Constitutional Law for Business and Online Commerce

The U.S. Constitution serves two major functions:

1. It creates the three branches of government (executive, legislative, and judicial) and allocates powers to these branches

2. It protects individual rights by limiting the government’s ability to restrict those rights

Federalism and Delegated Powers

• FederalismFederalism is the U.S. form of government– The federal government and the 50 state

governments share powers

• Enumerated powersEnumerated powers – certain powers delegated to the federal government by the states

FederalismFederalism (continued)(continued)

Any powers that are not specifically Any powers that are not specifically delegated to the federal government delegated to the federal government by the Constitution are reserved to by the Constitution are reserved to the statesthe states

Doctrine of Separation of Powers

(1 of 3)• Article I of the Constitution establishes the

legislative branchlegislative branch of government– The part of the government that consists of

CongressCongress:• the Senate• the House of Representatives

Doctrine of Separation of Powers

(2 of 3)• Article II of the Constitution establishes

the executive branchexecutive branch of government– The part of the government that consists of:

• the President• the Vice President

– The president is selected by the electoral college, not elected by popular vote

Doctrine of Separation of Powers

(3 of 3)• Article III of the Constitution establishes

the judicial branchjudicial branch of the government– The part of the government that consists of:

• the Supreme Court• other federal courts that may be created by the

Congress

Checks and BalancesChecks and Balances::

CertainCertain checks and balanceschecks and balances are are built into the constitution to ensure built into the constitution to ensure that no one branch of the federal that no one branch of the federal government becomes too powerful.government becomes too powerful.

Checks and Balances in Our System of Government: (1 of 2)

• The judicial branchjudicial branch has authority to examine the acts of the other two branches of government and determine whether these acts are constitutional

• The executive branchexecutive branch can enter into treaties with foreign governments only with the advice and consent of the Senate

Checks and Balances in Our System of Government: (2 of 2)

• The legislative branchlegislative branch is authorized to create federal courts and determine their jurisdiction and to enact statutes that change judicially made law

The Supremacy Clause

• Supremacy ClauseSupremacy Clause – establishes that the federal Constitution, treaties, federal laws, and federal regulations are the supreme law of the land– State and local laws that conflict with valid

federal law are unconstitutional

Preemption DoctrinePreemption Doctrine

The concept that federal law The concept that federal law takes precedence over state or takes precedence over state or local law.local law.

Commerce Clause

• A clause of the U.S. Constitution that grants Congress the power “to regulate commerce with foreign nations, and among the several states, and with Indian tribes.”

• Because this clause authorizes the federal government to regulate commerce, it has a greater impact on business than any other provision in the Constitution

Federal Regulation of Interstate Commerce

• The Commerce Clause also gives the federal government the authority to regulate interstate commerceinterstate commerce

• The federal government may regulate:– InterstateInterstate commerce that crosses state

borders– IntrastateIntrastate commerce that affects interstate

commerce

State and Local Government Regulation of Business (1 of 2)

• Police PowerPolice Power – the power of the states to regulate private and business activity within their borders

• States may enact laws that protect or promote the public health, safety, morals, and general welfare as long as the law does not unduly burden interstate unduly burden interstate commercecommerce

State and Local Government Regulation of Business (2 of 2)

• State and local governments may regulate:– InterstateInterstate commerce within their borders– IntrastateIntrastate commerce not exclusively

regulated by the federal government

• Zoning ordinances, state environmental laws, corporation and partnership laws, and property laws are enacted under this power

International Law: The Foreign Commerce Clause

• The Commerce Clause of the U.S. Constitution gives the federal government the exclusive power to regulate commerce with foreign nations

• DirectDirect and indirectindirect regulation of foreign commerce by state or local governments that discriminates against foreign commerce violates the Foreign Commerce ClauseForeign Commerce Clause– It is therefore unconstitutional

The Bill of Rights and Business

• The Bill of RightsBill of Rights provides certain freedoms and protections to individuals and business:

– Freedom of speech

– Freedom of religion

Freedom of Speech

• The right to engage in oral, written, and symbolic speech protected by the First Amendment

• The right to engage in oral, written, and symbolic speech protected by the First Amendment

• The U.S. Supreme Court places speech into three categories:

1.1. Fully protected

2.2. Limited protected

3.3. Unprotected

• The U.S. Supreme Court places speech into three categories:

1.1. Fully protected

2.2. Limited protected

3.3. Unprotected

Freedom of Religion

• The U.S. Constitution requires federal, state, and local governments to be neutral toward religion– The Establishment ClauseThe Establishment Clause – prohibits the

government from either establishing a state religion or promoting one religion over another

– The Free Exercise ClauseThe Free Exercise Clause – prohibits the government from interfering with the free exercise of religion in the United States

The Fourteenth Amendment

• Added to the U.S. Constitution in 1868

• Prohibits discriminatory and unfair action by the government

• Three clauses have important implications for business:– Equal Protection ClauseEqual Protection Clause– Due Process ClauseDue Process Clause– Privileges and Immunities ClausePrivileges and Immunities Clause

The Equal Protection Clause (1 of 3)

• Provides that a state cannot “deny to any person within its jurisdiction the equal protection of the laws.”

• The Supreme Court has held that it also applies to federal government action

The Equal Protection Clause (2 of 3)

• State, local, and federal governments are prohibited from enacting laws that classify and treat “similarly situated” persons differently

• Artificial persons, such as corporations, are also protected

The Equal Protection Clause (3 of 3)

• The Supreme Court has adopted three different standards for reviewing equal protection cases:– Strict Scrutiny TestStrict Scrutiny Test – applied to classifications

based on race– Intermediate Scrutiny TestIntermediate Scrutiny Test – applied to

classifications based on protected classes other than race (e.g., sex or age)

– Rational Basis TestRational Basis Test – applied to classifications not involving a suspect or protected class

Due Process Clause

• The Fifth and Fourteenth Amendments both contain a Due Process ClauseDue Process Clause

• These clauses provide that no person shall be deprived of “life, liberty, or property” without due process of the law

• Fifth Amendment ClauseFifth Amendment Clause – applies to federal government action

• Fourteenth Amendment ClauseFourteenth Amendment Clause – applies to state and local government action

Types of Due Process

Substantive Due ProcessSubstantive Due Process• Requires government

laws to be clear and not overly broad

• The test is whether a reasonable person could understand the law

Substantive Due ProcessSubstantive Due Process• Requires government

laws to be clear and not overly broad

• The test is whether a reasonable person could understand the law

Procedural Due ProcessProcedural Due Process• Requires the

government to give a person proper notice and hearing before depriving that person of his or her life, liberty, or property

Procedural Due ProcessProcedural Due Process• Requires the

government to give a person proper notice and hearing before depriving that person of his or her life, liberty, or property

The Privileges and Immunities Clause

• Article IV of the Constitution and the Fourteenth Amendment contain a Privileges and Immunities ClausePrivileges and Immunities Clause

• This clause prohibits states from enacting laws that unduly discriminate in favor of their residents

• This clause applies only to citizens– Corporations are not protected