CHAPTER V

THE LAW OF COMMERCE

49. The power to regulate commerce belongs to sovereignty. By the Constitution Congress is empowered “to regulate commerce with foreign nations, and among the several States, and with the Indian tribes.”[127] The principle of this regulation, or of the exercise of the power, is essentially that of taxation: it is a matter of jurisdiction. “The power of Congress to regulate commerce,” observes Chief Justice Marshall, in the first American judicial decision on the subject, “comprehends and warrants every act of national sovereignty which any other sovereign nation may exercise.”[128]

The enormous powers Congress wields through this clause cannot be fully defined. The Supreme Court has not defined them. Like sovereignty itself, the exercise of its essential powers, even when delegated functionally in government, does not yield to the limits of definition. The decisions of the Supreme Court are not definitions of the power over commerce so much as they are definitions of the particular exercise of the power of Congress within its jurisdiction, with respect to commerce, by the Constitution.[129] For the States also have jurisdiction over commerce. Our knowledge of the boundaries of these two jurisdictions arises from the conflict of laws concerning them.

50. In defining national jurisdiction and State jurisdiction over commerce, two propositions are fundamental:

(1) The Constitution of the United States is the supreme law of the land.[130]

(2) It is the province and duty of the judicial department to say what the law is.[131]

It should be clearly understood that power to regulate commerce is incident to sovereignty. Government—whatever its form—is a delegation of power by sovereignty, and of necessity possesses this power of regulation. The degree or extent of the delegation of the power to regulate commerce marks unmistakably the jurisdiction of the government exercising the power. The analogy is in the taxing power. In our system of dual government—national and State—there are two jurisdictions. The respective States have power over commerce; the United States has power to regulate commerce,—each jurisdiction expressly or impliedly outlined by the Constitution.

51. With slight change in wording, the leading decisions of the Supreme Court on the power of the United States to lay and collect taxes, and its decisions on the subject interpretative of the taxing power of the States, apply, in principle, to their respective powers over commerce:

If we measure the power of {taxation } {“regulating commerce”} residing in a State, by the extent of sovereignty which the people of a single State possess and can confer on its government, we have an intelligent standard, applicable to every case to which the power may be applied. We have a principle which leaves the power of {taxing the people and property of the State} {“regulating the commerce of the State” } unimpaired; which leaves to a State the command of all its resources, and which places beyond its reach all those powers which are conferred by the people of the United States on the government of the Union, and all those means which are given for the purpose of carrying those powers into execution. We have a principle which is safe for the States, and safe for the Union. We are relieved, as we ought to be, from clashing sovereignty; from interfering powers.[132]

52. No evil contributed more to the feebleness of the old Confederation than its inability to regulate commerce. The mischief being great, the grant of power to correct the mischief was correspondingly great. This grant of power to regulate commerce comprehends “all foreign commerce and all commerce among the States.” As inefficiency was the evil, the grant of power was to secure efficiency. In construing this grant—the commerce clause of the Constitution—the large and single purpose is so to construe as not to impair its efficiency and thus defeat the object of the grant.[133]

The commerce clause has become the authority for exercising the enormous powers of the national government as is illustrated, possibly, by the exercise of power under no other clause. This means that the United States in exercising this delegated power exercises so vast a power that it seems to be sovereignty itself. Vast as this power is—and practically it is incommensurable—it is a delegated, not an original power of the national government. The scope, purpose, and nature of this national power to regulate commerce are indicated by the Supreme Court in its construction of the commerce clause. Here as in the exercise of the taxing power the test is jurisdiction. The essential question is, What is the jurisdiction of the United States, what that of the respective States over commerce?

53. Commerce is intercourse,[134] and comprehends traffic, navigation, telegraphic intercommunication, and consequently, communication by telephone, wireless, or signals.[135]

The Constitution empowers Congress to regulate commerce “among the several States,” an expression which excludes “the completely interior traffic of a State.” This completely internal commerce is reserved for the State itself. To whatsoever extent the foreign or interstate commerce of the United States penetrates a State, it is subject to regulation by the United States; it is carried on within national jurisdiction. The power of Congress to regulate commerce within this jurisdiction is complete in itself and knows no limitations other than these prescribed in the Constitution. Thus this power to regulate commerce, though limited to commerce with foreign nations and among the States, and with the Indian tribes, is plenary as to these objects, and Congress in exercising this power is commonly spoken of as “sovereign.”[136] It follows, that as the Constitution is the supreme law of the land, and the Supreme Court has power to say what the law is—State laws to regulate commerce, in conflict with national laws, are unconstitutional. The essential issue, in such conflict, is one of jurisdiction. And here, the real question is whether the regulation of commerce by a State is essential to its existence as a State, or regulation by the United States is essential to its existence as the United States. Such regulation by a State is known as the exercise of the police power.[137]

But the United States also possesses police power. The line of demarcation between the State and the national police power follows closely, if not precisely, the line of demarcation between State power and national power to regulate commerce.[138] The State has power to protect itself,—that is, to guard its people against contagious or infectious diseases, as is exemplified in laws for the inspection of foods, for forbidding the pollution of streams, for securing the accuracy of weights and measures, the peace and good order of communities, the comfort of the inhabitants,—and, in a word,—to exercise such authority as, were no such authority exercised, the State would cease being the State.

54. The power granted to Congress to regulate commerce is not a power granted to the States; it pertains to the United States only. Therefore Congress has no power to regulate commerce that is not “with foreign nations, and among the several States, and with the Indian tribes.” Practically this deprives the State of police power over foreign and interstate commerce, and deprives the United States of police power over commerce that is, as to the State, completely internal. To what extent a State can protect itself from the entrance of paupers, insane or diseased persons, is a question for determination by the Courts. If such persons are “commerce” their entrance is a matter within the jurisdiction of Congress. But the welfare of the people of the United States is essentially the welfare of the people of the States, and Congress, in considering that welfare, avoids possible conflict with State legislation. Thus the immigration laws—all of which are national—include, or seek to include, these provisions for inspection which a State would prescribe, in the exercise of its police power for the health, safety, and general welfare of its own citizens. But here, too, a dominant principle prevails;

The government of the United States, within the scope of its powers, operates upon every foot of territory under its jurisdiction. It legislates for the whole nation, and is not embarrassed by State lines. Its peculiar duty is to protect one part of the country from encroachments by another upon the national rights which belong to all.[139]

Tested by this principle, any State laws conflicting with national immigration laws are unconstitutional.

55. The power to regulate commerce among the several States extends to commercial highways and to agencies employed in such commerce. Thus waterways capable of navigation and the free and unobstructed use of them are subjects of congressional legislation under the commerce clause. From this it follows that Congress legislates concerning these waterways, their protection, their dredging, the bridges that cross them, the boats that navigate them, the form, size, construction, command, and equipment of these boats, the inspection of boilers, the licensing of officers,—indeed, concerning navigation in its broadest application under the commerce clause. Vessels engaged in such commerce are described as “the public property of the nation, and subject to all the requisite legislation of Congress.”[140]

56. In like manner, the national power to regulate commerce extends over interstate commerce when carried on by land transportation. Thus cars on railroads used in interstate commerce must be equipped with automatic couplers and continuous brakes, and locomotives with driving-wheel brakes.[141]

To what length this regulation of commerce may be carried by Congress is unknown, nor can it be determined in advance. The limitations, if any, are of expediency.[142] Thus in exercise of this vast power Congress may regulate hours of labor, wages, selection and use of material in construction of vehicles engaged in such commerce; the education, training, and conduct of persons engaged in handling such commerce; the age of employment; and physical equipment for the welfare of employees, as well as tariff rates and other incidents.[143]

57. But in the exercise of this power to regulate commerce Congress has legislated “to protect trade and commerce against unlawful restraints and monopolies.”[144] Individuals, or corporations under State laws, engaged in business, in so far as they are contracts, combinations in the form of trusts, or otherwise, or conspiracies in restraint of trade or commerce among the several States are illegal. The test here is, Are such combinations in restraint of commerce among the several States, or with foreign nations, or with the Indian tribes? If any such combination be in restraint of commerce completely internal in a State, it does not fall within the jurisdiction of the United States. If illegal, it is illegal by State laws.[145] Thus a combination that is engaged in manufacturing is within the jurisdiction of the police power of the State, not within the jurisdiction given by the commerce clause of the Constitution.[146] The regulation of manufactures is not the regulation of commerce. A monopoly of manufacturing is not necessarily a monopoly of commerce among the several States. In other words, manufacturing is not commerce. The Constitution does not give Congress power to regulate manufactures. However, as soon as the article manufactured becomes an article of commerce among the several States, then it is subject to regulation by Congress.

58. As soon as the article is manufactured it is subject to the law of the State; the moment the article commences its final movement from the State of its origin, that moment it is an article of commerce as that word is used in the Constitution, and is within the jurisdiction of Congress.[147]

Manufacture is transformation,—the fashioning of raw materials into a change of form for use. The functions of commerce are different. The buying and selling and the transportation incidental thereto constitute commerce; and the regulation of commerce in the constitutional sense, embraces the regulation at least of such transportation. If it be held that the term includes the regulation of all such manufactures as are intended to be the subjects of commercial transactions in the future, it is impossible to deny that it would also include all productive industries that contemplate the same thing. The result would be that Congress would be invested, to the exclusion of the States, with the power to regulate, not only manufactures, but also agriculture, horticulture, stock-raising, domestic fisheries, mining,—in short, every branch of human industry.[148]

Assumption of power such as this by Congress would conflict with the residuary powers of the States,—powers over intrastate commerce, and that vast authority possessed by the States and known as their police powers. Were such authority possessed and exercised by Congress, the State governments would be paralyzed and between the States and the United States there would be endless conflict.

59. It is not the delegation to Congress of power to regulate commerce that makes the exercise of a similar power by the State void; it is the actual exercise by Congress of its power to regulate commerce that works the prohibition. In the absence of congressional legislation on the subject the State may legislate. Thus a State law for the regulation of pilots and pilotage, in the absence of Federal law for the same, is valid.[149] This means that sovereignty acting through the State government controls—or has jurisdiction—unless sovereignty has acted in the matter through the government of the United States. Thus, where the subject, say a bridge, a wharf, or a stream, over which power may be exercised, is local in its nature and operation, or constitutes a mere aid to commerce, the authority of the State may be exerted for its regulation and management until Congress interferes and supersedes State action.[150]

But a license fee exacted by a State law, from a vessel engaged in commerce is a tax for the use of navigable waters and not a charge in the nature of compensation for any specific improvement, or use of wharves. It is a burden on commerce and is a State regulation of commerce in conflict with the power of Congress to regulate it and therefore unconstitutional.[151] But the internal commerce of a State, that is, the commerce that is wholly confined within its limits is as much under its control as foreign or interstate commerce is under the control of the general government.[152]

60. By the words “taxation of commerce” is understood the taxation of the agency, means, instrument, vehicle, or article in such a way or with such effect as to control commerce; and by “control” is understood any degree of control. If the State can tax foreign or interstate commerce lightly, it can tax it heavily, and if heavily, it can so tax as to destroy commerce. So long as the article imported remains in the original form of package, the property of the importer, in his warehouse, it is within the jurisdiction of the United States; but as soon as it has become incorporated and mixed with the mass of property in the State, it is within the jurisdiction of the State and becomes subject to its taxing power.[153]

Were the State to tax the importer as such, this would be a tax on importation and beyond State jurisdiction. So too would be any charges, imposed by the State, on the introduction or incorporation of the imported article into and with the mass of property in the State. The essential principle here is that the taxing power of the State cannot reach and restrain the action of the national government within its proper sphere. “It cannot interfere with any regulation of commerce.”[154]

61. The object in delegating to Congress the power to regulate commerce—a delegation without limitations—was to insure uniformity against discriminating State legislation.[155] The large and fundamental purposes of the people of the United States in establishing a national government are cited in the Preamble to the Constitution. Unless the power to regulate commerce with foreign nations and among the several States was delegated to Congress, these fundamental purposes could not be realized.[156] It is a nice question: When has the commercial power of the United States over a commodity ceased and the power of the State commenced? The Supreme Court answers: The federal commercial power continues until the commodity has ceased to be the subject of discriminating legislation by reason of its foreign character. That power protects it even after it has entered the State from any burdens imposed by reason of its foreign origin.[157] Any article brought into a State, as an article of commerce, from another State,—that is from another political jurisdiction possesses “foreign character.” The principle involved here may thus be stated: (1) The Constitution having given Congress power to regulate commerce with foreign nations and among the several States, that power is necessarily exclusive whenever the subjects of it are national in their character, or admit only of one uniform system, or plan of regulation. (2) Where the power to regulate is exclusively in Congress, the failure of Congress to make express regulations indicates its will that the subject shall be left free from any restrictions or impositions; and any regulation of the subject by the States, except only in matters of local concern, is repugnant to such freedom. (3) The only way in which commerce between the States can be legitimately affected by State laws is when, by virtue of its police power, and by its jurisdiction over persons and property within its limits, a State provides for the security of the lives, limbs, health, and comfort of persons and the protection of property. But these police regulations, affecting commerce only incidentally,—such as (for example) the establishment and regulation of highways, canals, railroads, and wharves by taxation as forming part of the mass of property within the State,—must be strictly internal regulations, not imposing taxes on persons or property passing through the State, or coming into it for a temporary purpose and forming no part of the common mass of property within its jurisdiction. Any State regulation which discriminates adversely to the persons or property of other States is an unauthorized interference with the power of Congress over the subject.[158]

62. Interstate commerce cannot be taxed by the State even though the same amount of tax should be laid by the State on commerce carried on wholly within its limits.[159] The right involved is not a State right. “To carry on interstate commerce is not a franchise or privilege granted by the State; it is a right which every citizen of the United States is entitled to exercise under the Constitution and laws of the United States.”[160] That persons engaged in such commerce are incorporated under the laws of a State and thereby possess facilities for carrying on their business cannot deprive them of their fundamental right as against the State, but Congress, by its power to regulate commerce, may prescribe conditions under which their business is carried on, or by regulation, destroy their business entirely.[161] Thus a State cannot, by a license tax, exclude from its jurisdiction a foreign corporation engaged in interstate commerce, or impose any burdens upon such commerce within its limits.[162] But it is within the police power of a State to protect the lives and health of its people, and to protect property through laws suppressing nuisances; prohibiting manufactures injurious to the public health; prohibiting the manufacture and sale of intoxicating liquors; prohibiting lotteries, gambling, horse-racing, or anything else which the Legislature considers opposed to the public welfare.[163] A local regulation limiting the speed of trains on entering a town or city, or approaching a curve or a bridge, or requiring a train to stop at a particular place, comes within the exercise of the police power of the State.[164]

63. The power of a State over commerce being exclusive only as to commerce strictly internal and within its own boundaries,—that is, within its own jurisdiction,—it follows that “a State can no more regulate or impede commerce among the several States than it can regulate or impede commerce with foreign nations.”[165] Taxation, by a State, of goods coming into it from another State, would destroy freedom of trade within the nation, which Congress has seen fit shall remain undisturbed. This freedom of trade is national in character, and interference with it, by a State, would violate a function and defeat the purpose of nationality: that is, such violation would prevent the people of the United States from realizing their own sovereignty.

64. An illustration of the constitutional use of the power of the State over commerce is afforded by the tax, in Texas, on telegraph messages sent from one place to another exclusively within the State, by private parties, and not by the agents of the government of the United States. The Texas law imposing this tax is not in conflict with the power of Congress to regulate commerce,[166] and therefore was not repugnant to the Constitution of the United States. The line of demarcation as to exercise of the police power by a State is drawn “by the undoubted right of the States of the Union to control their purely internal affairs, in doing which they exercise powers not surrendered to the general government.”[167]

Many State laws regulating its administration of internal affairs are applications of its police power. The police power of the State is of right, and is founded on “the sacred law of self-defense.”[168] But this sacred law applies strictly to the domain of the State—to its own jurisdiction. “It cannot invade the domain of the national government.”[169] A State inspection law is a familiar example of the exercise of its police power, but such a law, working obstruction of interstate commerce, or any limitation of it, though such effect be only incidental, is repugnant to the Constitution.[170] Such repugnancy is effected by a State law levying a tax on tonnage, and is void.[171] But a charge for mooring or landing at a wharf, is not a tax on tonnage, but a charge for services rendered;[172] neither is the tax a tonnage tax when the State imposes a tax on vessels (even if regularly engaged in interstate commerce), the property of persons residing within the jurisdiction of the State, the vessels themselves being part of the mass of property within the State, being moored for long periods at the wharf for repairs and being under the protection of the State. The taxing power is a distinct and separate power from the power to regulate commerce. The right of taxation in a State remains over every subject where it existed before the adoption of the Constitution with the exception only of prohibitions expressed or implied in the Constitution.

The sovereign jurisdiction of the State is not limited; within that jurisdiction it is free to tax. But the powers to tax and to prohibit taxation are given in the Constitution by separate clauses, and these powers are separate and distinct from the power to regulate commerce. From this it follows that the enrolment of a ship or vessel in interstate commerce does not exempt its owner from taxation for his interest in it as property, upon a valuation by State law, as in the case of other personal property.[173]

65. There ever remains the question of the extent of the power of Congress to regulate commerce. American constitutional law as to commerce is largely of what the States may not do. But the enormous power of Congress to regulate commerce, more and more as the years pass,—as the meaning of “national jurisdiction” is defined by the courts of law,—the definition, however, slowly conforming to public opinion,—discloses the extent of the federal power through the commerce clause. Doubtless Congress has made but a beginning in its exercise of this power. Thus it has made lottery tickets articles of commerce, has excluded them from the mails, has assumed plenary authority of the carriage of such articles from State to State, and, by authority of the commerce clause has practically destroyed the lottery business in the United States.[174] The principle here decided is that, under the power to regulate commerce, regulation may take the form of prohibition, and that the power “may be exerted with the effect of excluding particular articles from such commerce.”[175]

In this decision the Court observes, “that the suppression of nuisances injurious to public health or morality is among the most important duties of government,” and quotes an earlier decision as to “the widespread pestilence of lotteries.” It might seem that while exercising its powers under the commerce clause Congress was really exercising the police power of the United States.

66. Of highest importance is the act of Congress of July 2, 1890, and later amendments, known as the Anti-Trust Act, entitled, An “Act to Protect Trade and Commerce against Unlawful Restraints and Monopolies.” The decisions growing out of this act have been made on issues involving the particular questions whether or not restraints and monopolies so-called were such under the act and conflicted with it. The power of Congress, under the commerce clause to prohibit such restraints and monopolies has not been denied. It will be remembered that power to regulate commerce is not power to regulate manufactures. The purpose of the Anti-Trust law[176] is “to destroy the power to place any direct restraint on interstate trade or commerce, when by any combination or conspiracy formed by either natural or artificial persons, such a power has been acquired; and the government may intervene and demand relief as well after the combination is fully organized as while it is in process of formation.”[177] The principle involved here is as to the power of corporations organized under State laws to restrain or to monopolize interstate commerce. The State has no power to create corporations with such powers, and consequently they cannot exercise them lawfully. And like attempts to restrain and monopolize interstate commerce made by individuals is alike unlawful.[178]

67. So, too, where a labor organization sought by a boycott to prevent the manufacture of articles intended for interstate commerce, and to prevent the re-selling of these articles in other States, the combination and plan were held to be restraint of commerce and in violation of the Anti-Trust act.[179] The cases strongly suggest that federal laws to regulate commerce may be essentially police regulations as, notably, laws requiring safety appliances on railroad trains and steamboats; laws regulating hours of labor and child labor; laws requiring arbitration of controversies between employers and employees operating in interstate commerce; the pure food law; the exclusion of lottery tickets from the mails, and the like. The Constitution contains no clause explicitly delegating the police power to the United States, and the exercise of police power by Congress has thus far been quite without exception under the commerce clause. Yet by parity of reasoning, the police power may be included under the power to declare war.

68. There is such a thing as the peace of the United States.[180] The enormous power of Congress under the commerce clause has undoubtedly promoted that peace: “domestic tranquillity” is one of the specified purposes in ordaining and establishing the Constitution. As absence of power to regulate commerce marked the weakness of the Articles of Confederation, so the special inclusion of that power among those delegated to Congress marks the strength of the Constitution.

69. Within their respective jurisdictions the United States and the several States have power to regulate commerce. The power over commerce, in either jurisdiction, is exercisable within the principle of self-preservation. Whatsoever exercise of this power is essential to the existence of either government belongs to that government and cannot be repugnant to the other, that is, under the dual system of American constitutional government. Simple as this principle may seem, its practical application in defining the two jurisdictions, or the authority of either government, involves all the issues in American constitutional law, and the decisions of the American judiciary in cases arising under the commerce clause of the Constitution.

A notable instance of the authority given by the commerce clause is the power of Congress, over the transportation of the mails, to prevent “any unlawful and forcible interference” with them. “The strong arm of the government may be put forth to brush away all obstructions to the freedom of interstate commerce or the transportation of the mails”; “the United States have a property in the mails.” The contents of the mail-bags—that is, matter, lawfully mailable—are commerce in the sense in which that word is used in the Constitution.

Constitutional provisions do not change, but their operation extends to new matters as the modes of business and the habits of life of the people vary with each succeeding generation. The law of the common carrier is the same to-day as when transportation on land was by coach and wagon, and on water by canal boat and sailing vessel, yet in its actual operation it touches and regulates transportation by modes then unknown, the railroad train and the steamship. Just so is it with the grant to the national government of power over interstate commerce. The Constitution has not changed. The power is the same. But it operates to-day upon modes of interstate commerce unknown to the fathers, and it will operate with equal force upon any new modes of such commerce which the future may develop.[181]

Under the commerce clause Congress

may enact such legislation as shall declare void and prohibit the performance of any contract between individuals or corporations where the natural and direct effect of such a contract will be, when carried out, to directly, and not as a mere incident to other and innocent purposes regulate to any substantial extent interstate commerce.

And “interstate” also includes “foreign commerce.”[182]

All the decisions

illustrate the principle that Congress in the exercise of its paramount power may prevent the common instrumentalities of interstate and intrastate commercial intercourse from being used in their intrastate operations to the injury of interstate commerce. This is not to say that Congress possesses the authority to regulate the internal commerce of a State, as such, but that it does possess the power to foster and protect interstate commerce, and to take all measures necessary or appropriate to that end, although intrastate transactions of interstate carriers may thereby be controlled.[183]