Commerce Clause

Whether any transaction constitutes interstate or intrastate commerce depends on the essential character of what is done and the surrounding circumstances. The courts take a commonsense approach in examining the established course of business in order to distinguish where interstate commerce ends and local commerce begins. If activities that are intrastate in character have such a substantial effect on interstate commerce that their control is essential to protect commerce from being burdened, Congress may not be denied the power to exercise that control.

In 1995, for the first time in nearly 60 years, the U.S. Supreme Court held that Congress had exceeded its power to regulate interstate commerce. In United States v. Lopez, 514 U.S. 549, 115 S. Ct. 1624, 131 L. Ed. 2d 626 (1995), the Court ruled 5–4 that Congress had exceeded its Commerce Clause power in enacting the Gun-Free School Zones Act of 1990 (18 U.S.C.A. § 921), which prohibited the possession of firearms within 1,000 feet of a school.

In reaching its decision, the Court took the various tests used throughout the history of the Commerce Clause to determine whether a federal statute is constitutional, and incorporated them into a new standard that specifies three categories of activity that Congress may regulate under the clause: (1) the channels of interstate commerce, (2) persons or things in interstate commerce or instrumentalities of interstate commerce, and (3) activities that have "a substantial relation to interstate commerce … i.e., those activities that substantially affect interstate commerce." The Court then applied this new standard to the 1990 Gun-Free School Zones Act and found that the statute could be evaluated under the third category of legislation allowed by the Commerce Clause. But the Court noted that the act was a criminal statute that had nothing to do with commerce and that it did not establish any jurisdictional authority to distinguish it from similar state regulations. Because the statute did not "substantially affect interstate commerce," according to the Court, it went beyond the scope of the Commerce Clause and was an unconstitutional exercise of Congress's legislative power.

The Court stressed that federal authority to regulate interstate commerce cannot be extended to the point that it obliterates the distinction between what is national and what is local and creates a completely centralized government. Although recognizing the great breadth of congressional regulatory authority, the Court in Lopez attempted to create a special protection for the states by providing for heightened scrutiny of federal legislation that regulates areas of traditional concern to the states.

In a novel application of the Commerce Clause, a federal court decided in United States v. Bishop Processing Co., 287 F. Supp. 624 (D.C. Md. 1968), that the movement of AIR POLLUTION across state lines from Maryland to Delaware constituted interstate commerce that is subject to congressional regulation. The plaintiff, the United States, sought an INJUNCTION under the federal Clean Air Act (42 U.S.C.A. §§ 7401 et seq. [1955]) to prevent the operation of the Maryland Bishop Processing Company, a fat-rendering plant, until it installed devices to eliminate its emission of noxious odors. The defendant plant owners argued, among other contentions, that Congress was powerless to regulate their business because it was clearly an intrastate activity. The court disagreed. Foul-smelling air POLLUTION adversely affects business conditions, depresses property values, and impedes industrial development. These factors interfere with interstate commerce, thereby bringing the plant within the scope of the provisions of the federal air-pollution law.

The power of Congress to regulate commerce also extends to contracts that substantially relate to interstate commerce. For example, Congress may regulate the rights and liabilities of employers and employees, as labor disputes adversely affect the free flow of commerce. Otherwise, contracts that do not involve any property or activities that move in interstate commerce are not ordinarily part of interstate commerce.

Congress acts within its power when it regulates transportation across state lines. The essential nature of the transportation determines its character. Transportation that begins and ends within a single state is intrastate commerce and is generally not within the scope of the Commerce Clause. If part of the journey passes through an adjoining state, then the transportation is interstate commerce, as long as the travel across state lines is not done solely to avoid state regulation. Commerce begins with the physical transport of the product or person and ends when either reaches the destination. Every aspect of a continuous passage from a point in one state to a point in another state is a transaction of interstate commerce. A temporary pause in transportation does not automatically deprive a shipment of its interstate character. For a sale of goods to constitute interstate commerce, interstate transportation must be involved. Once goods have arrived in one state from another state, their local sale is not interstate commerce.

Interstate commerce also includes the transmission of intelligence and information—whether by telephone, telegraph, radio, television, or mail—across state lines. The transmission of a message between points within the same state is subject to state regulation.