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Commerce Clause in American Federalism

SUBMITTED BY- PRANJALI DIXIT

SAP ID- 81072100023
BRANCH- LLM (CONSTITUTIONAL LAW)
SUBJECT- CONSTITUTION & FEDERALISM
TRIMESTER - II

SUBMITTED TO - PROF. ANJU SINGH

(FACULTY JUDICIAL PROCESS)
KIRIT P. MEHTA SCHOOL OF LAW, NMIMS.

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ACKNOWLEDGEMENT

I would like to extend my special thanks to my subject teacher PROF. ANJU SINGH as well as
our respected Dean Dr. Alok Misra who gave me this opportunity to attempt this Article on the
concept “Commerce Clause in American Federalism” which also helped me in clarifying and
diversifying my knowledge on this international legal concept. I am thankful to all who helped
me completing my project.

Pranjali Dixit
LLM (Constitutional Law)
SAP ID- 81072100023
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Table of Contents

Sr. No. Content Page No.

1. Cover Page & Topic Name 1
2. Acknowledgment 2
3. Table of Contents 3
4. Chapters (4-9)
1. Structure of the Article 4
2. Introduction & Meaning 5
3. Evolution & Scope of 6-7
Interpretation
4. Important Case Study 8
5. Impact on Federalism 9
5. Conclusion 10
6. Bibliography 11

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CHAPTER 1
STRUCTURE OF THE ARTICLE

RESEARCH HIGHLIGHTS

1. An introduction to the concept of “commerce clause” and its emergence.

2. To analyse implications of the concept through study of various relevant case laws.

RESEARCH OBJECTIVE

To describe & study the background, evolution and future of “commerce clause” in the light
of “federalism” in the United States of America.

RESEARCH METHODOLOGY

The methodology adopted by the researcher is descriptive and analytical. The

methodology will not include empirical research.

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CHAPTER 2
INTRODUCTION & MEANING

Commerce Clause is a very significant part of American Federal system considering that
United States of America is not only a capitalist country but also has a very strong federal
system.

As per the US constitution, various aspects concerning “Federalism” such as, the structure of
segregation of powers between the Centre and the States and powers between the government’s
various branches (checks and balances), the election of senators and representatives are laid
down under Article 1, clause 3, section 8, which amongst various other significant rights,
entails the following:

The commerce clause finds its home in Article 1- section 8, clause 3 of the US constitution
which says:

Article I - Section 8.- Clause 3

“To regulate commerce with foreign nations, and among the several states, and with the
Indian tribes;”

Since the legislative text describing the “commerce clause” is short penned, judicial precedents
have played a vital role in the interpretation of this clause over the course of time.

As per the “commerce clause” the central government of United States has been conferred upon
the power to the exclusion of the state governments to regulate trade and commerce activities
having an impact on foreign trade policies, inter state economic activities as well as such
commercial activities affecting Indian tribes.

In this Article the researcher has centred the focus of the scope of commerce clause pertaining
to the activities of interstate commerce, so as to throw light upon its impact on the federal
system of governance in the country.

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CHAPTER 3
EVOLUTION & SCOPE OF INTERPRETATION

It is pertinent to understand that the Congress in the United States of America has often sought
shelter under the Commerce Clause to justify over exercising its legislative powers on such
activities of states and their citizens over which the state has direct authority to enact statutes,
which had constantly lead to aggressive and ongoing controversial frictions regarding the
balance of powers grated to the federal government and the states government, consequently
the equilibrium being thrown off in one direction due to the lack of interpretational clarity of
the scope of powers of the federal government under the “commerce clause”. The “commerce
clause” has even historically been viewed as both a grant of congressional authority as also an
encroachment upon and restriction on the regulatory and legislative authority of the States.

Tests and scope of interpretation

1. The Impact Test

a. In “NLRB v. Jones & Laughlin Steel Corp, 301 U.S. 1 (1937)”, a test was laid by the
supreme court, to determine whether or not an activity came under the purview of
“commerce” and thus would the question of power to legislate on the same lie with the
center or state.

b. The determination criteria was if it had a “Substantial economic effect”” on the

interstate commerce or whether “cumulative effect” of one act would have an effect on
the commerce.

c. Similar tests and determination criteria were laid down in the case law “United States
v. Darby, 312 U.S. 100 (1941)” and “Wickard v. Filburn, 317 U.S. 111 (1942)”.
Various tests laid down in the abovementioned case laws showcase the general
willingness of the courts to give an unequivocal broad interpretation of the “commerce
clause”. This has helped in recognizing that any activity whether or not local will likely
affect the larger interstate commercial economic scheme considering that all actions
especially ones related to trade and commerce done within any part of the country have
a cumulative effect on the entire nation, in consideration of the dynamic and integrated
capitalist national economy.

2. Initial Broad Interpretation

In a particular case “Gibbons v. Ogden, 22 U.S. 1 (1824)”, the Supreme Court held that
intrastate activity could be regulated under the Commerce Clause, provided that the
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said activity is necessarily a part of a larger interstate commercial scheme. In the case
law “Swift and Company v. United States, 196 U.S. 375 (1905)”, the Supreme Court
held that federal government had the authority to regulate local/ interstate commerce,
as long as that particular activity could become part of the continuous “current” of
commerce and economics that involved the interstate movement of goods and services.

3. Shift towards Strict Interpretation

a. The Supreme Court, here refrained from invalidating a single law on the basis of the
“commerce clause”, and took a drastic shift from the interpretation laid down in the
NLRB decision previously.

b. In “United States v. Lopez, 514 U.S. 549 (1995)”, the Supreme Court attempted to
curtail the extremely broad legislative mandate provided to the Congress under the
Commerce Clause by circling back to a more conservative interpretation of the
provision. In this significantly impactful case, the defendant was charged with “carrying
a handgun to school” which was in complete violation of the federal “Gun Free School
Zones Act of 1990”.

c. Here, the defendant questioned the federal government’s authority to regulate firearms
in local schools, to which the federal government claimed with an explanation that this
particular matter most certainly fell under the “commerce clause”, considering the fact
that the mere possession of any form of ‘firearm’ in a ‘school zone’ would constitute
an offence and may consequently lead to violent crime on a nationwide level, thereby
affecting general economic conditions.

d. The surprising stand taken by the Supreme Court in this matter was that it pronounced
a narrow interpretation of the powers of the congress vested through the commerce
clause by rejecting the federal government's argument, and further holding that the
federal government has the power solely so as to regulate “the channels of commerce,
the instrumentalities of commerce, and action that substantially affects interstate
commerce” and nothing more than this under the “commerce clause”.

e. The court here, stated in absolute and stark words that it would at always refrain from
expanding the commerce clause beyond its natural and accurate interpretation.

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CHAPTER 4
IMPORTANT CASE STUDY

1. The Sherman Anti-Trust Act was the first Federal act that outlawed monopolistic
business practices

2. The purpose of the Congress national government so as to regulate the trade, commerce
and economic activities in the primary sense of traffic is specifically embodied in the
“Sherman Antitrust Act of 1890”.

3. This act was passed for the purpose of curbing the growing tendency to form industrial
combinations and cartels, and the first case under this Act to reach the court of law was
the famous United States v. E. C. Knight Co. also popularly known as Sugar Trust
Case.

4. In this case, the federal government had instructed for the cancellation of certain
agreements, pursuant to which the ‘American Sugar Refining Company’, had acquired,
nearly complete control of the manufacturing process and manufacture control of
refined sugar all across the United States of America.

5. Here, the Court opined, that there was a stark demarcation between the two spheres of
power, and, that in a series of propositions, it endeavored to lay down such a
demarcation categorically.

6. Applying this particular reasoning to the case before it, the Court proceeded stating
that: The object [of the combination] was manifestly “private gain” by virtue of the
manufacture of the commodity, but was not through the control of interstate or foreign
commerce.

7. There was nothing in the evidences provided as supporting to the case that would
otherwise indicate any intention to put a restraint upon trade and/or commerce, and the
fact, as we have dealt with in detail previously, that trade/commerce/economic activity
might be indirectly affected thus it was not enough to entitle the complainants to a
decree.

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CHAPTER 5
IMPACT ON FEDERALISM

The impact of the “commerce clause” is that it leads to a constant conflict between the state
and federal governments of the United States of America, causing an environment of friction
in the federal system of governance.

The reasons for the said loggerheads between the state and federal governments due to this
provision are elaborated hereinbelow:

1. The federal government has been quite notorious in the usage of the provisions and
entitlements created by the “commerce clause” for the sole purpose of increased reach of
governance leading towards absolute power.

2. This is so done by the federal government by overstepping its jurisdiction to exercise its
legislative powers to make enactments and enforce statutes on such matters/ activities/state
policies which are otherwise expressly reserved for the state legislative action and come
directly under the state’s powers to enact upon.

3. This is achieved by the federal government by way of taking shelter under the regime of
“commerce clause” which allows the federal government to regulate trade, commerce, and
other financial and economical activities irrespective of whether such activities so
impacting/ impacted by trade commerce & economics concern the entire country, interstate
provinces or local regions within the country solely by virtue of the powers vested upon the
federal government by the “commerce clause”.

4. This clause leaving an enormous ‘grey area’ in the legislative authorities of both the federal
and state governments has the impact of posing a threat to the very strong and long standing
system of federalism in the United States of America. However, the role of judiciary has
been a pivotal one in maintaining the equilibrium of powers of the centre and state in this
context by way of accurate interpretation of the said provision in a way so as to restore the
very spirit of Federalism in an otherwise capitalist country which is obviously most affected
by trade and commerce and consequently by the “commerce clause” itself.

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CONCLUSION

1. The commerce clause plays a vital role in determining the scope and extent of the
powers vested in the center and the states in legislating over state jurisdictions, under
the extended “scope” of the said legislature affecting the interstate commerce and
consequently the national economy.

2. This is not a welcome provision, to the states, as it selectively affects their ability to
freely exercise legislative freedom in the states, without the intervention of the centre,
enjoying truly the benefits of the federal system.

3. Previously, the federal governments of United States of America, ever since the
inception of this authority vested in it by the US constitution, have notoriously made
several attempts to encroach upon the legislative powers of the state governments,
which have rightfully been quashed by US Supreme Court, making it very clear that
the powers vested in the federal government by virtue of this clause, are limited only if
the matters upon which the federal court decides to legislate upon by virtue of this
power are impacted by and/or have a significant impact upon the trade, commerce
and/or economic activities of the country, states, and/or Indian tribes.

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Bibliography

1. LIST OF INTERNATIONAL DOCUMENTS

Research Article published by P.H.D student at University at Albany, State University

of New York

2. LIST OF LEGISLATIONS

U. S. Constitution

Sherman Antitrust Act of 1890

Gun Free School Zones Act of 1990

3. ONLINE DATABASE

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www.law.cornell.edu

www.senate.gov

www.govinfo.gov

www.britanica.com

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