COMMERCE CLAUSE ANALYSIS I. INTRO A. Definition: On its face, the Commerce Clause is an affirmative grant of legislative power to Congress, authorizing it “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Article 1, Section 8, Clause 3. 1. The power to regulate commerce “among the several states” is typically referred as the commerce power. 2. The Commerce Clause is the primary tool relied on by Congress to regulate domestic affair . B. Congress v. the Court Congress can allow the states to have a role by adopting state regulations. But that doesn’t give the states commerce power, its just adopting their standards-but it’s still congress acting. Congress can’t override the Court on a constitutional issue. But the Court can say, “we don’t like this state regulation, it should belong to congress” and congress can come back and say, “its okay, we like this regulation, the states know more about such and such then we do…” C. Purpose 1. To prevent individual states from erecting trade barriers to interstate and foreign trade. 2. Create a common market among the states. II. FORMULA: 1) Commerce? Commerce=the commercial exchange of goods and services including the marketing, purchase, and transportation of those goods. Production may affect exchange, but it is not part of the process of exchange. 2) Among the States? Those commercial exchanges that involve activity occurring in more than one state 3) Regulate? Power to prescribe the rules under which that commerce shall be transacted, including the power to prohibit particular transactions III. 3 CATEGORIES OF ACTIVITY CONGRESS MAY REGULATE UNDER CC: 1) The use of the channels of interstate commerce. a. The terms and conditions on which goods or services are sold interstate b. Restriction of the types of goods that can be shipped interstate. 2) The instrumentalities of interstate commerce such as railroads, airlines, and trucking companies.
a. Including the power to protect from threats that come from interstate or local activities. Thus, Congress may impose safety standards on intrastate carriers that use the same railway tracks, airspace, or highways as interstate carriers, in order to prevent them from endangering interstate carriers that operate on the same routes. 3) Using the Necessary and Proper Clause in connection with the CC a. The commerce power also includes the authority to regulate any economic activity that has a substantial relationship with interstate commerce or that substantially affects that commerce-the “substantially affects” test. i.e. The production of goods for sale in interstate commerce is not itself interstate commerce but it is an economic activity that substantially affects interstate commerce and therefore may be subjected to congressional regulation through a combination of the CC and the N and P Clause. b. The meaning assigned to the word “substantially” will determine the extent to which Congress may reach local activities. “Where economic activity substantially affects interstate commerce, legislation regulating that activity will be sustained.” Lopez To come within the realm of economic activity one of two standards must be satisfied: 1) the activity being regulated must itself be properly characterized as economic in nature, or 2) the regulation of the activity must be an essential part of a larger regulation of economic activity (the court concluded that gun possession was not an economic activity). However, even if the regulated activity can fairly be characterized as “economic” in order to fall within the ambit of the commerce power the activity must also have a substantial relation to interstate commerce or substantially affect interstate commerce. IV. LIMITATIONS 1) Congress may not rely on the commerce power to regulate matters that are completely internal to a state 2) Won’t reach those things with which it is not necessary to interfere for the purpose of executing some of the general powers of the government. V. HISTORY A. Gibbons-Congress may not rely on the commerce power to regulate matters that are completely internal to a state. B. Cooley v. Board of Wardens-What about state regulations that were potentially subject to federal regulation under the CC and N and P Clauses? If the federal government chose not to regulate these matters, could the states continue to do so? 1) Holding: Except in those areas which by their nature require a uniform national rule, the states retained a concurrent power to regulate local activities that affect interstate commerce until such time as Congress might opt to regulate those matters itself. 2) The Court eventually abandoned the view that there were areas of local economic activity over which the states and fed gov had concurrent authority. The Court divided power into two exclusive realms-all interest activity belonged
to the fed gov, other activities deemed to be of a local nature were (even though they might affect interstate commerce) were regulated by the states. a. Premised on the 10th Amend: “The powers not delegated to the U.S. by the Constitution…are reserved to the States…” b. United States v. E.C. Knight Co-The Court held that manufacturing was a local activity. c. From 1905-1936 the Court continued to give deference to the states and greatly limit the power of Congress to regulate commerce. i. Throughout the early years of the New Deal, the Court continued to invalidate various congressional enactments on the theory that the laws exceeded the scope of the power-this lead to Roosevelt’s court packing plan. VI. MODERN COMMERCE CLAUSE LAW A. Darby-While manufacture (including wages and hours) is not of itself interstate commerce, the shipment of manufactured goods interstate is such commerce and the prohibition of such shipment by Congress is indubitably a regulation of the commerce power as augmented by the N and P clause. 1) Even if a prohibition on interstate shipment was designed to compel in-state manufacturers to adopt federal standards and even if the prohibition had that effect, the law was constitutional so long as it actually regulated interstate commerce. 2) Brought us back to the “substantially effects” test overruling the notion that only activities that “directly effected” interstate commerce could be regulated. 3) Prohibition of the interstate shipment of goods produced under substandard labor conditions (CC) supports Congress ability to regulate wages and hours (N and P). 4) The Darby Court also rejected the Tenth Amendment argument. The amendment states a truism that all is retained which has not been surrendered. The power over commerce was surrendered to the U.S. by the Constitution, so if the statute comes within the scope of that power then the Tenth Amendment has no bearing on the constitutionality of the statute. (i.e. FLSA) B. When a federal law and a state statute come into conflict, the federal law governs as the supreme law of the land. C. Cumulative effects analysis (Wickard)-Even if a particular commercial activity being regulated seems to take place solely intrastate, the Court may find that when all similar activities are considered as a class, they have a cumulative effect on interstate commerce. Wickard is the limit and it should be understood to be one that was accepted because the home consumption was essentially an economic activity because it undermined the price control congress was trying to regulate.
EXAM TIPS
1. Whenever Congress is attempting to regulate an activity that does not itself constitute interstate commerce or an instrumentality of interstate commerce, what is at issue is the reach of the Necessary and Proper Clause as it augments the Commerce Clause. 2. When there is a conflict between state and gov-analyze-then discuss preemption Supremacy Clause in Article VI. Preemption may result either where Congress expressly denies state authority or where that is the implication of the exercise of federal power. There are two types of implied preemption: (1) Field preemption: where the scheme of federal regulation is so pervasive as to make rx the inference that Congress left no room for the States to supplement it. (2) Conflict preemption: where compliance with both federal and state regulations is a physical impossibility, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.
3. Statute Analysis: (1) Regulation of channels? (2) Regulation of instrumentalities? No-then does it (3) substantially affect interstate commerce? Is it an economic activity? Is its regulation part of a comprehensive regulatory scheme directed at economic activity? (Wickard). Economic activity is a prereq to exercising the commerce power-if it doesn’t exist then cannot exercise. “In those cases where we have sustained federal regulation of interstate activity based upon the activity’s substantial effects on interstate commerce, the activity in question has been some sort of economic endeavor.” (Though abuse to women is part of the collective cost of hospitalization and rehab and may be seen as a “part” of the commerce scheme as wheat was in Wickard-wheat itself is an economic activity whereas abuse is not). The economic consequences of this noneconomic behavior are too tenuous to establish a substantial link with interstate commerce.
Note 4: U.S. v. Morrison (Brzonkala)- (Rape case brought in fed court under VAWA.) Invalidated a key section of the federal Violence Against Women Act, as authorized neither by the CC nor by Due Process. Even with extensive findings by Congress that gender based violence had a substantial effect on commerce, the court held that the act was not within the CC power. Not economic in nature. Did not affect interstate commerce. Intruded upon core police powers. VA should prosecute not the fed gov. Note 5 p. 368-Dewey-broader in scope then the affecting commerce language-“the property actually used in commerce”-this was enough to win over a unanimous court. A home owner was not using his home for interstate commerce merely because he had secured a loan and insurance from out of state suppliers etc… Note 6-Solid Waste: The EPA was seeking to adopt an interpretation of “navigable waters”…that extended to change land use you would think you would only have to go to local/state gov…but the fed gov said in this case fed permission was needed under navigable waters…again an issue of statute interpretation. Channel of interstate commerce? No one was traveling through gravel pit. The argument that it affected interstate commerce was migratory birds landed there and moved on-interstate. But does this have to do with an economic activity.
Lower court held hunting to be an economic activity-SC didn’t agree. They wanted to know whether the issue was migratory birds or the landfill-can’t argue both. First question: DOES THE COMMERCE POWER ALLOW MY AGENCY TO ACT? Is there an alternative source of power? Necessary and Proper-McCulloch v. MD (weak-scope of means not new power) Under Executive power? I.e. birds coming from Canada or Mexico and therefore foreign affairs (subject of an agreement/treaty) that are therefore a separate source of authority that can be used by the federal gov to accomplish their objectives. Money-bribing the states (Education-state and local; but fed gov can say here’s a million dollars that you must use to test the ranking of your students) Commerce/Necessary and Proper/Foreign/Spending Power-all ways the Fed Gov might seek to enforce something they don’t have direct authority over.
i.e. bootstrap sale of ketchup to a restaurant to commerce, which congress can regulate, thereby controlling the discrimination occurring at the restaurant.
BLACK LETTER Achieving Social Welfare Objectives—A National Police Power -Congress' power to regulate the channels and instrumentalities of interstate commerce and persons and things in interstate commerce is plenary, permitting it to prescribe rules for the protection of commerce. Courts will not probe Congress' purpose in regulating interstate commerce. -While there is no national police power, Congress can achieve social welfare objectives through regulating interstate commerce. If Congress exercises its delegated powers, it may regulate matters traditionally regulated by the states. -Tenth Amendment. When Congress regulates private action, the Tenth Amendment is not a significant limitation on Congress' regulatory power. Local activities can be regulated if they are part of the "stream" of interstate commerce. The Affectation Doctrine -Under the necessary and proper clause, Congress can regulate local activities if it can rationally conclude that such activity has a substantial effect on interstate commerce. The courts defer to the congressional judgment but there are limits. Consider if the matter regulated is commercial, if there is a jurisdictional nexus to interstate commerce, if there is congressional fact finding, and if the regulation intrudes on areas of traditional state concern. The Taxing Power -Congress has the fiscal power of raising monies through taxes. However, this is not a regulatory power and "penalties" may not be imposed in the guise of taxes. -Courts today tend to accept any tax as a fiscal measure if, on its face, it is a revenue producing measure. -Disclosure requirements will not make a tax into a penalty but such provisions raise problems of self incrimination.
DORMANT COMMERCE CLAUSE ANALYSIS I. DEFINITION A. Can congress preempt the states even if it does nothing, or does congress have to act? Modernly commerce cases appear in two guises: 1) Affirmative commerce power-i.e .Gibbons-congress has acted and the question is whether or not there is a conflict. 2) Dormant (or negative) commerce clause-the courts have to decide because congress hasn’t acted. B. Issue: Does the affirmative grant of power to Congress through the CC also carry with it the negative/dormant inference that the states are thereby precluded from regulating interstate and foreign commerce? II. IS THERE A DORMANT COMMERCE POWER? A. Cooley v. Board of Wardens Rule: Congress retains the exclusive power to create national, uniform legislation, but that does not imply that the states are deprived of the power to create local, non-conflicting regulations. Holding: The Court viewed the half-pilotage fee as an exercise of the state’s police power. B. The problem was that Cooley offered no clear way to determine which activities require a uniform national rule (exclusive) and which lie within the concurrent (state and national) zone. The Court eventually abandoned Cooley. III. DISCRIMINATION A. Even where Congress has not legislated under the CC and the Clause thus remains dormant, state laws that burden or discriminate against interstate or foreign commerce may still be invalidated on the ground that they violate the dormant CC. B. Oregon Waste Issue: This case addresses a state law which promotes intrastate commerce by discriminating against out-of-state commerce by charging higher waste disposal fees. Rule: Such differential fees are per se invalid, unless it is based on the costs of disposing of out-of-state waste. Rx: Oregon must show that it advances a legitimate local purpose that cannot be adequately served by rx nondiscriminatory alternatives. Compensatory tax Rule: A facially discriminatory tax that imposes on interstate commerce the rough equivalent of an identifiable and substantially similar tax on intrastate commerce does not offend the commerce clause. Holding: Court found that the surcharge was simply economic protectionism. A state may grant a “limited preference” in the use of ground water to its citizens,
but that preference exists only for the most essential resources and may not be extended to landfills (then why concrete?). TWO-STEP TEST: Is the law discriminatory on its face? 1) Yes-then apply strict scrutiny 2) No-then apply the Pike balancing test: does burden outweigh local benefit? Dissent: Rehnquist found that the commodity at issue is not the waste itself, but the availability of landfill space. The majority ignored the impact of taxes and fees imposed on Oregon residents who support the state’s program. Furthermore, the majority’s decision will permit residents in Oregon’s neighbors to produce waste without “paying concomitant state taxes to develop new landfills.” The additional fee appropriately offsets the privilege of dumping waste without paying support taxes-applying the Pike balancing test of burdens and benefits. IV. IS THE LAW RATIONALLY RELATED TO A LEGITIMATE STATE PURPOSE? A. A state law that affects interstate or foreign commerce must have been enacted for a purpose or goal that falls within the state’s police powers. Under their police powers the states may regulate and tax for health, safety, morals, and general welfare of the public. B. Economic Protectionism-laws aimed at insulating a state from interstate competition-is per se invalid. 1) South-Central Timber: Facts: An Alaska statute required that timber taken from state lands be processed in Alaska before being shipped out of state. Because the admitted purpose of the law was to shield Alaska’s infant timber processing industry from the effects of interstate and foreign competition, the measure was held to be invalid per se. Rule: The key is whether a measure was adopted because of-rather than in spite of-its competition-shielding effects. (A state ban on the importation of baitfish is permitted when based on environmental reasons even if the effect is to protect local baitfish sellers). 2) Even if a court stops short of finding that a law was motivated by protectionism, the measure will still be subject to very strict scrutiny due to the fact that allegedly protectionist laws always involve discrimination against interstate commerce. As such, they are frequently struck down on the ground that the state has failed to use the least discriminatory means of achieving its goal. 3) Market Participant (CC doesn’t apply) v. Market Regulator (not allowed) a. Market Participant = acting as a buyer or seller b. Market Regulator = the state is not interested in buying or selling just in affecting how other parties buy and sell between one another c. Why should we give the state more latitude if it’s a market participant? They’re acting more like a business and the success of their deal is only as great as the price or goods they’re offering. They’re not exercising they’re
police power-they can’t shut you down just because you don’t buy their goods. Their power is less as a market participant. VI. OPPOSING VIEWS A. Justices Thomas and Scalia don’t agree with the notion of a dormant commerce clause and believe the Import-Export Clause (Article I Section 10, Clause 2) should govern instead. EXAM TIPS: Dormant Commerce Clause1) First ask if discriminatory between in state and out of state? Dormant =Start with a state regulation and ask “is the state within the scope of its power?”Affirmative = The government has acted and we’re asking if it is within the scope of its power?