By FindLaw Staff | Legally reviewed by Renee Guolee, J.D. | Last reviewed July 29, 2022
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The Commerce Clause is a major source of Congress' power. The Commerce Clause has been interpreted by the Supreme Court to grant three broad categories of power: (1) regulating the use of interstate commerce channels, (2) regulating people and things in interstate commerce, known as "instrumentalities" of interstate commerce, and (3) regulating activities that substantially affect interstate commerce. These three categories give Congress an important limitation to the exercise of state power.
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[The Congress shall have Power . . . ] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; . . .
The Commerce Clause serves a two-fold purpose: it is the direct source of the most important powers that the Federal Government exercises in peacetime, and, except for the due process and equal protection clauses of the Fourteenth Amendment, it is the most important limitation imposed by the Constitution on the exercise of state power. The latter, restrictive operation of the clause was long the more important one from the point of view of the constitutional lawyer. Of the approximately 1400 cases that reached the Supreme Court under the clause prior to 1900, the overwhelming proportion stemmed from state legislation.1 The result was that, generally, the guiding lines in construction of the clause were initially laid down in the context of curbing state power rather than in that of its operation as a source of national power. The consequence of this historical progression was that the word "commerce" came to dominate the clause while the word "regulate" remained in the background. The so-called "constitutional revolution" of the 1930s, however, brought the latter word to its present prominence.
The etymology of the word "commerce"2 carries the primary meaning of traffic, of transporting goods across state lines for sale. This possibly narrow constitutional conception was rejected by Chief Justice Marshall in Gibbons v. Ogden,3 which remains one of the seminal cases dealing with the Constitution. The case arose because of a monopoly granted by the New York legislature on the operation of steam-propelled vessels on its waters, a monopoly challenged by Gibbons, who transported passengers from New Jersey to New York pursuant to privileges granted by an act of Congress.4 The New York monopoly was not in conflict with the congressional regulation of commerce, argued the monopolists, because the vessels carried only passengers between the two states and were thus not engaged in traffic, in commerce in the constitutional sense.
"The subject to be regulated is commerce," the Chief Justice wrote. "The counsel for the appellee would limit it to traffic, to buying and selling, or the interchange of commodities, and do not admit that it comprehends navigation. This would restrict a general term, applicable to many objects, to one of its significations. Commerce, undoubtedly, is traffic, but it is something more—it is intercourse."5 The term, therefore, included navigation, a conclusion that Marshall also supported by appeal to general understanding, to the prohibition in Article I, § 9, against any preference being given "by any regulation of commerce or revenue, to the ports of one State over those of another," and to the admitted and demonstrated power of Congress to impose embargoes.6
Marshall qualified the word "intercourse" with the word "commercial," thus retaining the element of monetary transactions.7 But, today, "commerce" in the constitutional sense, and hence "interstate commerce," covers every species of movement of persons and things, whether for profit or not, across state lines,8 every species of communication, every species of transmission of intelligence, whether for commercial purposes or otherwise,9 every species of commercial negotiation that will involve sooner or later an act of transportation of persons or things, or the flow of services or power, across state lines.10
There was a long period in the Court's history when a majority of the Justices, seeking to curb the regulatory powers of the Federal Government by various means, held that certain things were not encompassed by the Commerce Clause because they were neither interstate commerce nor bore a sufficient nexus to interstate commerce. Thus, at one time, the Court held that mining or manufacturing, even when the product would move in interstate commerce, was not reachable under the Commerce Clause;11 it held insurance transactions carried on across state lines not to be commerce,12 and that exhibitions of baseball between professional teams that travel from state to state were not in commerce.13 Similarly, it held that the Commerce Clause was not applicable to the making of contracts for the insertion of advertisements in periodicals in another state14 or to the making of contracts for personal services to be rendered in another state.15
Later decisions either have overturned or have undermined all of these holdings. The gathering of news by a press association and its transmission to client newspapers are interstate commerce.16 The activities of Group Health Association, Inc., which serves only its own members, are "trade" and capable of becoming interstate commerce;17 the business of insurance when transacted between an insurer and an insured in different states is interstate commerce.18 But most important of all there was the development of, or more accurately the return to,19 the rationales by which manufacturing,20 mining,21 business transactions,22 and the like, which are antecedent to or subsequent to a move across state lines, are conceived to be part of an integrated commercial whole and therefore subject to the reach of the commerce power.
Continuing in Gibbons v. Ogden, Chief Justice Marshall observed that the phrase "among the several States" was "not one which would probably have been selected to indicate the completely interior traffic of a state." It must therefore have been selected to exclude "the exclusively internal commerce of a state." Although, of course, the phrase "may very properly be restricted to that commerce which concerns more states than one," it is obvious that "[c]ommerce among the states, cannot stop at the external boundary line of each state, but may be introduced into the interior." The Chief Justice then succinctly stated the rule, which, though restricted in some periods, continues to govern the interpretation of the clause. "The genius and character of the whole government seem to be, that its action is to be applied to all the external concerns of the nation, and to those internal concerns which affect the states generally; but not to those which are completely within a particular state, which do not affect other states, and with which it is not necessary to interfere, for the purpose of executing some of the general powers of the government."23
Recognition of an "exclusively internal" commerce of a state, or "intrastate commerce" in today's terms, was regarded as setting out an area of state concern that Congress was precluded from reaching.24 Although these cases seemingly visualized Congress's power arising only when there was an actual crossing of state boundaries, this view ignored Marshall's equation of intrastate commerce that affects other states or with which it is necessary to interfere in order to effectuate congressional power with those actions which are purely interstate. This equation came back into its own, both with the Court's stress on the "current of commerce" bringing each element in the current within Congress's regulatory power,25 with the emphasis on the interrelationships of industrial production to interstate commerce26 but especially with the emphasis that even minor transactions have an effect on interstate commerce27 and that the cumulative effect of many minor transactions with no separate effect on interstate commerce, when they are viewed as a class, may be sufficient to merit congressional regulation.28 "Commerce among the states must, of necessity, be commerce with[in] the states. . . . The power of congress, then, whatever it may be, must be exercised within the territorial jurisdiction of the several states."29
"We are now arrived at the inquiry—what is this power?" continued the Chief Justice. "It is the power to regulate; that is, to prescribe the rule by which commerce is to be governed. This power, like all others vested in congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the constitution . . . If, as has always been understood, the sovereignty of congress, though limited to specified objects, is plenary as to those objects, the power over commerce with foreign nations, and among the several states, is vested in Congress as absolutely as it would be in a single government, having in its constitution the same restrictions on the exercise of the power as are found in the constitution of the United States."30
Of course, the power to regulate commerce is the power to prescribe conditions and rules for the carrying-on of commercial transactions, the keeping-free of channels of commerce, the regulating of prices and terms of sale. Even if the clause granted only this power, the scope would be wide, but it extends to include many more purposes than these. "Congress can certainly regulate interstate commerce to the extent of forbidding and punishing the use of such commerce as an agency to promote immorality, dishonesty, or the spread of any evil or harm to the people of other states from the state of origin. In doing this, it is merely exercising the police power, for the benefit of the public, within the field of interstate commerce."31 Thus, in upholding a federal statute prohibiting the shipment in interstate commerce of goods made with child labor, not because the goods were intrinsically harmful but in order to extirpate child labor, the Court said: "It is no objection to the assertion of the power to regulate commerce that its exercise is attended by the same incidents which attend the exercise of the police power of the states."32
The power has been exercised to enforce majority conceptions of morality,33 to ban racial discrimination in public accommodations,34 and to protect the public against evils both natural and contrived by people.35 The power to regulate interstate commerce is, therefore, rightly regarded as the most potent grant of authority in Section 8.
As is recounted below, prior to reconsideration of the federal commerce power in the 1930s, the Court in effect followed a doctrine of "dual federalism," under which Congress's power to regulate much activity depended on whether it had a "direct" rather than an "indirect" effect on interstate commerce.36 When the restrictive interpretation was swept away during and after the New Deal, the question of federalism limits respecting congressional regulation of private activities became moot. However, in a number of instances the states engaged in commercial activities that would be regulated by federal legislation if the enterprise were privately owned, and the Court easily sustained application of federal law to these state proprietary activities.37 However, as Congress began to extend regulation to state governmental activities, the judicial response was inconsistent and wavering.38 Although the Court may shift again to constrain federal power on federalism grounds, at the present time the rule is that Congress lacks authority under the Commerce Clause to regulate the states as states in some circumstances, namely, when the federal statutory provisions "commandeer" a state's legislative or executive authority in order to implement a regulatory program.39
The Court has several times expressly noted that Congress's exercise of power under the Commerce Clause is akin to the police power exercised by the states.40 It should follow, therefore, that Congress may achieve results unrelated to purely commercial aspects of commerce, and this result in fact has often been accomplished. Paralleling and contributing to this movement is the virtual disappearance of the distinction between interstate and intrastate commerce.
In United States v. Lopez41 the Court, for the first time in almost sixty years,42 invalidated a federal law as exceeding Congress's authority under the Commerce Clause. The statute made it a federal offense to possess a firearm within 1,000 feet of a school.43 The Court reviewed the doctrinal development of the Commerce Clause, especially the effects and aggregation tests, and reaffirmed that it is the Court's responsibility to decide whether a rational basis exists for concluding that a regulated activity sufficiently affects interstate commerce when a law is challenged.44 As noted previously, the Court evaluation started with a consideration of whether the legislation fell within the three broad categories of activity that Congress may regulate or protect under its commerce power: (1) use of the channels of interstate commerce, (2) the use of instrumentalities of interstate commerce, or (3) activities that substantially affect interstate commerce.45
Clearly, the Court said, the criminalized activity did not implicate the first two categories.46 As for the third, the Court found an insufficient connection. First, a wide variety of regulations of "intrastate economic activity" has been sustained where an activity substantially affects interstate commerce. But the statute being challenged, the Court continued, was a criminal law that had nothing to do with "commerce" or with "any sort of economic enterprise." Therefore, it could not be sustained under precedents "upholding regulations of activities that arise out of or are connected with a commercial transaction, which viewed in the aggregate, substantially affects interstate commerce."47 The provision did not contain a "jurisdictional element which would ensure, through case-by-case inquiry, that the firearm possession in question affects interstate commerce."48 The existence of such a section, the Court implied, would have saved the constitutionality of the provision by requiring a showing of some connection to commerce in each particular case.
Finally, the Court rejected the arguments of the government and of the dissent that there existed a sufficient connection between the offense and interstate commerce.49 At base, the Court's concern was that accepting the attenuated connection arguments presented would result in the evisceration of federalism. "Under the theories that the government presents . . . it is difficult to perceive any limitation on federal power, even in areas such as criminal law enforcement or education where States historically have been sovereign. Thus, if we were to accept the Government's arguments, we are hard pressed to posit any activity by an individual that Congress is without power to regulate."50
Whether Lopez bespoke a Court determination to police more closely Congress's exercise of its commerce power, so that it would be a noteworthy case,51 or whether it was rather a "warning shot" across the bow of Congress, urging more restraint in the exercise of power or more care in the drafting of laws, was not immediately clear. The Court's decision five years later in United States v. Morrison,52 however, suggests that stricter scrutiny of Congress's commerce power exercises is the chosen path, at least for legislation that falls outside the area of economic regulation.53 The Court will no longer defer, via rational basis review, to every congressional finding of substantial effects on interstate commerce, but instead will examine the nature of the asserted nexus to commerce, and will also consider whether a holding of constitutionality is consistent with its view of the commerce power as being a limited power that cannot be allowed to displace all exercise of state police powers.
In Morrison the Court applied Lopez principles to invalidate a provision of the Violence Against Women Act (VAWA) that created a federal cause of action for victims of gender-motivated violence. Gender-motivated crimes of violence "are not, in any sense of the phrase, economic activity,"54 the Court explained, and there was allegedly no precedent for upholding commerce-power regulation of intrastate activity that was not economic in nature. The provision, like the invalidated provision of the Gun-Free School Zones Act, contained no jurisdictional element tying the regulated violence to interstate commerce. Unlike the Gun-Free School Zones Act, the VAWA did contain "numerous" congressional findings about the serious effects of gender-motivated crimes,55 but the Court rejected reliance on these findings. "The existence of congressional findings is not sufficient, by itself, to sustain the constitutionality of Commerce Clause legislation. . . . [The issue of constitutionality] is ultimately a judicial rather than a legislative question, and can be settled finally only by this Court."56
The problem with the VAWA findings was that they "relied heavily" on the reasoning rejected in Lopez—the "but-for causal chain from the initial occurrence of crime . . . to every attenuated effect upon interstate commerce." As the Court had explained in Lopez, acceptance of this reasoning would eliminate the distinction between what is truly national and what is truly local, and would allow Congress to regulate virtually any activity, and basically any crime.57 Accordingly, the Court "reject[ed] the argument that Congress may regulate noneconomic, violent criminal conduct based solely on that conduct's aggregate effect on interstate commerce." Resurrecting the dual federalism dichotomy, the Court could find "no better example of the police power, which the Founders denied the National Government and reposed in the States, than the suppression of violent crime and vindication of its victims."58
Yet, the ultimate impact of these cases on Congress's power over commerce may be limited. In Gonzales v. Raich,59 the Court reaffirmed an expansive application of Wickard v. Filburn, and signaled that its jurisprudence is unlikely to threaten the enforcement of broad regulatory schemes based on the Commerce Clause. In Raich, the Court considered whether the cultivation, distribution, or possession of marijuana for personal medical purposes pursuant to the California Compassionate Use Act of 1996 could be prosecuted under the federal Controlled Substances Act (CSA).60 The respondents argued that this class of activities should be considered as separate and distinct from the drug-trafficking that was the focus of the CSA, and that regulation of this limited non-commercial use of marijuana should be evaluated separately.
In Raich, the Court declined the invitation to apply Lopez and Morrison to select applications of a statute, holding that the Court would defer to Congress if there was a rational basis to believe that regulation of home-consumed marijuana would affect the market for marijuana generally. The Court found that there was a "rational basis" to believe that diversion of medicinal marijuana into the illegal market would depress the price on the latter market.61 The Court also had little trouble finding that, even in application to medicinal marijuana, the CSA was an economic regulation. Noting that the definition of "economics" includes "the production, distribution, and consumption of commodities,"62 the Court found that prohibiting the intrastate possession or manufacture of an article of commerce is a rational and commonly used means of regulating commerce in that product.63
The Court's decision also contained an intertwined but potentially separate argument that Congress had ample authority under the Necessary and Proper Clause to regulate the intrastate manufacture and possession of controlled substances, because failure to regulate these activities would undercut the ability of the government to enforce the CSA generally.64 The Court quoted language from Lopez that appears to authorize the regulation of such activities on the basis that they are an essential part of a regulatory scheme.65 Justice Scalia, in concurrence, suggested that this latter category of activities could be regulated under the Necessary and Proper Clause regardless of whether the activity in question was economic or whether it substantially affected interstate commerce.66
In National Federation of Independent Business (NFIB) v. Sebelius,67 the Court held that Congress did not have the authority under the Commerce Clause to impose a requirement compelling certain individuals to maintain a minimum level of health insurance (although, as discussed previously, the Court found such power to exist under the taxing power). Under this "individual mandate," failure to purchase health insurance may subject a person to a monetary penalty, administered through the tax code.68 By requiring that individuals purchase health insurance, the mandate prevents cost-shifting by those who would otherwise go without it. In addition, the mandate forces healthy individuals into the insurance risk pool, thus allowing insurers to subsidize the costs of covering the unhealthy individuals they are now required to accept.
Chief Justice Roberts, in a controlling opinion,69 suggested that Congress's authority to regulate interstate commerce presupposes the existence of a commercial activity to regulate. Further, his opinion noted that the commerce power had been uniformly described in previous cases as involving the regulation of an "activity."70 The individual mandate, on the other hand, compels an individual to become active in commerce on the theory that the individual's inactivity affects interstate commerce. Justice Roberts suggested that regulation of individuals because they are doing nothing would result in an unprecedented expansion of congressional authority with few discernable limitations. While recognizing that most people are likely to seek health care at some point in their lives, Justice Roberts noted that there was no precedent for the argument that individuals who might engage in a commercial activity in the future could, on that basis, be regulated today.71 The Chief Justice similarly rejected the argument that the Necessary and Proper Clause could provide this additional authority. Rather than serving as a "incidental" adjunct to the Commerce Clause, reliance on the Necessary and Proper Clause in this instance would, according to the Chief Justice, create a substantial expansion of federal authority to regulate persons not otherwise subject to such regulation.72
It had been generally established some time ago that Congress had power under the Commerce Clause to prohibit racial discrimination in the use of the channels of commerce.73 The power under the clause to forbid discrimination within the states was firmly and unanimously sustained by the Court when Congress in 1964 enacted a comprehensive measure outlawing discrimination because of race or color in access to public accommodations with a requisite connection to interstate commerce.74 Hotels and motels were declared covered—that is, declared to "affect commerce"—if they provided lodging to transient guests; restaurants, cafeterias, and the like, were covered only if they served or offered to serve interstate travelers or if a substantial portion of the food which they served had moved in commerce.75 The Court sustained the Act as applied to a downtown Atlanta motel that did serve interstate travelers,76 to an out-of-the-way restaurant in Birmingham that catered to a local clientele but that had spent 46 percent of its previous year's out-go on meat from a local supplier who had procured it from out-of-state,77 and to a rural amusement area operating a snack bar and other facilities, which advertised in a manner likely to attract an interstate clientele and that served food a substantial portion of which came from outside the state.78
Writing for the Court in Heart of Atlanta Motel and McClung, Justice Clark denied that Congress was disabled from regulating the operations of motels or restaurants because those operations may be, or may appear to be, "local" in character. "[T]he power of Congress to promote interstate commerce also includes the power to regulate the local incidents thereof, including local activities in both the States of origin and destination, which might have a substantial and harmful effect upon that commerce."79
But, it was objected, Congress is regulating on the basis of moral judgments and not to facilitate commercial intercourse. "That Congress [may legislate] . . . against moral wrongs . . . rendered its enactments no less valid. In framing Title II of this Act Congress was also dealing with what it considered a moral problem. But that fact does not detract from the overwhelming evidence of the disruptive effect that racial discrimination has had on commercial intercourse. It was this burden which empowered Congress to enact appropriate legislation, and, given this basis for the exercise of its power, Congress was not restricted by the fact that the particular obstruction to interstate commerce with which it was dealing was also deemed a moral and social wrong."80 The evidence did, in fact, noted the Justice, support Congress's conclusion that racial discrimination impeded interstate travel by more than 20 million Black citizens, which was an impairment Congress could legislate to remove.81
The Commerce Clause basis for civil rights legislation prohibiting private discrimination was important because of the understanding that Congress's power to act under the Fourteenth and Fifteenth Amendments was limited to official discrimination.82 The Court's subsequent determination that Congress is not necessarily so limited in its power reduces greatly the importance of the Commerce Clause in this area.83
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