Chapter 4: Constitutional
Authority to Regulate Business
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The Constitutional
Powers of Government
 Before the Revolutionary War, States
wanted a confederation with a weak
national government and very limited
powers. After the war ended, the
States voted to create a new, federal
government that shared power with
States.
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The Constitutional
Powers of Government
 Federal Form of Government:
• Shares power between national and
state governments.
• National government has limited,
enumerated powers delegated from
States.
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The Constitutional
Powers of Government
 Federal Form of Government
(cont’d).
• 10th Amendment: powers reserved to
the states and to the people.
• Police Powers: order, safety, morals.
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The Constitutional
Powers of Government
 The Separation of Powers.
• Three branches that provide checks and
balances:
• Legislative (Congress): Creates laws.
• Executive (President/Agencies): Enforce
laws.
• Judicial (Federal Courts): Interprets laws.
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The Constitutional
Powers of Government
 The Commerce Clause.
• Power to regulate interstate commerce
defined in Gibbons v. Ogden (1824):
activities that “substantially affect
interstate commerce.” 
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The Constitutional
Powers of Government
 The Commerce Clause.
• Expansion of National Powers.
• In 1942, Supreme Court expanded
commerce clause to purely interstate
businesses (Wickard v. Filburn).
• In 1964, Supreme Court prohibited racial
discrimination in interstate commerce
(Heart of Atlanta Motel v. U.S.).
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The Constitutional
Powers of Government
 The Commerce Clause.
• Commerce Clause Today.
• National government can regulate
virtually any business enterprise,
including those that are internet-based.
Limits: U.S. v. Lopez (1995).
• What about medical marijuana and the
commerce clause?
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The Constitutional
Powers of Government
 The Commerce Clause.
• The “Dormant” Commerce Clause.
• Generally, federal government has
exclusive authority to regulate commerce
that substantially affects trade among the
states.
• States possess inherent police powers to
regulate health, safety, public order,
morals and general welfare. 
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The Constitutional
Powers of Government
 The Commerce Clause.
• The “Dormant” Commerce Clause.
• State police powers or regulations that
substantially interfere with interstate
commerce will be struck down.
• CASE 4.1 FAMILY WINEMAKERS OF
CALIFORNIA V. JENKINS (2010). Did the
State of Massachusetts discriminate
against out-of-state wineries?
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The Constitutional
Powers of Government
 The Supremacy Clause.
• In case of direct conflict between state
and federal law, state law is invalid.
• A valid federal statute or regulation will
take precedence over a conflicting state
or local statute. 
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The Constitutional
Powers of Government
 The Supremacy Clause.
• Preemption occurs when Congress
chooses to act exclusively when
national and state governments have
concurrent powers.
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Business and the Bill of Rights
 First Ten Amendments to the United
States Constitution are called the Bill
of Rights.
 All apply to natural persons and most
apply to business entities as well.
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The Bill of Rights
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Business and the Bill of Rights
 Limits on Federal and State
Government Actions.
• Bill of Rights was originally intended as a
limit on national government powers.
• Today, Bill of Rights is applied to States via
the “due process” clause of the 14th
Amendment.
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Business and the Bill of Rights
 The First Amendment – Freedom of
Speech.
• Afforded highest protection by courts.
• Symbolic Speech: Texas v. Johnson (1989),
the “flag burning” case. 
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Business and the Bill of Rights
 The First Amendment – Freedom of
Speech.
• Reasonable Restrictions.
• Balance must be struck between a government’s
obligation to protect its citizens versus a citizen’s
right to speech.
• If restriction is content neutral, restrictions must
target some societal problem – not to primarily
suppress the message.
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Business and the Bill of Rights
 The First Amendment – Freedom of
Speech.
• Corporate Political Speech.
• Political speech by corporations is protected
by the First Amendment.
• In Citizens United v. Federal Election
Commission (2010) the Supreme Court ruled
that corporations can spend freely to
support or oppose candidates for President
and Congress.
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Business and the Bill of Rights
 The First Amendment – Freedom of
Speech.
• Commercial Speech.
• Courts give substantial protection to
commercial speech (advertising).
• Restrictions must: Implement substantial
government interest; directly advance that
interest; and go no further than necessary.

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Business and the Bill of Rights
 The First Amendment – Freedom of
Speech.
• Commercial Speech.
• CASE 4.2: BAD FROG BREWERY, INC. V.
NEW YORK STATE LIQUOR AUTHORITY
(1998). Did the State unconstitutionally
restrict commercial speech when it
prohibited a certain gesture (illustration)
on beer labels?
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Business and the Bill of Rights
 The First Amendment – Freedom of
Speech.
• Unprotected Speech: certain types of
speech are not protected by the First
Amendment: slander, fighting words,
pornography.
–Obscenity (see Miller v. California).
–Online Obscenity: CDA, COPA, Children’s
Internet Protection Act, Children’s Internet
Protection Act (2000).
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Business and the Bill of Rights
 The First Amendment – Freedom of
Religion.
• Government may not “establish” a
religion or prohibit the “free exercise” of
religion.
• The Establishment Clause: prohibits
government from establishing a statesponsored religion, or passing laws that
favor one over the other. 
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Business and the Bill of Rights
 The First Amendment – Freedom of
Religion.
• The Establishment Clause.
• CASE 4.3 TRUNK V. CITY OF SAN DIEGO
(2011). What was the Supreme
Court’s rationale for ordering the
cross removed?
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Business and the Bill of Rights
 The First Amendment – Freedom of
Religion.
• Free Exercise Clause: First Amendment
guarantees the “free exercise” of
religion.
• Employers must reasonably
accommodate beliefs as long as
employee has sincerely held beliefs.
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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.”
 Due Process: Procedural and
Substantive issues. 
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Due Process and Equal Protection
 Due Process.
• 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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Due Process and Equal Protection
 Due Process.
• Substantive Due Process: focuses on
content or substance of legislation.
• Laws limiting fundamental rights (speech,
privacy, religion) must have a “compelling
state interest.”
• Laws limiting non-fundamental rights
require a “rational basis.”
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Due Process and Equal Protection
 Equal Protection.
• Similarly situated individuals must be
treated in the same manner.
•Strict Scrutiny Test.
• Suspect trait (race, national origin) must
serve a “compelling state interest” which
includes remedying past discrimination. 
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Due Process and Equal Protection
 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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Due Process and Equal Protection
 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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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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Privacy Rights
 Federal Statutes Affecting Privacy
Rights.
• “Pretexting” for financial information
is illegal under Gramm-Leach-Bliley.
• Privacy Act of 1974.
• Medical Information: HIPAA of 1996.
• Court Records.
• USA PATRIOT Act of 2001.
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