Eleanor Finch
The Commerce Clause, outlined in Article I, Section 8, Clause 3 of the US Constitution, grants Congress the power to regulate commerce with foreign nations, among several states, and with Indian tribes. This clause has been interpreted by courts and scholars as giving Congress broad authority over interstate commerce, including the ability to remove barriers to interstate trade and address issues of national concern. The Interstate Commerce Act of 1887, which regulated railroad rates and made the industry the first subject to federal control, was a significant application of the Commerce Clause. The act was passed in response to public anger over unfair railroad rates, demonstrating how the Commerce Clause can be used to address issues that impact multiple states and their citizens.
| Characteristics | Values |
|---|---|
| Interstate commerce | Requires movement of the subject of regulation across state borders |
| Commerce Clause | Grants Congress the power to regulate commerce with foreign nations and among states |
| Commerce | Intercourse and all its branches, regulated by prescribing rules for carrying on that intercourse |
| Congress | Can regulate and prescribe rules by which commerce is governed |
| Federal control | Can be extended to intrastate activities that affect interstate commerce |
| Regulation | Congress can regulate intrastate commerce only when it arises out of or is connected with a commercial transaction |
| Trade agreements | The federal government can enter into credible trade agreements with foreign powers |
| Trade barriers | The Commerce Clause can be used to remove barriers that states try to impose on interstate trade |
| Federal regulation | The Interstate Commerce Act of 1887 subjected railroads to federal regulation for the first time |
| Monopoly | The Interstate Commerce Act addressed the problem of railroad monopolies by setting guidelines for how railroads could do business |
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![Select List of References on Federal Control of Commerce and Corporations Comp. under the Direction of A. P. C. Griffin, Chief of Division of Bibliography. 1903 [Leather Bound]](https://m.media-amazon.com/images/I/617DLHXyzlL._AC_UY218_.jpg)
What You'll Learn
The Commerce Clause
The interpretation of the Commerce Clause has been a subject of ongoing controversy regarding the balance of power between the federal government and the states. While it grants Congress broad powers to regulate commerce, the exact definition of "commerce" is not explicitly defined in the Constitution, leading to varying interpretations. Some argue it refers simply to trade or exchange, while others interpret it more broadly to include commercial and social intercourse between citizens of different states.
The Dormant Commerce Clause is an important aspect of this debate, implying a prohibition against states passing legislation that discriminates against or excessively burdens interstate commerce. This ensures that protectionist state policies do not favour in-state citizens or businesses over those from other states.
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Interstate Commerce Act
The Commerce Clause, outlined in Article I, Section 8, Clause 3 of the US Constitution, grants Congress the power to regulate commerce with foreign nations, among the states, and with Native American tribes. This clause has been interpreted by courts and scholars in different ways, with some focusing on the "'commerce' aspect and others on the 'regulate' aspect. The Supreme Court has held that Congress may regulate intrastate activities that substantially affect interstate commerce, with the Court's interpretation evolving over time.
The Interstate Commerce Act of 1887 was a significant piece of legislation that applied the Commerce Clause to regulating railroad rates. This Act was passed in response to public anger over unfair railroad rates, with small businesses and farmers protesting that railroads charged them higher rates than larger corporations. The Act created the Interstate Commerce Commission to oversee the conduct of the railroad industry, making it the first industry subject to federal regulation. The law required "just and reasonable" rate changes, prohibited rebates and "preference" in rates, and forbade long-haul/short-haul discrimination.
The Interstate Commerce Act addressed the problem of railroad monopolies, which had the power to set prices, exclude competitors, and control the market in certain geographic areas. These monopolies were generally viewed as harmful to free competition and the public interest. While the Act was supported by both major political parties and pressure groups, it was not very effective in practice due to contradictory provisions and technical difficulties in implementation.
The creation of the Interstate Commerce Commission marked a turning point in federal policy. Before 1887, Congress had applied the Commerce Clause only on a limited basis, mainly to remove barriers to interstate trade. After the Act, the national economy became more integrated, and the Commerce Clause became a powerful tool for Congress to address national issues involving commerce across state lines. This expansion of federal power under the Commerce Clause has been controversial, with ongoing debates about the balance of power between the federal government and the states.
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State vs. federal power
The Commerce Clause, outlined in Article I, Section 8, Clause 3 of the US Constitution, grants Congress the power to regulate commerce with foreign nations, among the states, and with Indian tribes. This clause has been a source of tension between state and federal power, with courts and commentators often discussing each of the three areas of commerce as separate powers granted to Congress.
The Commerce Clause emerged as a response to the absence of federal commerce power under the Articles of Confederation, which resulted in a nationwide economic downturn. State legislatures controlled their own commerce, hindering the federal Congress's ability to enter into credible trade agreements with foreign powers. Thus, the Commerce Clause aimed to address interstate trade barriers and enhance the federal government's ability to negotiate trade deals.
The interpretation and application of the Commerce Clause have been contentious issues, with ongoing debates about the balance of power between federal and state governments. The Supreme Court has historically viewed the clause as limiting state power rather than a source of federal power. Early cases often involved state legislation that impeded interstate commerce, with the Court interpreting "commerce" broadly to include commercial and social intercourse between citizens of different states.
The Commerce Clause has been used by Congress to justify exercising legislative power over state activities, particularly in regulating interstate commerce. For example, in United States v. Wrightwood Dairy Co. (1942), the Court upheld federal price regulation of intrastate milk commerce, asserting that the power of Congress over interstate commerce is plenary and complete.
However, the Court has also recognised the unique position of states in the constitutional system and emphasised limitations on Congressional power under the Commerce Clause. In Garcia v. San Antonio Metropolitan Transit Authority (1985), the Court acknowledged that the scope of Congress's authority under the clause must reflect the states' position.
Additionally, the Dormant Commerce Clause prohibits states from passing legislation that discriminates against or excessively burdens interstate commerce. This prevents protectionist state policies that favour in-state citizens or businesses over non-citizens conducting business within the state. For instance, in West Lynn Creamery Inc. v. Healy, the Supreme Court struck down a Massachusetts state tax on milk products as it impeded interstate commercial activity by discriminating against non-Massachusetts entities.
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Railroads and monopolies
The Constitution gave federal control over interstate commerce to address the problems of interstate trade barriers and enable the government to enter into trade agreements. This was achieved through the Commerce Clause, which grants Congress the power to "regulate Commerce with foreign Nations, and among the several States".
The railroads were the first industry to become subject to federal regulation with the passing of the Interstate Commerce Act in 1887. This Act was passed in response to public anger over unfair railroad rates, which saw small businesses and farmers protesting that the railroads charged them higher rates than larger corporations. The railroads were also setting higher rates for short hauls than for long-distance ones.
The Interstate Commerce Act limited railroads to charging rates that were "reasonable and just", forbade rebates to high-volume users, and made it illegal to charge higher rates for shorter hauls. The Act also established a five-member enforcement board, known as the Interstate Commerce Commission (ICC), which heard complaints against the railroads and issued cease-and-desist orders to combat unfair practices.
The development of the railroads in the early 19th century facilitated Westward expansion and development, as settlements no longer needed to be self-sufficient and could simply "import" what they needed via rail. This interconnectedness was extremely attractive to businessmen, who saw the opportunity to increase their wealth by exploiting the untapped resources of the West. The railroads rapidly became huge businesses, imperative to the success of American enterprise, and their material needs helped create several other big industries, such as iron, steel, copper, glass, machine tools, and oil.
To avoid the loss of production, large corporations attempted to stabilize their situations by pooling markets and centralizing management. By combining all of the fields into one conglomeration, the railroads acquired new powers, such as the ability to "squeeze out competitors, force down prices paid for raw materials, charge customers more, and get special treatment from suppliers". This led to the railroads becoming monopolies, with the power to set prices, exclude competitors, and control the market in several geographic areas.
While the Interstate Commerce Act was a step towards regulating the railroads, it was not very effective in practice. The most successful provisions of the law were the requirement that railroads submit annual reports to the ICC and the ban on special rates arranged among the railroads themselves. Over time, the courts narrowed the ICC's authority, and in 1995, Congress abolished the commission, transferring its remaining functions to the Surface Transportation Board.
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Trade agreements
The Commerce Clause, outlined in Article I, Section 8, Clause 3 of the US Constitution, grants Congress the power to regulate commerce with foreign nations and among the several states. This clause has been used by Congress to justify exercising legislative power over the activities of states and their citizens, impacting the balance of power between the federal government and the states.
Prior to the inclusion of the Commerce Clause, state legislatures controlled their own commerce, which prevented the federal Congress from entering into credible trade agreements with foreign powers to open markets for American goods. This resulted in a nationwide economic downturn, which was blamed on the policies enacted by democratically elected legislatures. As a result, the Commerce Clause was included in the Constitution to address the problems of interstate trade barriers and the ability to enter into trade agreements.
The Commerce Clause has been interpreted differently by various courts and commentators, who have tended to discuss each of the three areas of commerce (foreign commerce, interstate commerce, and Indian commerce) as separate powers granted to Congress. There is also a dispute over the range of powers granted by the Commerce Clause, with some arguing that it refers simply to trade or exchange, while others claim that it describes broader commercial and social intercourse between citizens of different states.
The Supreme Court has played a significant role in interpreting the Commerce Clause, with early cases primarily viewing it as limiting state power rather than as a source of federal power. The Court has held that Congress may regulate activities within a state that arise from or are connected to a commercial transaction and that substantially affect interstate commerce. This includes activities that have a "substantial economic effect" on interstate commerce or where the "cumulative effect" of an act could impact such commerce.
The Interstate Commerce Act of 1887 was a significant example of the Commerce Clause being used to address national issues involving commerce across state lines. The Act created an Interstate Commerce Commission to regulate the railroad industry, making it the first industry subject to federal regulation. The Act addressed problems with railroad monopolies, which had the power to set prices, exclude competitors, and control the market in certain geographic areas.
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Frequently asked questions
The Commerce Clause is an enumerated power listed in the United States Constitution (Article I, Section 8, Clause 3). The clause states that the United States Congress has the power to regulate commerce with foreign nations, among the several states, and with Indian tribes.
The Commerce Clause was included in the Constitution to address the problems of interstate trade barriers and the ability to enter into trade agreements. State legislatures controlled their own commerce, which prevented the federal Congress from entering into credible trade agreements with foreign powers. This led to a nationwide economic downturn.
The Supreme Court has interpreted the Commerce Clause as limiting state power and as a source of federal power. The Court has held that Congress may regulate activities within a state that arise from or are connected with a commercial transaction and that substantially affect interstate commerce.
The Dormant Commerce Clause refers to the prohibition, implicit in the Commerce Clause, against states passing legislation that discriminates against or excessively burdens interstate commerce. It aims to prevent protectionist state policies that favour state citizens or businesses over non-citizens conducting business within the state.
