The Constitution and its Influence on Business

OBE 118, Section 3

Fall, 2004

Professor McKinsey

How Does the Constitution Affect Business?

• Limits government’s authority to directly (and indirectly though creation of laws) regulate and restrict business.

• Often, businesses that challenge governmental action reach these fundamental limits

The U.S. Constitution• The three branches of power in our government

provide checks and balances against each other

Key Provisions of U.S. Constitution

• Commerce Clause

• Supremacy Clause

• Enumerated Powers

• Separation of Powers

Those giving the Federal Government Power:

The Commerce Clause

Important because it gives federal to business because it gives power to the federal government while limiting power of state government.

• Textbook is misleading here.• Affirmative power- when congress “occupies the field”• The limit on federal power under the Commerce Clause? -

– Activity regulated must have a substantial economic effect on interstate commerce.

• Dormant aspect of Commerce Clause covered later in this lecture.

“The Congress shall have the Power…to regulate Commerce…among the several states…”

Article 1, Section 8

The Supremacy Clause

Federal power wins over state power.

“This Constitution, and the Laws of the United States… shall be the supreme Law of the Land…”

Article 6, Section 2

Key Provisions of U.S. Constitution

• Commerce Clause• Supremacy Clause• Enumerated Powers of the Branches

– Judicial Review text is misleading, it is not controversial, it is completely accepted.

Those giving the Federal Government Power:

Key Provisions of U.S. Constitution

• 10th Amendment

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States are reserved to the States respectively, or to the people.”

Means: If the federal government is not given a power the States have the power unless the Constitution forbids them to have that power.

Those giving the State Governments Power:

Key Provisions of U.S. Constitution

• Due Process Clauses• Takings Clause• Freedom of Speech • Contracts Clause• Dormant aspect of Commerce Clause restricting

State power• Equal Protection Clause

Those Restricting Governmental Power:

Due Process• Due Process Clauses (actually two of them,

one in 5th Amendment and one in 14th Amendment)

• No deprivation of life liberty or property unless treated fairly

• Depending on the forum, you have rights such as having a neutral decision maker, presenting your story, questioning the evidence against you, etc.

Takings Clause

• 5th Amendment: “…nor shall private property be taken for public use, without just compensation”

• Full takings• Part of land takings (e.g. road easements)• A particular right?• Temporary?• “Inverse condemnation” versus “eminent domain”

Dormant Commerce Clause• States cannot discriminate against

interstate commerce.• No economic protectionism at state level• When federal law “occupies the field”

then state law is invalid as well, even if it could survive a discrimination test.

Equal Protection Clause• 14th Amendment: “ No State shall…deny

any person within its jurisdiction the equal protection of the laws.”

• When government classifies people, it can exceed its authority:– Racial, ethnic etc: unconstitutional most of the

time (what about affirmative action)– Gender based: sometimes– Economic:

Freedom of Speech• 1st Amendment: “ Congress shall make no

law…abridging the freedom of speech…”

• Government cannot prohibit political speech, expression of ideas, opinions etc.:– Government can– Sometimes acts can be speech– Obscenity and commercial speech are

SummaryGranting PowerCommerce clause, supremacy clause, enumerated powers,

10th Amendment (states) Limits• Due Process Clauses• Takings Clause• Freedom of Speech• Contracts Clause• Dormant aspect of Commerce Clause restricting State

power.• Equal Protection ClauseNext we look at how law is made pursuant to these

constraintsQuiz on Thursday on the assigned reading for Thursday

and a few questions from this material.