitigate the effects of the Great Depression. Consequently, Wickard and the following cases resulted.
Interestingly, in the 1990s, the Courts began to reverse their position on the Commerce Clause. Now, the future of Congressional limits on the commerce clause is questioned.
Expansion Under the New Deal
United States v. Darby
312 U.S. 100 (1941).
Darby was charged with violating the Fair Labors Standards Act of 1938. He sought an injunction against the act to declare it unconstitutional and was successful. This appeal followed.
Is the Fair Labors Standards Act unconstitutional?
As long as there is a direct impact on interstate commerce, Congress has the authority to regulate intrastate commerce.
The act is constitutional. Reversed.
Similar to Hammer v. Dagenhart, this act was designed to limit the interstate commerce of companies that violated the act. The main difference is that this act limited those companies who paid less than a minimum wage or worked more than the maximum work hours.
Darby was found in violation of this act.
In direct contrast to Hammer v. Dagenhart, this court basically adopted the dissent in that opinion. So, if Congress can direct the goods that go over state lines, then the act is constitutional. The purpose for the act does not matter.
Because this statement was against the opinion in Hammer, the Court says that Hammer was inconsistent from the norm and overrules it.
There are two parts of this case:
- There were goods in interstate commerce. No doubt the goods can be regulated.
- The requirement of wages and hours. Because this is related to the interstate commerce, Congress is able to restrict. Although the purpose was other than regulating commerce, it does not disqualify Congress from making the regulations.
Additionally, the court says that the 10th amendment does not affect the policy here. They say that the 10th amendment is “but a truism.” That is, the amendment is nearly worthless, where it is only applicable if the federal government goes too far.
The takeaway from this and other cases is that the New Deal was successful in the long run. The courts upheld the legislation and the New Deal set the foundation for the administrative state (agencies to further social policies).
Expansion Under the Civil Rights
Heart of Atlanta Motel v. United States
379 U.S. 241 (1964).
Heart of Atlanta Motel was in violation of Title II of the 1964 Civil Rights Act. They sought an injunction to challenge the constitutionality of the act, lost and appealed.
Does the act violate Congress’s commerce power?
If the action affects local activities that have a significant impact on interstate commerce, the act is constitutional. The courts may use a rational basis (the end goal reasonably follows the Constitution) to determine the effects of the act.
There is a significant impact on interstate commerce. Affirmed.
Part of the 1964 Civil Rights Act was to regulate businesses that segregated according to race. The Atlanta Motel was such a business that segregated by race. As such, they were found in violation and fined.
The justification for this congressional power was the commerce clause. Businesses that dealt with travelers from across several states, or had a significant impact on several states, would need to follow the regulation. The Atlanta Motel had several rooms resulting in about 75% occupancy from out of state travelers. Therefore, they were subject to the regulation.
The fact that Congress has a moral goal does not mean that they are unable to use the commerce clause to reach that goal. So, if there is a significant impact on interstate commerce, Congress can do whatever it likes to regulate that commerce. In this case, Congress regulates against businesses that deal in interstate commerce and have discriminatory policies. Here, there is an actual effect upon interstate commerce because black people traveling over state lines would have a difficult time finding lodging due to the policies of companies.
Here, the court extends the influence of interstate commerce. That is, not only in the transportation of goods, but it includes marketing over state lines and people traveling over state lines. Additionally, the courts say that discrimination affects interstate commerce. This is because African Americans were restricted in their travel which has a negative economic impact on interstate businesses (can’t travel, stay, or eat at those locations). In other words, there was a substantial effect on interstate commerce.
Katzenbach v. McClung
379 U.S. 294 (1964).
This case is a sister to Heart of Atlanta Motel. The difference here is that McClung was the owner of a restaurant that practiced segregation. He was fined, for violating the same Title of the 1964 Civil Rights Act and sued for an injunction.
Is the act constitutional? If so, did this restaurant engage in a substantial portion with interstate commerce?
Same rule as above. However, I feel like this case illustrates the rational basis test better.
“But where we find that the legislatures, in light of the facts and testimony before them, have a rational basis for finding a chosen regulatory scheme necessary to the protection of commerce, our investigation is at an end.”
The restaurant did engage in significant interstate commerce. Therefore, Affirmed.
McClung owned Ollie’s Barbecue that was several blocks away from the interstate and even further from buses and rails. Most of their food is purchased within state boundaries.
The Act restricts hotels and restaurants who have a significant impact on interstate commerce. So, the court needs to consider either whether the court serves interstate travelers or serves food that has a significant impact on interstate commerce.
Congress has stated their rational basis for finding that racial discrimination has an effect on interstate commerce. It restricts the ability of people to move freely between states, travel to restaurants and other locations. As such, Congress wants to regulate that limitation to ensure that there is a free flow of commerce. So, although the restaurant’s focus is on producing and obtain materials within the state, there is a significant impact on commerce.
The reason why this is a harder case is because there was more local influence on this case than Heart of Atlanta Motel. However, there are people from out of state that do go there, even minimal. So, the restaurant argues that it is local and is not subject to regulation.
But the court disagrees. This is because there was a rational basis for the whole Act. As a result, even though it was minimal here, there was an adverse effect through aggregation.
Another thing to note (thinking ahead to the exam) is that the necessary and proper clause could substitute here as well. So, if we are not sure about whether the Commerce clause is in effect, the necessary and proper clause can be used to add points.
A turn back in time
United States v. Lopez
514 U.S. 549 (1995).
Lopez was found in violation of the Gun-Free School Zones Act of 1990 and sought an injunction against the constitutionality of the act.
Does the statute violate the commerce clause?
There are three categories where congress can exercise their power:
- Interstate commerce
- Instrumentalities of interstate commerce (persons or things) even if the instrumentality is local.
- Substantial effect.
This case is about the substantial effect category.
“The Act neither regulates a commercial activity nor contains a requirement that the possession be connected in any way to interstate commerce. We hold that the Act exceeds the authority of Congress ‘to regulate Commerce . . . among the several States . . . .'”
Lopez was a student who brought his gun to school which violated §922(q)(1)(A). This section makes it a crime to knowingly possess a firearm where the person knows that they are in a school zone.
The purpose of this statute was for the federal government to curtail gun violence in school zones.
The majority states the three categories and that there is no substantial effect on interstate commerce. The reasoning was because allowing this expansion would allow congress to govern other features that are solely in the hands of state regulation. For instance, it is a long chain of steps to determine that there was a rational basis to regulate based on economic impact. Through this long chain, the dissent would have any power regulated by Congress including family law and school curriculum.
Kennedy and O’Connor concur saying that schools are a traditional state power and Congress should not branch into that realm.
Thomas would revert back to Hammer and does not like the aggregation principle. He argues that commerce only deals in goods which is separate then manufacture and agriculture.
The dissents argue that there is a rational basis to regulate this. Gun violence has a substantial effect on the economics of a country, negative effect on classroom learning, and negative commercial effects. Thus, Congress could easily find a rational basis that there was a substantial effect on commerce.
Ultimately, this a debate about federalism and who (federal or state) gets how much power.
There are three kinds of interstate commerce.
- Channels of interstate commerce
- Instrumentalities of interstate commerce (persons or things) even if the instrumentality is local.
- Substantial effect.
Most cases are about the third category. Ultimately, the activity that is going on itself needs to be economic. Here, there was no direct economic effect and thus it was a violation of commerce clause power.
Morrison furthered this principle by turning down a statute that did regulate the commerce with the proper language. This was because the activity itself was not an economic factor.
However, Raich seems to be controversial. It seemed to fit the meaning of completely local (backyard). However, because there was a wide variety of economic influence based on the exceptions to the law.
National Federation of Independent Business (NFIB) v. Sebelius
567 U.S. 519 (2012).
There are several questions presented in this case. Regarding the commerce clause: Does Congress have the authority through the commerce clause or the necessary and proper clause to enforce the individual mandate in the Patient Protection and Affordable Care Act?
Commerce Clause: Congress has the power to regulate commerce, not compel it.
Necessary and Proper Clause: Congress is only allowed to do things that are necessary and proper if it derives from a congressional power.
The individual mandate is not a proper exercise of the commerce clause. As such, it is also not a proper exercise of the necessary and proper clause.
The Affordable Care Act was passed to help Americans have affordable heath insurance. However, there was a problem with the act. To cover the costs associated, insurance companies would suffer. Thus, Congress created an individual mandate where those who chose not to pay for private health insurance or have it paid by an employer, would be mandated to pay into a general insurance fund which would be used to mitigate the cost of insurance companies. This provision was called the individual mandate.
Congress justified this mandate on the premise that refusal to follow the mandate had a substantial economic effect on interstate commerce by the adverse affect on insurance companies.
This case is different than any others because previously, the Commerce clause was used to restrict the people from doing things. In this case, the commerce clause would be used to compel people to do things. If this was allowed, the government could find nearly any excuse to compel people to live better. In other words, “the framers gave Congress the power to regulate commerce, not to compel it . . . .”
Additionally, this is not a good exercise of the proper and necessary clause. This is because that clause was designed to give Congress power to meet the needs of other powers. Here, there is no power afforded so the necessary and proper clause does not have effect.
Ultimately, this is a discussion about activity vs. inactivity. Both the majority and the joint dissent agree that this is a regulation on inactive commercial proceedings. However, the Ginsberg dissent argues that this is a regulation on commercial activity because nearly everyone within 5 years will require health insurance (90%). So, the question really comes down to who is in the market and when are they in the market.
It is important to note the differences of the opinion here. This case was broken up into several constitutional issues. First the commerce clause. Second, the taxing and spending power. The majority opinion works because it is broken up into sections. The first few sections about the commerce clause are deemed unconstitutional by the majority and the joint dissent. Ginsberg dissents to this point arguing that it is constitutional. However, the majority says that the taxing and spending power is Constitutional. So, Ginsberg and the others agree with that while the joint dissent believes the whole document is unconstitutional. Thus, we have one majority opinion authored by the Chief Justice where the others pick and choose which sides they believe worked.
The issue here are two claims. One of socialism v. the other of a free rider. There are arguments that causing the general public to pay for medical care creates socialism. However, the issue the program was trying to resolve was that people can receive emergency care (emergency rooms are obligated to provide care) even if the parties do not have insurance.
To resolve this issue, Congress passed a mandate that either the you pay for private insurance, have it provided by an employer, or pay a fee to the IRS to help lower the cost of insurance.
The largest controversy here was that the bill penalized those who refused to pay the mandate (See the Broccoli argument).
Action v. Inaction
The main argument from the majority is that the clause mandates those not engaged in the marketplace to become engaged in the marketplace. According to the Constitution, the commerce clause does not have the authority to compel, only regulate. Roberts says that it is not the role of the court to create a metaphysical theory.
The takeaway, inactivity is not commerce. In other words, not being active in the market does not give Congress the authority to allow the market to make one active.
The Ginsberg dissent on this issue argues that this is an active market. The reason being that everyone will engage in the health care market (60% within a year and 90% within 5). Interestingly, this is exactly the metaphysical argument that Roberts does not like. Additionally, inactivity in the market does affect the market. By doing nothing, individuals cause insurance companies to increase rates which causes those companies to have less jobs (not enough money to pay employees). Because of this drastic effect on commerce, Ginsberg believes that the individual mandate does fall under the authority of Congress.
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.