Chapter 4
Constitutional Authority
to Regulate Business
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History
Before the Revolutionary War, States wanted a
confederation with weak national government
and very limited powers.
After the war, in 1787, the States voted to amend
Articles of Confederation and create a new,
federal government that shared power with
States.
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§1: Constitutional Powers
of 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.
Privileges and Immunities Clause (Art. IV §2)
Full Faith and Credit Clause (Art. IV §1)
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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, the
Commerce Clause authorizes the national
government to regulate virtually any business
enterprise, including the internet-based. Limits:
U.S. v. Lopez (1995)
Case 4.1: Reno v. Condon (2000)
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State Commerce
States possess inherent police powers to regulate
health, safety, public order, morals and general
welfare.
“Dormant” Commerce Clause.
Case 4.2: Ferguson v. Friendfinders. Inc. (2002)
State laws that substantially interfere with
interstate commerce will be struck down.
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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.
Federal Taxing and Spending Powers.
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§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.
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Free Speech
Afforded highest protection by courts.
Symbolic Speech.
 Texas v. Johnson (1989).
 R.A.V. vs. City of St.Paul (1992).
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Commercial Speech
Advertising is protected speech. Restrictions
must:
 Implement substantial government interest;
 Directly advance that interest; and
 Go no further than necessary.
Case 4.3: Bad Frog Brewery (1998).
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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).
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Unprotected Speech
Certain types of speech are not protected by the
First Amendment:
 Slander.
 Obscenity (Miller v. California).
 Fighting Words.
Online Obscenity
 CDA, COPA, Children’s Internet Protection Act.
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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) and Lynch v. Donnelly
(1984).
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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).
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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).
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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.
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§3: Due Process and
Equal Protection
Fifth and Fourteenth Amendments provide “no
person shall be deprived of life, liberty or
property without due process of law.”
Procedural and Substantive issues.
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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.
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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.”
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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.
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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).
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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.
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§4: Privacy Rights
Fundamental right not expressly found in the
constitution, but derived from First, Fifth and
Fourteenth Amendments.
Laws and policies affecting privacy are subject to
the compelling interest test.
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Law on the Web
Online Constitution Center
See the “Vote-Smart” site on federalism.
Federalist Society.com.
ACLU.org.
Legal Research Exercises on the Web.
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