Stream of Commerce

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With respect to the Commerce Clause, the “stream of commerce” concept appeared in a 1922 U.S. Supreme Court decision, Stafford v. Wallace, which continued a gradual expansion of Congress’s authority under the Commerce Clause. Article I, Section 8, Clause 3 of the Constitution provides Congress with the power to regulate commerce “with foreign Nations, and among the several States, and with the Indian Tribes.” Prior to the early 1900s, the Supreme Court limited the reach of Congress’s power under this clause to activities, such as trade or barter, that were considered commerce, or as having a direct effect on commerce, in the localized economy of the time. Activities such as mining, manufacturing, and production were not commerce under these decisions as they either produced the goods that were the subject of commerce or were considered as having only an indirect effect on commerce. The courts held, therefore, that these activities were not subject to congressional regulation under the Commerce Clause. These early decisions also limited Congress’s ability to regulate activities that took place within a single state (intrastate commerce activities).

As the American economy developed, the Supreme Court’s Commerce Clause decisions began to reflect a more complex understanding of commerce. In Stafford, the Supreme Court upheld provisions of a federal law that regulated the business of large meatpackers. At the time, five meatpackers dominated the purchase of livestock and the preparation of meat products across the nation. Congress sought to curb these companies’ monopolistic practices by regulating the local operations of the stockyards owned by the meatpackers through which much of the nation’s livestock passed. The meatpackers challenged this regulation as unconstitutional. In upholding the legislation, the Supreme Court recognized that many of the regulated activities, taken individually, were intrastate in nature. However, the Court adopted a pragmatic approach to determining whether an activity constituted interstate commerce subject to congressional regulation. In essence, the Court held that activities that, by their very existence, threatened to obstruct the “stream of commerce” were subject to regulation under the Commerce Clause. Later decisions expanded this approach into a “substantial effect on commerce” test.

Under the substantial effects test, Congress has authority under the Commerce Clause to regulate any activity, or class of activities, that substantially affects interstate commerce, even if the activity takes place wholly within one state. The Supreme Court has, thus, held that Congress has the power under the Commerce Clause to regulate discrimination by the owners of a single hotel because Congress could reasonably conclude that such discrimination adversely affects interstate commerce.

In 1995, however, the Supreme Court issued a decision that suggested that Congress’s power under the Commerce Clause is limited. In United States v. Lopez, the Supreme Court held that Congress may not reach every conceivable activity under the guise of the Commerce Clause. Rather, Congress must have a reasonable basis for concluding that an activity substantially affects interstate commerce before regulating that activity through its Commerce Clause authority.

BIBLIOGRAPHY: Chester James Antieau and William J. Rich, Modern Constitutional Law, 2nd ed. (Rochester, NY: Lawyers Cooperative Pub. Co., 1997), §44.05; Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241 (1964); Stafford v. Wallace, 258 U.S. 495 (1922); and United States v. Lopez, 514 U.S. 549 (1995).

Stanley B. Lutz

Last Updated: 2006

SEE ALSO: Commerce among the States; Interstate Commerce; United States v. Lopez; U.S. Supreme Court