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Power to Regulate Commerce

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Clause 3. The Congress shall have Power *** To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.

POWER TO REGULATE COMMERCE

Purposes Served by the Grant

This clause serves a two-fold purpose: it is the direct source of the most important powers that the Federal Government exercises in peacetime, and, except for the due process and equal protection clauses of the Fourteenth Amendment, it is the most important limitation imposed by the Constitution on the exercise of state power. The latter, restrictive operation of the clause was long the more important one from the point of view of the constitutional lawyer. Of the approximately 1400 cases which reached the Supreme Court under the clause prior to 1900, the overwhelming proportion stemmed from state legislation.629 The result was that, generally, the guiding lines in construction of the clause were initially laid down in the context of curbing state power rather than in that of its operation as a source of national power. The consequence of this historical progression was that the word “commerce” came to dominate the clause while the word “regulate” remained in the background. The so-called “constitutional revolution” of the 1930s, however, brought the latter word to its present prominence.

Definition of Terms

Commerce.—The etymology of the word “commerce”630 carries the primary meaning of traffic, of transporting goods across state lines for sale. This possibly narrow constitutional conception was rejected by Chief Justice Marshall in Gibbons v. Ogden,631 which remains one of the seminal cases dealing with the Constitution. The case arose because of a monopoly granted by the New York legislature on the operation of steam-propelled vessels on its waters, a monopoly challenged by Gibbons, who transported passengers from New Jersey to New York pursuant to privileges granted by an act of Congress.632 The New York monopoly was not in conflict with the congressional regulation of commerce, argued the monopolists, because the vessels carried only passengers between the two States and were thus not engaged in traffic, in “commerce” in the constitutional sense.

629 E. PRENTICE & J. EGAN, THE COMMERCE CLAUSE OF THE FEDERAL CONSTITUTION 14 (1898).

630 That is, “cum merce (with merchandise).”

631 22 U.S. (9 Wheat.) 1 (1824).

632 Act of February 18, 1793, 1 Stat. 305, entitled “An Act for enrolling and licensing ships or vessels to be employed in the coasting trade and fisheries, and for regulating the same.”

“The subject to be regulated is commerce,” the Chief Justice wrote. “The counsel for the appellee would limit it to traffic, to buying and selling, or the interchange of commodities, and do not admit that it comprehends navigation. This would restrict a general term, applicable to many objects, to one of its significations. Commerce, undoubtedly, is traffic, but it is something more—it is intercourse.”633 The term, therefore, included navigation, a conclusion that Marshall also supported by appeal to general understanding, to the prohibition in Article I, § 9, against any preference being given “by any regulation of commerce or revenue, to the ports of one State over those of another,” and to the admitted and demonstrated power of Congress to impose embargoes.634

Marshall qualified the word “intercourse” with the word “commercial,” thus retaining the element of monetary transactions.635 But, today, “commerce” in the constitutional sense, and hence “interstate commerce,” covers every species of movement of persons and things, whether for profit or not, across state lines,636 every species of communication, every species of transmission of intelligence, whether for commercial purposes or otherwise,637 every species of commercial negotiation which will involve sooner or later an act of transportation of persons or things, or the flow of services or power, across state lines.638

There was a long period in the Court’s history when a majority of the Justices, seeking to curb the regulatory powers of the Federal Government by various means, held that certain things were not encompassed by the commerce clause because they were either not interstate commerce or bore no sufficient nexus to interstate commerce. Thus, at one time, the Court held that mining or manufacturing, even when the product would move in interstate commerce, was not reachable under the commerce clause;639 it held insurance transactions carried on across state lines not commerce,640 and that exhibitions of baseball between professional teams that travel from State to State were not in commerce,641 and that similarly the commerce clause was not applicable to the making of contracts for the insertion of advertisements in periodicals in another State642 or to the making of contracts for personal services to be rendered in another State.643 Later decisions either have overturned or have undermined all of these holdings. The gathering of news by a press association and its transmission to client newspapers are interstate commerce.644 The activities of a Group Health Association, which serves only its own members, are “trade” and capable of becoming interstate commerce;645 the business of insurance when transacted between an insurer and an insured in different States is interstate commerce.646 But most important of all there was the development of, or more accurately the return to,647 the rationales by which manufacturing,648 mining,649 business transactions,650 and the like, which are antecedent to or subsequent to a move across state lines, are conceived to be part of an integrated commercial whole and therefore subject to the reach of the commerce power.

633 Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 189 (1824).

634 22 U.S. at 190–94.

635 22 U.S. at 193.

636 As we will see, however, in many later formulations the crossing of state lines is no longer the sine qua non; wholly intrastate transactions with substantial effects on interstate commerce may suffice.

637 E.g., United States v. Simpson, 252 U.S. 465 (1920); Caminetti v. United States, 242 U.S. 470 (1917).

638 “Not only, then, may transactions be commerce though non-commercial; they may be commerce though illegal and sporadic, and though they do not utilize common carriers or concern the flow of anything more tangible than electrons and information.” United States v. South-Eastern Underwriters Ass’n, 322 U.S. 533, 549–550 (1944).

639 Kidd v. Pearson, 128 U.S. 1 (1888); Oliver Iron Co. v. Lord, 262 U.S. 172 (1923); United States v. E. C. Knight Co., 156 U.S. 1 (1895); and see Carter v. Carter Coal Co., 298 U.S. 238 (1936).

640 Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1869); and see the cases to this effect cited in United States v. South-Eastern Underwriters Ass’n, 322 U.S. 533, 543–545, 567–568, 578 (1944).

641 Federal Baseball League v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922). When called on to reconsider its decision, the Court declined, noting that Congress had not seen fit to bring the business under the antitrust laws by legislation having prospective effect and that the business had developed under the understanding that it was not subject to these laws, a reversal of which would have retroactive effect. Toolson v. New York Yankees, 346 U.S. 356 (1953). In Flood v. Kuhn, 407 U.S. 258 (1972), the Court recognized these decisions as aberrations, but it thought the doctrine entitled to the benefits of stare decisis inasmuch as Congress was free to change it at any time. The same considerations not being present, the Court has held that businesses conducted on a multistate basis but built around local exhibitions, are in commerce and subject to, inter alia, the antitrust laws, in the instance of professional football, Radovich v. National Football League, 352 U.S. 445 (1957), professional boxing, United States v. International Boxing Club, 348 U.S. 236 (1955), and legitimate theatrical productions. United States v. Shubert, 348 U.S. 222 (1955).

642 Blumenstock Bros. v. Curtis Pub. Co., 252 U.S. 436 (1920).

643 Williams v. Fears, 179 U.S. 270 (1900). See also Diamond Glue Co. v. United States Glue Co., 187 U.S. 611 (1903); Browning v. City of Waycross, 233 U.S. 16 (1914); General Railway Signal Co. v. Virginia, 246 U.S. 500 (1918). But see York Manufacturing Co. v. Colley, 247 U.S. 21 (1918).

644 Associated Press v. United States, 326 U.S. 1 (1945).

645 American Medical Ass’n v. United States, 317 U.S. 519 (1943). Cf. United States v. Oregon Medical Society, 343 U.S. 326 (1952).

646 United States v. South-Eastern Underwriters Ass’n, 322 U.S. 533 (1944).

647 “It has been truly said, that commerce, as the word is used in the constitution, is a unit, every part of which is indicated by the term.” Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 194 (1824). And see id. at 195–196.

648 NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937).

649 Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 (1940). And see Hodel v. Virginia Surface Mining & Reclamation Ass’n, 452 U. S. 264, 275–283 (1981). See also Mulford v. Smith, 307 U.S. 38 (1939) (agricultural production).

650 Swift & Co. v. United States, 196 U.S. 375 (1905); Stafford v. Wallace, 258 U.S. 495 (1922); Chicago Board of Trade v. Olsen, 262 U.S. 1 (1923).

Among the Several States.—Continuing in Gibbons v. Ogden, Chief Justice Marshall observed that the phrase “among the several States” was “not one which would probably have been selected to indicate the completely interior traffic of a state.” It must therefore have been selected to demark “the exclusively internal commerce of a state.” While, of course, the phrase “may very properly be restricted to that commerce which concerns more states than one,” it is obvious that “[c]ommerce among the states, cannot stop at the exterior boundary line of each state, but may be introduced into the interior.” The Chief Justice then succinctly stated the rule, which, though restricted in some periods, continues to govern the interpretation of the clause. “The genius and character of the whole government seem to be, that its action is to be applied to all the external concerns of the nation, and to those internal concerns which affect the states generally; but not to those which are completely within a particular state, which do not affect other states, and with which it is not necessary to interfere, for the purpose of executing some of the general powers of the government.”651

Recognition of an “exclusively internal” commerce of a State, or “intrastate commerce” in today’s terms, was at times regarded as setting out an area of state concern that Congress was precluded from reaching.652 While these cases seemingly visualized Congress’ power arising only when there was an actual crossing of state boundaries, this view ignored Marshall’s equation of “intrastate commerce” which “affect[s] other states” or “with which it is necessary to interfere” in order to effectuate congressional power with those actions which are “purely” interstate. This equation came back into its own, both with the Court’s stress on the “current of commerce” bringing each element in the current within Congress’ regulatory power,653 with the emphasis on the interrelationships of industrial production to interstate commerce654 but especially with the emphasis that even minor transactions have an effect on interstate commerce655 and that the cumulative effect of many minor transactions with no separate effect on interstate commerce, when they are viewed as a class, may be sufficient to merit congressional regulation.656 “Commerce among the states must, of necessity, be commerce with[in] the states.... The power of congress, then, whatever it may be, must be exercised within the territorial jurisdiction of the several states.”657

651 22 U.S. (9 Wheat.) 1, 194, 195 (1824).

652 New York v. Miln, 36 U.S. (11 Pet.) 102 (1837); License Cases, 46 U.S. (5 How.) 504 (1847); Passenger Cases, 48 U.S. (7 How.) 283 (1849); Patterson v. Kentucky, 97 U.S. 501 (1879); Trade-Mark Cases, 100 U.S. 82 (1879); Kidd v. Pearson, 128 U.S. 1 (1888); Illinois Central R.R. v. McKendree, 203 U.S. 514 (1906); Keller v. United States, 213 U.S. 138 (1909); Hammer v. Dagenhart, 247 U.S. 251 (1918); Oliver Iron Co. v. Lord, 262 U.S. 172 (1923).

653 Swift & Co. v. United States, 196 U.S. 375 (1905); Stafford v. Wallace, 258 U.S. 495 (1922); Chicago Board of Trade v. Olsen, 262 U.S. 1 (1923).

654 NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937).

655 NLRB v. Fainblatt, 306 U.S. 601 (1939); Kirschbaum v. Walling, 316 U.S. 517 (1942); United States v. Wrightwood Dairy Co., 315 U.S. 110 (1942); Wickard v. Filburn, 317 U.S. 111 (1942); NLRB v. Reliance Fuel Oil Co., 371 U.S. 224 (1963); Katzenbach v. McClung, 379 U.S. 294 (1964); Maryland v. Wirtz, 392 U.S. 183 (1968); McLain v. Real Estate Bd. of New Orleans, 444 U.S. 232, 241–243 (1980); Hodel v. Virginia Surface Mining & Reclamation Ass’n, 452 U.S. 264 (1981).

656 United States v. Darby, 312 U.S. 100 (1941); Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964); Maryland v. Wirtz, 392 U.S. 183 (1968); Perez v. United States, 402 U.S. 146 (1971); Russell v. United States, 471 U.S. 858 (1985); Summit Health, Ltd. v. Pinhas, 500 U.S. 322 (1991).

657 Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 196 (1824). Commerce “among the several States” does not comprise commerce of the District of Columbia nor of the territories of the United States. Congress’ power over their commerce is an incident of its general power over them. Stoutenburgh v. Hennick, 129 U.S. 141 (1889); Atlantic Cleaners & Dyers v. United States, 286 U.S. 427 (1932); In re Bryant, 4 Fed. Cas. 514 (No. 2067) (D. Oreg. 1865). Transportation between two points in the same State, when a part of the route is a loop outside the State, is interstate commerce. Hanley v. Kansas City Southern Ry. Co., 187 U.S. 617 (1903); Western Union Tel. Co. v. Speight, 254 U.S. 17 (1920). But such a deviation cannot be solely for the purpose of evading a tax or regulation in order to be exempt from the State’s reach. Greyhound Lines v. Mealey, 334 U.S. 653, 660 (1948); Eichholz v. Public Service Comm’n, 306 U.S. 268, 274 (1939). Red cap services performed at a transfer point within the State of departure but in conjunction with an interstate trip are reachable. New York, N.H. & H. R.R. v. Nothnagle, 346 U.S. 128 (1953).

Regulate.—“We are now arrived at the inquiry—” continued the Chief Justice, “What is this power? It is the power to regulate; that is, to prescribe the rule by which commerce is to be governed. This power, like all others vested in congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the constitution . . . If, as has always been understood, the sovereignty of congress, though limited to specified objects, is plenary as to those objects, the power over commerce with foreign nations, and among the several states, is vested in congress as absolutely as it would be in a single government, having in its constitution the same restrictions on the exercise of the power as are found in the constitution of the United States.”658

Of course, the power to regulate commerce is the power to prescribe conditions and rules for the carrying-on of commercial transactions, the keeping-free of channels of commerce, the regulating of prices and terms of sale. Even if the clause granted only this power, the scope would be wide, but it extends to include many more purposes than these. “Congress can certainly regulate interstate commerce to the extent of forbidding and punishing the use of such commerce as an agency to promote immorality, dishonesty, or the spread of any evil or harm to the people of other states from the state of origin. In doing this, it is merely exercising the police power, for the benefit of the public, within the field of interstate commerce.”659 Thus, in upholding a federal statute prohibiting the shipment in interstate commerce of goods made with child labor, not because the goods were intrinsically harmful but in order to extirpate child labor, the Court said: “It is no objection to the assertion of the power to regulate commerce that its exercise is attended by the same incidents which attend the exercise of the police power of the states.”660

658 Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 196–197 (1824).

659 Brooks v. United States, 267 U.S. 432, 436–437 (1925).

660 United States v. Darby, 312 U.S. 100, 114 (1941).

The power has been exercised to enforce majority conceptions of morality,661 to ban racial discrimination in public accommodations,662 and to protect the public against evils both natural and contrived by people.663 The power to regulate interstate commerce is, therefore, rightly regarded as the most potent grant of authority in § 8.

Necessary and Proper Clause.—All grants of power to Congress in § 8, as elsewhere, must be read in conjunction with the final clause, cl. 18, of § 8, which authorizes Congress “[t]o make all Laws which shall be necessary and proper for carrying into Execution the foregoing powers.” It will be recalled that Chief Justice Marshall alluded to the power thus enhanced by this clause when he said that the regulatory power did not extend “to those internal concerns [of a state] . . . with which it is not necessary to interfere, for the purpose of executing some of the general powers of the government.”664 There are numerous cases permitting Congress to reach “purely” intrastate activities on the theory, combined with the previously mentioned emphasis on the cumulative effect of minor transactions, that it is necessary to regulate them in order that the regulation of interstate activities might be fully effectuated.665 In other cases, the clause may not have been directly cited, but the dictates of Chief Justice Marshall have been used to justify more expansive applications of the commerce power.8

661 E.g., Caminetti v. United States, 242 U.S. 470 (1917) (transportation of female across state line for noncommercial sexual purposes); Cleveland v. United States, 329 U.S. 14 (1946) (transportation of plural wives across state lines by Mormons); United States v. Simpson, 252 U.S. 465 (1920) (transportation of five quarts of whiskey across state line for personal consumption).

662 Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964); Katzenbach v. McClung, 379 U.S. 294 (1964); Daniel v. Paul, 395 U.S. 298 (1969).

663 E.g., Reid v. Colorado, 187 U.S. 137 (1902) (transportation of diseased livestock across state line); Perez v. United States, 402 U.S. 146 (1971) (prohibition of all loansharking).

664 Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 195 (1824).

665 E.g., Houston & Texas Ry. v. United States, 234 U.S. 342 (1914) (necessary for ICC to regulate rates of an intrastate train in order to effectuate its rate setting for a competing interstate train); Wisconsin R.R. Comm’n v. Chicago, B. & Q. R.R., 257 U.S. 563 (1922) (same); Southern Ry. v. United States, 222 U.S. 20 (1911) (upholding requirement of same safety equipment on intrastate as interstate trains). See also Wickard v. Filburn, 317 U.S. 111 (1942); United States v. Wrightwood Dairy Co., 315 U.S. 110 (1942). Gonzales v. Raich, 545 U.S. 1 (2005).

8 See, e.g., United States v. Darby, 312 U.S. 100, 115-16 (1941).

Federalism Limits on Exercise of Commerce Power.—As is recounted below, prior to reconsideration of the federal commerce power in the 1930s, the Court in effect followed a doctrine of “dual federalism,” under which Congress’ power to regulate much activity depended on whether it had a “direct” rather than an “indirect” effect on interstate commerce.666 When the restrictive interpretation was swept away during and after the New Deal, the question of federalism limits respecting congressional regulation of private activities became moot. However, the States did in a number of instances engage in commercial activities that would be regulated by federal legislation if the enterprise were privately owned; the Court easily sustained application of federal law to these state proprietary activities.667 However, as Congress began to extend regulation to state governmental activities, the judicial response was inconsistent and wavering.668 While the Court may shift again to constrain federal power on federalism grounds, at the present time the rule is that Congress lacks authority under the commerce clause to regulate the States as States in some circumstances, when the federal statutory provisions reach only the States and do not bring the States under laws of general applicability.669

Illegal Commerce

That Congress’ protective power over interstate commerce reaches all kinds of obstructions and impediments was made clear in United States v. Ferger.670 The defendants had been indicted for issuing a false bill of lading to cover a fictitious shipment in interstate commerce. Before the Court they argued that inasmuch as there could be no commerce in a fraudulent bill of lading, Congress had no power to exercise criminal jurisdiction over them. Said Chief Justice White: “But this mistakenly assumes that the power of Congress is to be necessarily tested by the intrinsic existence of commerce in the particular subject dealt with, instead of by the relation of that subject to commerce and its effect upon it. We say mistakenly assumes, because we think it clear that if the proposition were sustained it would destroy the power of Congress to regulate, as obviously that power, if it is to exist, must include the authority to deal with obstructions to interstate commerce . . . and with a host of other acts which, because of their relation to and influence upon interstate commerce, come within the power of Congress to regulate, although they are not interstate commerce in and of themselves.”671 Much of Congress’ criminal legislation is based simply on the crossing of a state line as creating federal jurisdiction.672

666 E.g., United States v. E. C. Knight Co., 156 U.S. 1 (1895); Hammer v. Dagenhart, 247 U.S. 251 (1918). Of course, there existed much of this time a parallel doctrine under which federal power was not so limited. E.g., Houston & Texas Ry. v. United States (The Shreveport Rate Case), 234 U.S. 342 (1914).

667 E.g., California v. United States, 320 U.S. 577 (1944); California v. Taylor, 353 U.S. 553 (1957).

668 For example, federal regulation of the wages and hours of certain state and local governmental employees has alternatively been upheld and invalidated. See Maryland v. Wirtz, 392 U.S. 183 (1968), overruled in National League of Cities v. Usery, 426 U.S. 833 (1976), overruled in Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528 (1985).

669 New York v. United States, 505 U.S. 144 (1992). See also Printz v. United States, 521 U.S. 898 (1997). For elaboration, see the discussions under the supremacy clause and under the Tenth Amendment.

670 250 U.S. 199 (1919).

671 250 U.S. at 203.

672 E.g., Hoke v. United States, 227 U.S. 308 (1913) (transportation of women for purposes of prostitution); Gooch v. United States, 297 U.S. 124 (1936) (kidnapping); Brooks v. United States, 267 U.S. 432 (1925) (stolen autos). For example, in Scarborough v. United States, 431 U.S. 563 (1977), the Court upheld a conviction for possession of a firearm by a felon upon a mere showing that the gun had sometime previously traveled in interstate commerce, and Barrett v. United States, 423 U.S. 212 (1976), upheld a conviction for receipt of a firearm on the same showing. The Court does require Congress in these cases to speak plainly in order to reach such activity, inasmuch as historic state police powers are involved. United States v. Bass, 404 U.S. 336 (1971).

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Last modified: June 9, 2014