Chapter 3. Constitutional Authority to Regulate Business

Chapter Objectives
Describe the concept of federalism and the doctrine of separation of powers.
Define and apply the Supremacy Clause of the US Constitution.
Explain the federal government's authority to regulate foreign commerce.
Explain the federal government's authority to regulate interstate commerce.
Describe state and local governments' authority to regulate commerce under their "police power."
Explain how speech is protected by the First Amendment.
Describe how commercial speech may be regulated by proper time, place, and manner restrictions.
Describe the freedom of religion provided by the First Amendment.
Describe substantive and procedural due process.
Explain the doctrine of equal protection.

Federalism and separation of powers
The US Constitution creates the three branches of government [legislative (Article I), executive (Article II), judicial (Article III)] and allocates powers to those branches. Checks and balances are built into the Constitution so that no one branch of government becomes too powerful. It also protects individual rights by limiting the government's ability to restrict those rights.

Federalism is the US form of government. Certain powers, called enumerated powers, were delegated to the federal government by the states when they ratified the Constitution.

Supremacy Clause of the US Constitution
The Supremacy Clause establishes that the federal Constitution, treaties, federal laws, and federal regulations are the supreme law of the land. Federal law takes precedent over state law or local law. Any state or local law that "directly and substantially" conflicts with valid federal law is preempted under the Supremacy Clause.

Commerce Clause of the US Constitution
Federal government's authority to regulate foreign commerce
The Commerce Clause gives the federal government exclusive power to regulate commerce with foreign nations. State regulation of foreign commerce is prohibited.

Federal government's authority to regulate interstate commerce
The Commerce Clause gives the federal government authority to regulate interstate commerce. This is interpreted to mean regulation of activities that affect commerce. The regulated activity does not itself have to be in interstate commerce.

State and local governments' authority to regulate commerce under "police power"
The states retained power to regulate intrastate and much interstate business activities within their borders; this is referred to as police power. State and local laws cannot unduly burden interstate commerce; if they do, they are an unconstitutional violation of the Commerce Clause.

Bill of Rights
The Bill of Rights is defined as the first ten amendments to the US Constitution.

Speech and the First Amendment
Freedom of speech is guaranteed by the First Amendment to the US Constitution. This is defined as the right to engage in oral, written, and symbolic speech. Speech is divided into three categories:

• Fully protected speech—speech that the government cannot regulate
• Limited protected speech—speech that cannot be forbidden, but can be subject to time, place, and manner restrictions
• Offensive speech—speech that is offensive to many members of society
• Commercial speech—speech used by businesses, such as advertising
• Unprotected speech—speech that is unprotected by the First Amendment and that may be totally forbidden by the government
• Dangerous speech—such as yelling "fire" in a crowded theater where there is no fire
• Fighting words—words that are likely to provoke a hostile or violent response from the average person
• Speech that incites the violent or revolutionary overthrow of the government (as opposed to abstract teaching about such concepts)
• Defamatory language
• Child pornography
• Obscene speech—the definition of obscene speech is very subjective

Freedom of religion and the First Amendment
The First Amendment requires federal, state, and local governments to be neutral toward religion. There are two separate religion clauses:

• Establishment Clause—prohibits the government from either establishing a state religion or promoting one religion over another
• Free Exercise Clause—prohibits the government from interfering with the free exercise of religion in the US

Substantive and procedural due process
The Fifth and Fourteenth Amendments of the Constitution contain a Due Process Clause that states that no person shall be deprived of "life, liberty or property" without due process of law. There are two categories of due process:

• Substantive due process—requires that government statutes, ordinances, regulations, or other laws must be clear on their face and not overly broad in scope. The test is whether a "reasonable person" could understand the law to be able to comply with it.
• Procedural due process—requires that the government give a person proper notice and hearing of an action before that person is deprived of his or her life, liberty, or property.

Doctrine of equal protection
The Equal Protection Clause of the Fourteenth Amendment provides that a state cannot "deny to any person within its jurisdiction the equal protection of the laws." Under this clause, governments may not enact laws that classify and treat "similarly situated" persons differently. Artificial persons, such as corporations, are also protected.

Privileges and Immunities Clause
The Privileges and Immunities Clause of the Fourteenth Amendment prohibits states from enacting laws that unduly discriminate in favor of their residents.

• Commerce Clause—Clause of the U.S. Constitution that vests Congress with the power "to regulate commerce with foreign nations."
• commercial speech—Speech used by businesses, such as advertising. It is subject to time, place, and manner restrictions.
• Due Process Clause—A clause to the Fifth and Fourteenth Amendments that says no person shall be deprived of "life, liberty or property" without due process of the law.
• enumerated powers—Certain powers delegated to the federal government by the states.
• Equal Protection Clause—A clause that provides that a state cannot "deny to any person within its jurisdiction the equal protection of the laws."
• Establishment Clause—A clause to the First Amendment that prohibits the government from either establishing a state religion or promoting one religion over another.
• executive branch—The part of the government that consists of the president and vice president.
• federalism—The United States form of government; the federal government and the 50 state governments share powers.
• Fourteenth Amendment—Amendment that was added to the U.S. Constitution in 1868. It contains the Due Process, Equal Protection, and Privileges and Immunities Clauses.
• Free Exercise Clause—A clause to the First Amendment that prohibits the government from interfering with the free exercise of religion in the United States.
• freedom of speech—The right to engage in oral, written, and symbolic speech protected by the First Amendment.
• intermediate scrutiny test—Test that is applied to classifications based on sex or age.
• judicial branch—The part of the government that consists of the Supreme Court and other federal courts.
• legislative branch—The part of the government that consists of Congress (the Senate and the House of Representatives).
• obscene speech—Speech that (1) appeals to the prurient interest, (2) depicts sexual conduct in a patently offensive way, and (3) lacks serious literary, artistic, political, or scientific value.
• offensive speech—Speech that is offensive to many members of society. It is subject to time, place, and manner restrictions.
• preemption doctrine—The concept that federal law takes precedent over state or local law.
• Privileges and Immunities Clause—A clause that prohibits states from enacting laws that unduly discriminate in favor of their residents.
• procedural due process—Due process that requires that the government must give a person proper notice and hearing of the action before that person is deprived of his or her life, liberty, or property.
• rational basis test—Test that is applied to classifications not involving a suspect or protected class.
• strict scrutiny test—Test that is applied to classifications based on race.
• substantive due process—Due process that requires that government statutes, ordinances, regulations, or other laws be clear on their face and not overly broad in scope.
• Supremacy Clause—A clause of the U.S. Constitution that establishes that the federal Constitution, treaties, federal laws, and federal regulations are the supreme law of the land.
• United States Constitution—The fundamental law of the United States of America. It was ratified by the states in 1788.
• unprotected speech—speech that is not protected by the First Amendment and may be forbidden by the government

Internet Links
Government: www.firstgov.gov
Questions about government: www.firstgov.gov/Contact/Faq.shtml
Federal forms: www.fedforms.gov