Commerce clause history

The section of the Constitution (Article 1, Section 8, Clause 3) that gives Congress the authority “to regulate Commerce with foreign nations, among the several States, and with the Indian tribes.” The section became one of the most contentious parts of the Constitution in the 19th century and became a central issue in disputes between the states and the federal government.

The clause had its first serious application by the Supreme Court in a case that revolved around a ferry service between New York and New Jersey. New York had granted an exclusive steamship monopoly to a company run by Robert FULTON and Robert LIVINGSTON and piloted by Aaron Ogden. A rival New Jersey company, run by Thomas Gibbons and piloted by Cornelius VANDERBILT, challenged the monopoly in court. Losing in the lower court, the case found its way to the Supreme Court, where Chief Justice John Marshall ruled in favor of the New Jersey company in the landmark case Gibbons v. Ogden (1824). Marshall held that commerce between states was more than simply traffic, it was also social intercourse and included navigation. By ruling in favor of Gibbons, the Court effectively used the clause to strike down a state-granted monopoly. In the absence of ANTITRUST legislation at the federal level before 1890, the commerce clause became one tool used to battle alleged monopolies when it could be shown that transportation companies sought to eliminate competition or fix prices by controlling interstate commerce.

The Court recognized that the power did not extend to commerce that was purely intrastate. But when interstate commerce was involved, it fell within the purview of the Congress. The issue arose again after the Civil War when the RAILROADS began to expand in the American West. The states attempted to regulate the activities of the railroads, and one case found its way to the Supreme Court in 1877. The Court ruled in Munn v. Illinois that certain sorts of industries, including railroads and grain storage facilities, operated in the public interest and as such were subject to its authority. Munn ran a grain warehouse and was charged with operating without a license. The Court upheld an Illinois Supreme Court ruling upholding his conviction, stating that such businesses were “clothed in the public interest.” Nine years later, however, advocates of railroad regulation were disappointed when the Court ruled in Wabash Railway Co. v. Illinois (1886) that the states could not regulate railways simply passing through the states.

Applications of the commerce clause to railroad regulation were not used by the federal government to regulate the rails unless a case arose in which a defendant claimed that state regulations actually involved unconstitutional burdens upon interstate commerce, as in the case of Munn. In 1887, Congress created the INTERSTATE COMMERCE COMMISSION to oversee the railways. But the commerce clause was still a major issue even after the SHERMAN ACT was passed in 1890.

In United States v. E.C. Knight Co. (1896), the Court ruled that the company had not acted illegally to restrain trade or commerce despite the fact that the United States had argued that it was part of a larger trust, the American Sugar Refining Co., which actively acquired smaller companies in the 1890s. The decision led to an unprecedented merger boom. Cases that followed, notably Addyston Pipe & Steel Co. v. United States (1899) and Swift & Co. v. United States (1905), were found in favor of the government when it claimed that the companies operating locally could still affect interstate commerce by their decisions.

Further reading

• Corwin, Edward S. The Commerce Power v. States Rights: Back to the Constitution. 1936. Reprint, Gloucester, Mass.: Peter Smith, 1962. 
• Frankfurter, Felix. The Commerce Clause under Marshall, Taney and Waite. Chapel Hill: University of North Carolina Press, 1937.