1. © 2007 by West Legal Studies in Business / A Division of Thomson Learning CHAPTER 4 Constitutional Authority to Regulate Business

2. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 2 The Constitutional Powers of Government The U.S. Constitution established a federal form of government, in which government powers are shared by the national government and the state governments. Separation of Powers: At the national level, government powers are divided among the legislative, executive, and judicial branches.

3. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 3 The Commerce Clause The breadth of the commerce clause: –The commerce clause expressly permits Congress to regulate commerce. –Over time, courts expansively interpreted this clause, and today the commerce power authorizes the national government, at least theoretically, to regulate virtually every commercial enterprise in the United States.

4. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 4 The Commerce Clause The regulatory powers of the states: –Under their police powers, state governments may regulate private activities to protect or promote the public order, health, safety, morals, and general welfare.

5. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 5 The Commerce Clause If state regulations substantially interfere with interstate commerce, they will be held to violate the commerce clause of the U.S. Constitution. –Case 4.1 Heart of Atlanta Motel v. United States (1964). Dormant Commerce Clause. –Case 4.2 MaryCLE, LLC v. First Choice Internet, Inc. (2006).

6. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 6 The Supremacy Clause The U.S. Constitution provides that the Constitution, laws, and treaties of the United States are “the supreme law of the land.” Whenever a state law directly conflicts with a federal law, the state law is rendered invalid. Preemption occurs when Congress chooses to act exclusively in a concurrent area.

7. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 7 The Taxing and Spending Powers Taxing power: “Power to lay and collect taxes…” If a tax measure bears some reasonable relationship to revenue production, it is generally held to be within the taxing power. Spending power: Power “to pay the debts and provide for the common defense and general welfare…” Congress can spend revenues not only to carry out its enumerated powers but also to promote other objectives so long as it does not violate the Bill of Rights.

8. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 8 Business and the Bill of Rights The Bill of Rights, which consists of the first ten amendments to the U.S. Constitution, was adopted in 1791 and embodies a series of protections for individuals, and in most cases, business entities, against types of interference by the federal government.

9. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 9 Freedoms guaranteed by the Bill of Rights included the following: Freedom of Speech Freedom from Compelled Self-Incrimination Freedom from Unreasonable Searches and Seizures Freedom of Religion Business and the Bill of Rights

10. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 10 Freedom of Speech Freedom of speech is the most prized American freedom. Symbolic Speech. –Case 4.3 Hodgkins v. Peterson (2004). Other types of speech protected under the First Amendment include: –Political speech. –Commercial speech (advertising).

11. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 11 Online Obscenity “Obscene” speech is not protected by the First Amendment. However, what standard are we to use when judging whether something is or is not “obscene?” The Communications Decency Act (CDA) made the transmission of “indecent” or “patently offensive” speech or images to minors a criminal offense. COPA: struck down. CIPA: library filtering did not violate the First Amendment.

12. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 12 Freedom of Religion Under the First Amendment, the government may neither: –Establish any religion (the establishment clause). –Prohibit the free exercise of religion (the free exercise clause).

13. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 13 Due Process and Equal Protection Two other constitutional guaranties of great significance to Americans are the:  Due process clause contained in both the Fifth and Fourteenth Amendments.  Equal protection clause of the Fourteenth Amendment.

14. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 14 Due Process Both the Fifth and the Fourteenth Amendments provide that no person shall be deprived of “life, liberty, or property, without due process of law.” This due process clause has two components: –Procedural due process. –Substantive due process.

15. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 15 Procedural v. Substantive Due Process Procedural due process: Requires that any government decision to take life, liberty, or property must be made fairly, using fair procedures. Substantive due process: Focuses on the content of legislation. Generally, a law violates substantive due process unless the law promotes a compelling state interest, such as public safety.

16. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 16 Equal Protection Under the Fourteenth Amendment, a state may not “deny to any person within its jurisdiction the equal protection of the laws.” A law or action that limits the liberty of some person, but not others, may violate the Equal Protection clause. –Such a law may be deemed valid, however, if there is a rational basis for the discriminatory treatment of a given group or if the law substantially relates to an important government objective.

17. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 17 Depending on the classification courts apply different types of ‘scrutiny’ to determine whether the law violates equal protection clause: –Minimal Scrutiny (“Rational Basis”). –Intermediate Scrutiny (cases involving gender). –Strict Scrutiny (fundamental rights). Equal Protection

18. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 18 Privacy Rights There is no specific guarantee of a right to privacy in the Constitution, but such a right has been derived from guarantees found in other constitutional amendments, such as the: –First Amendment. –Third Amendment. –Fourth Amendment. –Fifth Amendment. –Ninth Amendment.

19. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 19 Federal Statutes Protecting Privacy Rights. –Health Insurance Portability and Accountability Act (HIPAA) of 1996 defines how health information can be used or disclosed. –Driver’s Privacy Protection Act of 1994. Did Congress exceed its authority? Privacy Rights