CHAPTER XIII
THE REGULATION OF COMMERCE
The Power to Regulate Commerce.—Under the Articles of Confederation, as we have seen, Congress possessed no power to regulate commerce among the states or with foreign nations. That power remained entirely with the states. Each state accordingly made such regulations as it saw fit, without regard to the general welfare. It was this want of commercial power on the part of Congress that contributed as much as anything else perhaps to the downfall of the Confederation. The Constitution as finally adopted gave Congress the exclusive power to regulate commerce among the states, with foreign countries, and with the Indian tribes, which were then treated somewhat as foreign nations for certain purposes. The only limitations placed on the power of Congress in this respect were that no duty should be levied on goods exported from any state; that no preference should be given by any regulation of commerce or revenue to the ports of one state over those of another; and that no vessels bound to or from one state should be obliged to enter, clear, or pay duties in another.
Regulation of Foreign Commerce. In pursuance of the power to regulate commerce with foreign nations Congress has enacted a large amount of legislation relating to tonnage duties, duties on imports, quarantine, immigration, the importation of adulterated foods, wines, teas, and other food products, the conduct of navigation, the construction and inspection of ships carrying passengers, pilotage, clearances, the protection of shipping, the rights of seamen, the registration and insurance of vessels, life-saving appliances, the use of wireless telegraph apparatus, and the like. It was also in pursuance of this power that the Embargo Act was passed in 1807 and the Nonintercourse Act in 1809—both of which were in effect prohibitions rather than regulations of commerce.
The Navigation Laws prescribe with great detail how vessels registered under the American flag shall be constructed and equipped for the comfort and safety of their crews and passengers; how they shall be inspected; rules that shall be observed to avoid collisions, how signals shall be displayed, etc.; the forms of papers vessels must carry; how the wages of seamen shall be paid, the nature of their contracts, etc.
The Tonnage Laws prescribe the rate of tonnage duties that shall be levied on vessels entering American ports. Tonnage duties, as the name indicates, are a form of taxation calculated on the basis of the tonnage admeasurement of the vessel; they are levied on American as well as foreign ships, though the rate is higher on the latter than on the former. Sometimes they have been higher on the vessels of some foreign countries than on those of others, in which case they are known as discriminating tonnage duties. Such discriminating duties are employed for the purpose of favoring the commerce of those nations which extend us commercial privileges and for shutting out or restricting that of nations which discriminate against our trade. In pursuance of the power to regulate foreign commerce, Congress prohibits foreign vessels from engaging in the coasting trade, and permits only citizens of the United States to serve as masters on vessels registered under the American flag. Formerly only American-built vessels could be registered, but in 1914, after the outbreak of the great war in Europe, Congress passed an act allowing ships built in foreign yards, when owned by American citizens, to be registered under the American flag; and more than 100 such vessels have been so registered.
Immigration.—By virtue of the commerce power Congress has enacted a series of immigration laws imposing restrictions on the coming of immigrants to our shores. For a long time immigration from Europe was encouraged rather than restricted, but within recent years so many undesirable persons have found their way to America that Congress has been led to pass various laws designed to shut out the worst of them and admit only the desirable ones.[42]
First of all, the immigration laws exclude convicts, insane persons, paupers and those likely to become paupers, persons suffering with dangerous, loathsome, and contagious diseases; epileptics, persons afflicted with tuberculosis, idiots, feeble-minded persons, polygamists, anarchists, immoral persons, and others of this character.
In the second place, what are known as alien contract laborers are prohibited from entering the United States, that is, persons who come under contract already entered into, to perform labor, whether skilled or unskilled. The law excluding this class was enacted in obedience to the demands of the union laborers of the United States, who did not wish to be subjected to competition with foreign laborers specially imported for the purpose. Actors, teachers, lecturers, and members of other professions are exempted from the law, and so are skilled laborers if domestic laborers of like kind are not available in the United States.
A third group of excluded classes are Chinese laborers, the immigration of whom was first prohibited in 1882.
A law of 1916 provides, with certain exceptions, that no alien shall be admitted unless he can read English or some other language or dialect. A law passed in 1921 limits the number of immigrants who may enter annually from each country, to 3 per cent of the number already in the United States, or a total of about 356,000.
There is now a head tax of eight dollars levied upon every immigrant who is admitted. Persons whose steamship passage has been paid by others or who have been otherwise assisted to come are not allowed to enter. When an immigrant has been denied admission by the commissioner of immigration at the port at which he has landed, he may take an appeal to a special board of inquiry. If the decision of this board is against him he may appeal to the United States commissioner-general of immigration, and finally to the secretary of the department of labor. If the final decision is against him, the steamship on which he sailed is required at its own expense to transport him to the port from which he sailed.
Quarantine.—In pursuance of the power to regulate foreign commerce, Congress has enacted a volume of legislation in regard to quarantine and medical inspection of ships and their passengers coming from foreign ports. In most instances inspections are made by the United States consul at the port from which the vessel sails, and a bill of health is furnished the master of the vessel, but in some Asiatic and South American ports regular medical inspectors are stationed. At various ports along the coast, national quarantine stations have been established at which inspections of incoming vessels are made and at which they may be detained if found to have on board persons suffering from dangerous contagious diseases.
Pure Food.—Congress has also provided for the inspection of foods imported from abroad. Whenever a vessel is found to have on board impure or adulterated foods or teas, it is forbidden to land the cargo or is allowed to land it only after certain conditions are complied with such as the change of labels to correspond with the actual contents of packages. In this way an attempt is made to protect the American consumer against impure and unwholesome food products shipped here from foreign ports.
Interstate Commerce has been interpreted to include the carriage of passengers from one state to another; the transportation of commodities of whatsoever character, including lottery tickets, obscene literature, and any other objects which may be the subject of transportation; and the transmission of ideas or information by telegraph or telephone from a point in one state to a point in another. In short, interstate commerce means not only transportation and traffic in articles but intercourse and communication by the modern devices for transmitting thought; and the power to prescribe the conditions under which such intercourse may be carried on across state lines belongs to Congress.[43] Congress controls also the coasting trade between parts of the same state and the traffic on all rivers which flow into the ocean or the Great Lakes and thus constitute highways of interstate or foreign commerce.
Immigration Station, Ellis Island, New York Harbor
Immigrants Ready to Start West
Power Retained by the States.—Nevertheless it is often difficult in a particular case to draw the line between acts which regulate interstate commerce and acts which merely affect it without regulating it. The Supreme Court in a long line of decisions has held that the states not only have complete power of control over all commerce originating and ending within their limits but that they may also enact legislation for the protection of the public health, safety, good order, and morals of their people even when such legislation affects commerce among the states, the only restriction being that such legislation must be reasonable and must not amount to a direct interference with interstate traffic. The right of the states in this respect is known as the police power—a power which is very extensive and of which they cannot be deprived by Congress. Thus they may enact reasonable quarantine laws forbidding the entrance into their territory of diseased persons from other states or the importation of diseased live stock. Likewise they may limit the speed of interstate trains running through their towns, may require railroads to provide gates at crossings, safety appliances for cars, and the like.
The Original Package Doctrine.—A state, however, prior to 1920, could not without the consent of Congress prohibit the importation of liquor in original packages into its territory from other states, although it might be a prohibition state.[44] But Congress itself, by an act passed in 1913, prohibited the transportation of intoxicating liquors into states having prohibition laws.
Likewise, the states cannot impose taxes on passengers passing through their territory bound for points in other states, or require interstate trains to stop at county seats, or impose taxes on telegraph messages sent to points in other states, or on bills of lading of freight destined to points in other states, or on goods intended for exportation, and so on.
Regulation of Interstate Railway Traffic.—For a long time Congress took no action toward regulating railway traffic among the states, thus leaving the railroads free to carry on their business as they pleased, regardless of the interest of the public whom they served. But with the enormous development of the railway system of the country gross evils began to creep in, in the form of excessive rates, discriminations, combinations for the suppression of competition, inadequate provision for the safety of passengers, etc., in consequence of which a widespread demand grew up for legislation bringing the railroads under governmental control. The outcome of this agitation was the interstate commerce act of 1887, the provisions of which have been amended and extended by several subsequent acts, notably the Elkins act of 1903, the railway rate law of 1906, and the interstate commerce law of 1910.
Interstate Commerce Commission.—The law of 1887 created an interstate commerce commission which now consists of eleven members appointed by the President and paid a salary of $12,000 a year each, which commission has general supervision of the execution of the several acts mentioned above. It hears complaints against the railroads, makes investigations upon petition, and to this end may summon witnesses and compel the production of papers and records, and conduct hearings. If, after an investigation, it finds that the law is being violated by a railroad company, it may request the proper federal authorities to institute a prosecution of the offending company, and the law requires that such a prosecution shall be made. For a long time the commission had no power to fix rates, but only the negative right to say that a given rate was unjust and unreasonable. But by the act of 1906 it was given the power, after a full hearing, to determine and prescribe just and reasonable maximum rates and charges, as well as to prescribe regulations for the conduct of railway traffic.
The Laws Now in Force prescribe that all railway rates and charges for carrying freight and passengers must be just and reasonable; that no rebates, drawbacks, or special rates shall be granted to particular shippers; that no discriminations shall be made as to rates or service to certain persons or places; that no free passes, with certain specified exceptions, shall be granted; that no greater charges shall be made for a "short haul" than for a "long haul"; that no railroads shall be allowed to transport commodities which they are engaged in producing, with certain exceptions; that competing railways shall not be allowed to pool their freight or earnings; that schedules showing rates, fares, and charges shall be published and kept open for inspection and cannot be changed except after thirty days' notice to the commission; that all railroads shall keep their accounts according to a uniform system prescribed by the commission; and that they shall make annually to the commission a full and complete report of their business and earnings.
An important extension of the interstate commerce act was made in 1906, when express and sleeping car companies, pipe lines used for transporting oil from one state to another, and telegraph, telephone, and cable companies engaged in sending messages from one state to another or to foreign countries, were brought under the operation of the law and their business subjected to the same conditions and restrictions as those applying to railroads. By an act of 1912 railroads were prohibited from owning, controlling, or having any interest in competing water carriers, and by an act of 1913 provision was made for preparing a valuation of all railroads in the United States.
Congress has also enacted laws requiring interstate railroads to equip their cars with automatic couplers and other safety appliances, fixing the liability of railway employers for injuries sustained by railway employees, encouraging the arbitration of railway strikes, and establishing an eight-hour work day on railways (1916). An act excluding the products of child labor from interstate commerce (1916) was declared unconstitutional by the Supreme Court.
In pursuance of acts of Congress passed in 1916 and 1918, the President in 1918 took over the control of railroads, telegraphs, and telephones for the duration of the war.
Federal Anti-trust Legislation.—The commerce clause of the Constitution has also furnished the authority for some important congressional legislation against what are popularly known as "trusts," that is, combinations of corporations or business associations formed to avoid the wastes of competition and to secure economy of management. But the control of the supply of a commodity means the elimination of competition and usually the maintenance of high rates to the injury of consumers. For a long time the greater part of the business of the country was conducted by individuals, companies, or corporations, and the advantages of competition were preserved to the public, but in the course of the economic development of the country, corporations began to consolidate for the reasons stated, with the result that the supply of many commodities came to be controlled by single combinations. At first the states undertook to deal with the problem by passing anti-"trust" laws, but the business of so many of the more powerful organizations was interstate in character that state legislation was inadequate to deal with them.
The Sherman Anti-"trust" Law.—Finally, in obedience to a widespread popular demand, Congress took action in 1890 by passing what is popularly known as the Sherman anti-"trust" act to protect trade and commerce among the states against unlawful restraint and monopolies. This act declared that every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the states or with foreign nations was illegal, and it prescribed appropriate penalties for violations thereof. This law, however, applies only to "trusts" which are in restraint of trade among the states or with foreign nations. It has no application to those whose activities are confined entirely within the boundaries of a single state; with such "trusts" the states alone have the power to deal.
In pursuance of the act of 1890, prosecutions have been instituted in the federal courts against a large number of "trusts," and some of them have been broken up, but the larger number have escaped. In 1911, for example, the Supreme Court decided that the Standard Oil and tobacco "trusts" were illegal, and their dissolution was decreed.
The Clayton Anti-"trust" Act.—In 1914 Congress passed another important act directed against combinations in restraint of trade. In brief, it prohibits price discriminations among purchasers, exclusive trade agreements between manufacturers and retailers, the holding of the stock of one corporation by another, and interlocking directorates. Like the other anti-"trust" acts it applies, of course, only to persons or corporations engaged in interstate commerce or trade. To enforce the act a federal trade commission was created. It consists of five members appointed by the President, at a salary of $10,000 each.
Federal Pure Food Legislation.—The commerce clause of the Constitution is also the source of some important legislation designed to protect the public against impure, unwholesome, and adulterated foods produced in the United States. We have already called attention to the legislation of Congress against the importation of impure foods, and teas from abroad. Still more recently Congress passed an interstate pure food law prohibiting the transportation among the states and territories of any food products which are adulterated or which contain foreign substances not indicated in the labels. The law also provides for the fixing of a standard of pure foods and other products transported from one state to another or intended for interstate transportation, and provides that they must come up to the standard prescribed.
The Meat Inspection Law.—To protect the public against unwholesome meat products, Congress enacted in 1891 a law which was strengthened in important particulars in 1906, providing for the inspection of slaughtering houses whose products are intended for interstate commerce. The law requires the registration of all establishments engaged in slaughtering animals the products of which are to be shipped into other states or are intended for export. Each is given a number, and federal inspectors are assigned to inspect the animals intended for slaughter, to inspect their carcasses in certain cases, and to see that the business of slaughtering is conducted under clean and wholesome conditions. Animals found suffering with certain diseases are not allowed to be slaughtered for food purposes, and meat discovered to be unwholesome must be rejected. Supervision is also exercised over the processes of packing and canning, and there are detailed regulations in regard to labeling.
References. Andrews, Manual of the Constitution, pp. 89-95. Beard, American Government, ch. xix. Cooley, Principles of Constitutional Law, pp. 66-88. Hart, Actual Government, ch. xxiv. Hinsdale, American Government, secs. 374-380. Johnson, Railway Transportation, ch. xxvi.
Illustrative Material.—Annual reports of the Interstate Commerce Commission, of the Department of Agriculture, of the Attorney-General, of the Commissioner of Navigation, of the Commissioner of Immigration, and of the Public Health and Marine Hospital Service.
Research Questions
1. What were the reasons for giving Congress control over foreign and interstate commerce?
2. Why did the delegates from the Southern states oppose giving this power to Congress?
3. What is meant by the "original package" doctrine?
4. Why should a railroad company be prohibited from granting rebates? For charging more for a "short haul" than for a "long haul"? From transporting the products of its own mines and manufactories? From pooling its freight or earnings?
5. What are the arguments for and against granting government subsidies for the upbuilding of the merchant marine?
6. What have been the principal reasons for the decline of the American carrying trade?
7. What is the amount of money annually appropriated for improving the rivers and harbors of the country?
8. How has the commerce clause of the Constitution been the source of important extensions of the power of the national government? Mention some important recent acts of Congress that have been passed in pursuance of this clause.
9. Should Congress, in your judgment, impose greater restrictions upon immigration than it now imposes?
10. Do you think Congress should have power to regulate the business of life insurance? To regulate marriage and divorce?
11. Is the policy of governmental regulation of railroads preferable to governmental ownership? Give your reasons.