Constitutional Authority to Regulate Business
Describe the form of government created by the U.S. Constitution.
Explain the relationship between the national government and state governments
as set forth in the Constitution.
Identify the constitutional basis for the regulatory power of the federal
Summarize the fundamental rights protected by the First Amendment.
Give some examples of how other constitutional protections affect business.
The Constitutional Powers
The U.S. Constitution established a
federal form of government, in which government powers are shared by the
national government and the state governments.
At the national level, government
powers are divided among the legislative, executive, and judicial branches.
The Commerce Clause
The breadth of the commerce
The commerce clause expressly
permits Congress to regulate commerce.
Over time, courts expansively
interpreted this clause, and today the commerce power authorizes the national
government, at least theoretically, to regulate virtually every commercial
enterprise in the United States.
The Commerce Clause
The regulatory powers of
Under their police powers, state
governments may regulate private activities to protect or promote the
public order, health, safety, morals, and
If state regulations substantially
interfere with interstate commerce, they will be held to violate the commerce
clause of the U.S. Constitution.
Gibbons v. Ogden (1824)
This early case, involving a
dispute over the rights to operate steamboats between New York and New Jersey,
helped define Congress’ power “to regulate commerce … among the several
What did the U.S. Supreme Court
hold? What does the term
What might have resulted if the
court had held otherwise, that the national government did not have the
exclusive power to regulate interstate commerce?
Case 6.1 Heart of Atlanta Motel
v. United States
The U.S. Supreme Court held that
the discrimination practiced by a local Atlanta motel could be prohibited by the
federal government under the commerce clause since:
“If it is interstate commerce that feels
the pinch, it does not matter how local the operation that applies the
Suppose that only 5% of the
motel’s guests, or even 2 or 1%, were from out of state.
In such a situation, would the court still have been justified in
regulating the motel’s activities?
Case 6.2 J.E. Goodenow v. City
Council of Maquoketa, Iowa
Two-thirds of the Goodenow
family farm is located within the city limits of Maquoketa, Iowa.
At one time, the city mowed all the right-of-ways including the grass,
weeds, and ditches. When the city enacted an ordinance to require the owners of
the adjoining property to mow these strips, the Goodenow family did not perform.
The family appealed to the city
council but was denied exemption. John
Goodenow and the others filed a petition against the city.
Should all citizens be
considered obligated to render some unpaid service to their states?
The Supremacy Clause
The U.S. Constitution provides that the Constitution, laws, and
treaties of the United States are “the supreme law of the land.”
Whenever a state law directly conflicts with a federal law, the
state law is rendered invalid.
The Taxing and Spending Powers
“Power to lay and collect taxes…”
If a tax measure bears some reasonable relationship to revenue
production, it is generally held to be within the taxing power.
Power “to pay the debts and provide for the common defense and general
Congress can spend revenues not only to carry out its enumerated powers
but also to promote other objectives so long as it does not violate the Bill of
Business and the Bill of Rights
Bill of Rights, which consists
of the first ten amendments to the U.S. Constitution, was adopted in 1791 and
embodies a series of protections for individuals, and in most cases, business
entities, against types of interference by the federal government.
Business and the Bill of Rights
Freedoms guaranteed by the
Bill of Rights included the following:
Freedom of Speech
Types of speech protected under the
First Amendment include:
Certain types of speech, such as
defamatory speech and lewd or obscene speech, are not protected under the First
The Constitution as
a “Living Document”
Because the rights guaranteed by
the first ten amendments are described in very general terms, it is often up to
the U.S. Supreme Court as interpreter of the Constitution to define our rights
and determine their boundaries.
Supreme Court justices are not
elected by the people but are appointed by the president, with the advice and
consent of the Senate. Do you think that the justices exercise too much
authority in shaping the rights and liberties of Americans?
Can you think of a better alternative?
Many colleges and universities have
issued speech or behavioral codes in an attempt to curb the “hate speech”
exchanged between different ethnic groups on campuses.
Many contend forcing students to
engage only in “politically correct” speech violates the First Amendment,
while others argue that hate speech essentially constitutes “fighting words”
and thus should not be constitutionally protected.
Does hate speech equate with
fighting words? Should colleges and
universities be permitted to regulate speech on their campuses?
Should the same rights of free
speech apply over the internet that apply in a face to face conversation?
The Communications Decency Act made
it a criminal offense to transmit “indecent” speech or images or make it
available online to minors.
What did the the Supreme Court rule
when the constitutionality of the CDA was challenged in court?
The CDA stated that indecent
speech is to be measured by community standards, but what community standards
would have to be applied to the internet, which has no geographic boundaries?
Free Speech and Unwanted Electronic Mail
Although the First Amendment
expressly protects persons only from government actions, its protections
sometimes extend to conduct involving private facilities (such as distributing
leaflets in a shopping mall) because such areas serve a public function.
What about transmission of
“electronic leaflets” over the internet?
Should the same principles apply? Is
the transmission of such “junk mail” or “spam” significantly different
from the distribution of leaflets in a shopping mall or on a public street?
Regulating Online Obscenity
“Obscene” speech is not
protected by the First Amendment. However,
what standard are we to use when judging whether something is or is not
The Communications Decency Act (CDA)
made the transmission of “indecent” or “patently offensive” speech or
images to minors a criminal offense. Traditionally
the relevant standard to be applied was that of the community—but which
Individual Rights vs.
Traditionally, the courts have
protected free speech and other First Amendment freedoms to the fullest extent,
even if they were “hate crimes” or “hate speech.”
Recently, a few courts have put the welfare and security of the community
The Supreme Court of Illinois
recently upheld a Chicago ordinance to keep gangs from loitering in the streets.
Should ordinances prohibiting
gangs from assembling on streets be permissible restraints on First Amendment
Case 6.3 Bad Frog Brewery v. New York
State Liquor Authority
Bad Frog Brewery Inc., makes and
sells alcoholic beverages. Some of
the labels displayed a frog “giving the finger.”
Bad Frog’s authorized NY distributor, Renaissance Beer Co., applied to
the New York State Liquor Authority (NYSLA) for brand label approval as required
by state law. The NYSLA denied the application because the beer was going to be
displayed in public. Bad Frog filed
a suit against NYSLA asking for an injunction against the denial.
Whose interests are advanced by
the banning of certain types of advertising?
Freedom of Religion
Under the First Amendment,
the government may neither:
Establish any religion
(the establishment clause)
Prohibit the free exercise of religion
(the free exercise clause)
Church and State under Islamic Law
Today, Muslims constitute over
one-half of the population in 35 nations. The
Muslim faith (Islam) is one of the great religions of the world.
Americans protest state-sponsored religion, but the Islamic law does not
provide for the separation of church and state.
The Islamic religion controls Islamic law and regulates all public and
Is the union of religion and law
incompatible with a democratic form of government?
Other Constitutional Protections
other constitutional guaranties of great significance to Americans are the:
Due process clause contained in
both the Fifth and Fourteenth Amendments
Equal protection clause
of the Fourteenth Amendment
Both the Fifth and the Fourteenth
Amendments provide that no person shall be deprived of “life, liberty, or
property, without due process of law.”
This due process clause has two
Procedural due process
Substantive due process
Procedural v. Substantive
Requires that any government decision to take life, liberty, or property
must be made fairly, using fair procedures.
Focuses on the content of legislation.
Generally, a law violates substantive due process unless the law promotes
a compelling state interest, such as public
Under the Fourteenth Amendment, a
state may not “deny to any person within its jurisdiction the equal protection
of the laws.”
A law or action that limits the
liberty of some person, but not others, may violate the Equal Protection clause.
Such a law may be deemed valid,
however, if there is a rational basis for the discriminatory treatment of a
given group or if the law substantially relates to an important government
Case 6.4 Bah v. City of
The Atlanta City Council adopted a
dress code for cab drivers that required them to wear shoes that covered the
entire foot, dark pants or skirts down to the ankle, and solid white or light
blue shirts that have sleeves and collars.
Hats had to be baseball style with an Atlanta or taxicab theme.
Mohamed Bah, a cab driver, was cited for violating the code and and he
filed a suit against the city. He
accused the code of violating the equal protection clause.
An injunction was issued which was later reversed by an appellate
Would it be constitutional to
impose a dress code on others who are licensed by the city and who deal with
out-of-town visitors—food servers, bellhops, and outdoor vendors, for example?
is no specific guarantee of a right to privacy in the Constitution, but such a
right has been derived from guarantees found in other constitutional amendments,
such as the:
What is the basic structure of the U.S. government?
What constitutional clause gives the federal government the power to regulate
commercial activities among the various states?
What constitutional clause allows laws enacted by the federal government to take
priority over conflicting state laws?
What is the Bill of Rights? What
freedoms are guaranteed by the First Amendment?
Where in the Constitution can the due process clause be found?