The Evolution of the Commerce Clause (Part I)

The Commerce Clause of the Constitution has grown in size and scope to limit federalism and liberty to the individual states. If Federalism is denied to the states, then it follows liberty is denied to the people. The greatest aspect of America is different laws governing each state allows individuals the freedom to live in a state of their liking. If the federal government forces all states to have common laws, federalism and individual liberty are gone. The Commerce Clause refers to Article 1, Section 8, clause 3 of the U.S. Constitution, which gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” From the early definition of “commerce” and from Madison’s writings in the Federalist Papers it is easy to determine that he had a narrow view of “commerce” to mean only “trade” between states, foreign nations, and Indian tribes. “Commerce” did not mean controlling production, manufacturing, or all economic parameters of businesses.

In Paul v. Virginia in 1869 the Court held that insurance policies were not protected under the commerce clause. However, Paul was overturned in the 1944 case between United States v. South-Eastern Underwriters Association. In this case, the Court held that the 1890 Sherman Anti-Trust Act applied to insurance companies citing the commerce clause. Congress passed the McCarran – Ferguson Act of 1945 in an attempt to limit the implications and impact of the South-Eastern Underwriters decision a year earlier. The United States v. E.C. Knight Company case in 1895 limited Congress’s power to control and regulate monopolies through the commerce clause and the Sherman Anti-Trust Act. In this case Congress tried to break up the Sugar Trust but the Court claimed “Refining was a local activity not subject to Congress regulation by the commerce clause” (as Madison asserted). Hence, action against manufacturing monopolies relied on state law until the 1930s and the FDR era.

In 1888 the Supreme Court decided in Kidd v. Pearson that there was a distinction between manufacturing and commerce (again as Madison asserted). The Court held that Iowa could prohibit the manufacturing of alcohol even if the product was going to be sold across state lines because it did not interfere with commerce. The Champions v. Ames case in 1903 upheld the Federal Lottery Act of 1895. This law prevented the buying and selling of lottery tickets across state lines via the interstate commerce clause. This ruling was important because it meant Congress could prohibit good from crossing state lines. In the Passenger Car Cases of 1899: Smith v. Turner and Norris v. Boston, the Court held that the commerce clause included regulation of people including immigrants when it struck down passenger taxes on ships.

The 1911 case between Southern Railway v. United States the Court held that Congress had the authority to apply the commerce clause to regulate intrastate safety on railways. In other words, Congress could demand intrastate trains be equipped with safety equipment to prevent injury and property damage on interstate trains.

In Hoke v. United States in 1911, the Court held Congress did not have the power to regulate prostitution using the commerce clause. Prostitution was clearly an issue up to the states to decide and explains the reason why prostitution is legal in Nevada and illegal just about everywhere else. However, in 1914 the case between Houston E. W.T. Company v. United States the Court ruled Congress could regulate intrastate commerce to control interstate commerce. The Court held that regulating railroad taxes within the state of Texas was needed so out of state railroad companies could also compete in Texas.

Hammer v. Dragonhart was decided in 1918 and the Court held that the regulation of child labor was not interstate commerce. Therefore, Congress does not have the power to regulate the manufacturing process and the products made by children outlawing the Keating – Owens Act of 1916. Justice Oliver Wendell Holmes in his dissent (Holmes is known as the great dissenter) said “the entire manufacturing process in the U.S. is under Congressional jurisdiction”. Holmes claimed that federal government prohibition laws prove that Congress can regulate any industry or product. However, prohibition was an Amendment to the Constitution. Hammer was overturned in 1941 in United States v. Darby Lumber Company. In Darby the Court upheld FDR’s Fair Labor and Standards Act (FLSA) of 1938 using the commerce clause to yield Congress the power to regulate economic conditions. This ruling limited the decision in Carter v. Carter Coal Company. This case was decided in 1936 and was over whether or not Congress had the power to regulate the coal industry. The Court ruled that “production and manufacturing” of products is not covered by the commerce clause which overruled the FDR administration’s Bituminous Coal Conservation Act which tried to control wages, overtime, and other economic factors in coal mining. Darby also upheld wage regulation for women in West Coast Hotel v. Parrish in 1935. In Darby, the Court held that the FLSA prevented States from using “substandard” practices to create an unfair economic advantage affecting commerce.