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Chapter 4: Constitutional Authority to Regulate Business

This chapter outlines the evolution of the constitutional authority to regulate business from the pre-Revolutionary War era through the establishment of the federal government in 1787. It describes the limited, enumerated powers of the national government as established by the Constitution and how the Commerce Clause has expanded federal regulation of business enterprises. The chapter also addresses the Bill of Rights, exploring protections of free speech, freedom of religion, and due process as they pertain to business. Key Supreme Court cases illustrate these legal principles and their implications for state and federal law.

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Chapter 4: Constitutional Authority to Regulate Business

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  1. Chapter 4:Constitutional Authority to Regulate Business

  2. History Before Revolutionary War, States wanted a confederation with weak national government and very limited powers. After the war, in 1787, States voted to amend Articles of Confederation and create a new, federal government that shared power with States.

  3. §1: Constitutional Powers of the Federal Government • Constitution established a federal form of government with checks and balances among three branches: executive, legislative and judicial. • National government has limited, enumerated powers delegated from States.

  4. U.S. Commerce Clause • Power to regulate interstate commerce defined in Gibbons v. Ogden(1824). • Expansion to private businesses began with Wickard v. Fillburn(1942). • Today, Commerce Clause it authorizes the national government to regulate virtually any business enterprise, including internet. • Limits: U.S. v. Lopez(1995), Alden v. Maine(1999).

  5. State Commerce • States possess inherent police powers to regulate health, safety, public order, morals and general welfare. • State laws that substantially interfere with interstate commerce will be struck down. • Raymond Motor v. Rice (1978).

  6. U.S. Supremacy Clause • Article VI of the Constitution “Supreme Law of the Land.” • In case of direct conflict between state and federal law, state law is invalid. • Congress can preempt states. • Taxing Powers (Emerging Trends).

  7. §2: Business and the Bill of Rights • Bill of Rights are not absolute. • Originally the Bill of Rights was a limit on the national government’s powers. • During the early 1900’s, the Supreme Court applied the Bill of Rights to the States via the “due process” clause of the 14th amendment.

  8. Free Speech • Afforded highest protection by courts. • Symbolic Speech. • Texas v. Johnson(1989). • R.A.V. vs. City of St.Paul(1992).

  9. Commercial Speech • Advertising is protected speech. Restrictions must: • Implement substantial government interest; • Directly advance that interest; and • Go no further than necessary. • Case 4.1: Bad Frog Brewery(1998).

  10. Corporate Political Speech Afforded significant protection by the first amendment but not to the degree of speech of natural persons. • First National v. Bellotti(1978). • Consolidated Edison v. Public Service Commission(1980).

  11. Unprotected Speech • Certain types of speech are not protected by the first amendment: • Slander. • Pornography, Obscenity. • Fighting Words. • What about “Hate Speech”? • Doe v. University of Michigan (1989).

  12. Freedom of Religion • First amendment many neither prohibit the “establishment” nor prohibit the “free exercise” of religion. • The first amendment does not require complete “separation of church and state.” • First amendment mandates accommodation of all religions and forbids hostility toward any. Zorach v. Clauson(1952).

  13. Freedom of Religion • First amendment guarantees the “free exercise” of religion. • Employers must reasonably accommodate beliefs as long as employee has sincerely held beliefs. • Frazee v. Illinois(1989).

  14. Self-Incrimination • Fifth amendment guarantees no person can be compelled to testify against himself in a criminal proceeding. • Does not apply to corporations or partnerships. • Verniero v. Beverly Hills Ltd (1998).

  15. Searches and Seizures • Fourth amendment requires warrant with “probable cause.” • Warrantless exceptions exist for “evanescent” evidence. • Searches of Business: generally business inspectors must have a warrant. Marshall v. Barlow’s(1978).

  16. Equal Protection Strict Scrutiny. • Laws that affect the fundamental rights of similarly situated individuals in a different manner are subject to the “strict scrutiny” test. • Any “suspect class” (race, national origin) must serve a “compelling state interest” which includes remedying past discrimination.

  17. Equal Protection • Intermediate Scrutiny. • Applied to laws involving gender or legitimacy. • To be constitutional laws must be substantially related to important government objectives. • (EXAMPLE: Illegitimate teenage pregnancy).

  18. Equal Protection Rational Basis Test. • Applied to matters of economic or social welfare. • Laws will be constitutional if there is a rational basis relating to legitimate government interest. • Case 4.3: WHS Realty v. Morristown (1999).

  19. Due Process • 5th and 14th amendments provide “no person shall be deprived of life, liberty or property without due process of law.” • Procedural and Substantive issues.

  20. Procedural Due Process • Procedures depriving an individual of her rights must be fair and equitable. • Constitution requires adequate notice and a fair and impartial hearing before a disinterested magistrate.

  21. Substantive Due Process • Focuses on the content or substance of legislation. • Laws limiting fundamental rights (speech, privacy, religion) must have a “compelling state interest.” • Laws limiting non-fundamental rights require only a “rational basis.”

  22. Privacy • Fundamental right not expressly found in the constitution, but derived from 1st, 5th and 14th amendments. • Laws and policies affecting privacy are subject to the compelling interest test.

  23. Law on the Web • Online Constitution at Cornell U. • See the “Vote-Smart” site on federalism. • Federalist Society.com. • ACLU.org. • Official U.S. Supreme Court site. • Legal Research Exercises on the Web.

  24. Emerging Trends: Taxing Cyberspace • States sales tax-sufficient “nexus”? • Quill v. North Dakota(1992). • Internet Tax Freedom Act • http://www.house.gov/chriscox/nettax/lawsums.html Return

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