Interstate commerce includes all commercial transactions that cross from one state to another in the United States. A trip, the shipment of goods, or sending a message may be interstate commerce. In its broadest sense, however, interstate commerce has come to mean all dealings and affairs that concern more than one state and have a real and substantial relation to the national interest. Commerce carried on within the borders of only one state is called intrastate commerce.
Throughout U.S. history, there have been many disputes, laws, and court decisions concerning the regulation of interstate commerce. A clause in Article I of the U.S. Constitution, called the “commerce clause,” gives Congress the power to “regulate commerce with foreign nations and among the several states.” Interpretations of this language by the Supreme Court of the United States have given Congress broad regulatory powers. On the basis of the commerce clause, the federal government regulates many economic activities. These include child labor, minimum wages and hours, manufacturing, transportation, communication, and racial discrimination in the use of public accommodations. The Departments of Justice and Labor and several federal agencies enforce interstate commerce laws.
In some cases, the states may pass local laws affecting interstate commerce. State regulations are permissible if they do not conflict with federal laws and do not create an excessive burden on interstate commerce.
The commerce clause
corrected a weakness of the Articles of Confederation, under which the first government of the United States operated. The Articles, adopted in 1781, lacked power to regulate commerce. Each state set up various taxes, tariffs, and trade restrictions that would give it an advantage over the other states. Delegates to the Constitutional Convention of 1787 were convinced that the national government needed some central control over commerce. The Constitution they wrote provided that the United States Congress would have sole authority over interstate and foreign commerce. See Articles of Confederation ; Constitution of the United States .
Although the Constitution gives Congress the power to regulate interstate commerce, it does not define the word commerce. As early as 1824, the Supreme Court gave a broad interpretation to the commerce clause. In the case of Gibbons v. Ogden, the court stated that commerce was not limited “to traffic, to buying and selling, or the interchange of commodities … but it is something more. … It describes the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse.” The Supreme Court has used this definition to uphold the constitutionality of many interstate commerce laws. See Gibbons v. Ogden .
The Interstate Commerce Act
of 1887 marked the beginning of extensive federal government regulation of interstate commerce. The act was designed to prevent discrimination and abuses by railroads.
The first railroads had begun to operate in the United States during the early 1800’s. By the mid-1800’s, a number of railroad companies had grown strong by merging with other railroad firms and by adding new routes. These railroads provided faster, cheaper, and more efficient service than other systems of transportation. People and industries increasingly began to rely on railroads and greatly reduced the use of highways, rivers, and canals for commerce.
During the 1860’s, many railroads began to abuse their favored position. Some railroads that had a monopoly on the service to a particular town charged unfairly high rates for that service. Rival railroads sometimes agreed among themselves to charge comparable rates that far exceeded the costs of certain services. Higher rates were sometimes charged for shorter hauls than for longer hauls over the same route. Many railroads charged lower rates to shippers who gave them large amounts of business than to farmers and other small shippers even though the service was similar. Public demands for an end to the unfair business practices of railroads steadily increased.
In 1887, Congress passed the Act to Regulate Commerce. This act limited both the use of different rates for the same service and any agreements that set standard prices in the industry. The act, which became known as the Interstate Commerce Act, also created the Interstate Commerce Commission (ICC) to enforce the law. The ICC was the first federal regulatory agency and served as a model for future agencies. The ICC’s authority was later extended to most forms of interstate transportation on land and water.
Other regulatory commissions.
During the late 1800’s, many large-scale manufacturing and mining firms began to abuse their power over consumers. Like the railroads, the firms often eliminated competition or charged unfairly high prices. In 1890, Congress passed the Sherman Antitrust Act. This act became the first of a series of federal measures designed to combat monopoly in all types of industries. Another important development occurred in 1914, when Congress established the Federal Trade Commission to protect free and fair competition in the economy.
Congress has since established many other regulatory agencies. The Federal Aviation Administration regulates air traffic. The Federal Communications Commission regulates communications. Other agencies regulate such activities as stock and commodity trading and labor relations.
Interstate commerce today.
Before 1937, most matters regulated as interstate commerce included (1) the transportation of people and goods across state lines; (2) the interstate transmission of messages and electricity; and (3) the buying and selling of goods intended for shipment or use in other states. The matter regulated had to be in interstate commerce; it could not precede or follow interstate commerce. For example, the Supreme Court’s 1935 decision in Schechter v. United States held that Congress could not regulate the wages and hours of workers who prepared for local use goods brought in from other states.
In 1937, the Supreme Court returned to a broader interpretation of the words “commerce among the states.” National Labor Relations Board v. Jones and Laughlin Steel Corporation was the first of a series of cases giving Congress wide regulatory powers. In that case, the court held that local activities of labor unions bear “a close relationship with interstate commerce,” and therefore may affect commerce. From the time the court made its decision, the matter regulated no longer had to be in the flow of commerce among the states.
Since 1937, a variety of laws concerning matters that might affect commerce have been passed by Congress and upheld by the Supreme Court. These include laws regulating wages and hours, child labor, discrimination against shippers, fraudulent security transactions, professional football, and deceptive selling practices.
In the 1960’s and 1970’s, an increasing number of people charged that the regulation of interstate commerce had brought about some unreasonably high or low transportation rates. The Civil Aeronautics Board, which regulated the fares, routes, and schedules of commercial airlines, was strongly criticized and later abolished. Other critics argued that the ICC’s strict regulation of railroad rates made it difficult for the railroads to compete with trucks or barge lines.
As a result of these criticisms, Congress passed several deregulation laws during the late 1970’s and early 1980’s. These laws greatly reduced the powers of regulatory agencies in the airline, trucking, and railroad industries. For example, the Airline Deregulation Act of 1978 provided for the end of many federal controls over commercial airlines.
