Copyright © 2004 by Prentice-Hall. All rights reserved. PowerPoint Slides to Accompany BUSINESS LAW E-Commerce and Digital Law International Law and Ethics 5 th Edition by Henry R. Cheeseman Slides developed by Les Wiletzky Wiletzky and Associates, Puyallup, WA Chapter 3 Constitutional Authority to Regulate Business Chapter 3 Constitutional Authority to Regulate Business

3 - 2Copyright © 2004 by Prentice-Hall. All rights reserved. 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.

3 - 3Copyright © 2004 by Prentice-Hall. All rights reserved. Basic Constitutional Concepts Federalism and Delegated Powers Separation of Powers Checks and Balances

3 - 4Copyright © 2004 by Prentice-Hall. All rights reserved. Federalism and Delegated Powers  Federalism is the U.S. form of government.  The federal government and the 50 state governments share powers.  Enumerated powers – certain powers delegated to the federal government by the states.

3 - 5Copyright © 2004 by Prentice-Hall. All rights reserved. Federalism (continued) Any powers that are not specifically delegated to the federal government by the Constitution are reserved to the states.

3 - 6Copyright © 2004 by Prentice-Hall. All rights reserved. The Doctrine of Separation of Powers  Article I of the Constitution establishes the legislative branch of government. The part of the government that consists of Congress: The part of the government that consists of Congress:  the Senate  the House of Representatives

3 - 7Copyright © 2004 by Prentice-Hall. All rights reserved. The Doctrine of Separation of Powers (continued)  Article II of the Constitution establishes the executive branch of government. The part of the government that consists of: The part of the government that consists of:  the President  the Vice President

3 - 8Copyright © 2004 by Prentice-Hall. All rights reserved. The Doctrine of Separation of Powers (continued)  Article III of the Constitution establishes the judicial branch of the government. The part of the government that consists of: The part of the government that consists of:  the Supreme Court  other federal courts that may be created by the Congress

3 - 9Copyright © 2004 by Prentice-Hall. All rights reserved. Checks and Balances: Certain checks and balances are built into the constitution to ensure that no one branch of the federal government becomes too powerful.

3 - 10Copyright © 2004 by Prentice-Hall. All rights reserved. Some of the checks and balances in our system of government are: 1. The judicial branch has authority to examine the acts of the other two branches of government and determine whether these acts are constitutional.

3 - 11Copyright © 2004 by Prentice-Hall. All rights reserved. Some of the checks and balances in our system of government are: (continued) 2. The executive branch can enter into treaties with foreign governments only with the advice and consent of the Senate.

3 - 12Copyright © 2004 by Prentice-Hall. All rights reserved. Some of the checks and balances in our system of government are: (continued) 3. The legislative branch is authorized to create federal courts and determine their jurisdiction and to enact statutes that change judicially made law.

3 - 13Copyright © 2004 by Prentice-Hall. All rights reserved. The Supremacy Clause  Supremacy 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. State and local laws that conflict with valid federal law are unconstitutional.

3 - 14Copyright © 2004 by Prentice-Hall. All rights reserved. Preemption Doctrine The concept that federal law takes precedence over state or local law.

3 - 15Copyright © 2004 by Prentice-Hall. All rights reserved. The 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.”

3 - 16Copyright © 2004 by Prentice-Hall. All rights reserved. The Commerce Clause (continued)  Because this clause authorizes the federal government to regulate commerce, it has a greater impact on business than any other provision in the Constitution.

3 - 17Copyright © 2004 by Prentice-Hall. All rights reserved. Federal Regulation of Interstate Commerce  The Commerce Clause also gives the federal government the authority to regulate interstate commerce. Commerce that moves between states or that affects commerce between states. Commerce that moves between states or that affects commerce between states.

3 - 18Copyright © 2004 by Prentice-Hall. All rights reserved. Federal Regulation of Interstate Commerce (continued)  The federal government may regulate: Interstate commerce that crosses state borders. Interstate commerce that crosses state borders. Intrastate commerce that affects interstate commerce. Intrastate commerce that affects interstate commerce.

3 - 19Copyright © 2004 by Prentice-Hall. All rights reserved. State and Local Government Regulation of Business – State “Police Power”  Police 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 commerce.

3 - 20Copyright © 2004 by Prentice-Hall. All rights reserved. State and Local Government Regulation of Business (continued)  State and local governments may regulate: Interstate commerce Interstate commerce Intrastate commerce not exclusively regulated by the federal government. Intrastate 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.

3 - 21Copyright © 2004 by Prentice-Hall. All rights reserved. Example: Federal Telecommunications Act Preempts State and Local Laws  The Federal Telecommunications Act of 1996 (FTA) was enacted to increase competition within the telecommunications industry.  The FTA prohibits state and local governments from blocking freedom of entry into the growing telecommunications industry.

3 - 22Copyright © 2004 by Prentice-Hall. All rights reserved. Example: Federal Telecommunications Act Preempts State and Local Laws (continued)  Because the FTA is federal law, under the Supremacy Clause of the U.S. Constitution, it preempts any state or local law that conflicts with its provisions.

3 - 23Copyright © 2004 by Prentice-Hall. All rights reserved. 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.

3 - 24Copyright © 2004 by Prentice-Hall. All rights reserved. International Law: The Foreign Commerce Clause (continued)  Direct and indirect regulation of foreign commerce by state or local governments that discriminates against foreign commerce violates the Foreign Commerce Clause. It is therefore unconstitutional. It is therefore unconstitutional.

3 - 25Copyright © 2004 by Prentice-Hall. All rights reserved. The Bill of Rights and Business The Bill of Rights provides certain freedoms and protections to individuals and businesses.

3 - 26Copyright © 2004 by Prentice-Hall. All rights reserved. The Bill of Rights and Business (continued)  Freedom of Speech – the right to engage in oral, written, and symbolic speech. Fully Protected Speech Fully Protected Speech Limited Protected Speech Limited Protected Speech Offensive Speech Offensive Speech Commercial Speech Commercial Speech Unprotected Speech Unprotected Speech

3 - 27Copyright © 2004 by Prentice-Hall. All rights reserved. The Bill of Rights and Business (continued) Freedom of Religion – the U.S. Constitution requires federal, state, and local governments to be neutral toward religion.

3 - 28Copyright © 2004 by Prentice-Hall. All rights reserved. The Bill of Rights and Business (continued)  Freedom of Religion (continued) The Establishment Clause – a clause to the First Amendment that prohibits the government from either establishing a state religion or promoting one religion over another. The Establishment Clause – a clause to the First Amendment that prohibits the government from either establishing a state religion or promoting one religion over another. The Free Exercise Clause – a clause to the First Amendment that prohibits the government from interfering with the free exercise of religion. The Free Exercise Clause – a clause to the First Amendment that prohibits the government from interfering with the free exercise of religion.

3 - 29Copyright © 2004 by Prentice-Hall. All rights reserved. Other Constitutional Clauses and Business  Fourteenth Amendment – was added to the U.S. Constitution in The provisions of the Fourteenth Amendment prohibit discriminatory and unfair action by the government. The provisions of the Fourteenth Amendment prohibit discriminatory and unfair action by the government.

3 - 30Copyright © 2004 by Prentice-Hall. All rights reserved. Other Constitutional Clauses and Business (continued)  Fourteenth Amendment (continued) Three clauses have important implications for business: Three clauses have important implications for business:  Equal Protection Clause  Due Process Clause  Privileges and Immunities Clause

3 - 31Copyright © 2004 by Prentice-Hall. All rights reserved. The Equal Protection Clause  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.

3 - 32Copyright © 2004 by Prentice-Hall. All rights reserved. The Equal Protection Clause (continued)  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.

3 - 33Copyright © 2004 by Prentice-Hall. All rights reserved. The Equal Protection Clause (continued)  The Supreme Court has adopted three different standards for reviewing equal protection cases. Strict Scrutiny Test – applied to classifications based on race. Strict Scrutiny Test – applied to classifications based on race. Intermediate Scrutiny Test – applied to classifications based on protected classes other than race (e.g., sex or age). Intermediate Scrutiny Test – applied to classifications based on protected classes other than race (e.g., sex or age). Rational Basis Test – applied to classifications not involving a suspect or protected class. Rational Basis Test – applied to classifications not involving a suspect or protected class.

3 - 34Copyright © 2004 by Prentice-Hall. All rights reserved. Due Process Clause  The Fifth and Fourteenth Amendments both contain a Due Process Clause.  These clauses provide that no person shall be deprived of “life, liberty, or property” without due process of the law.

3 - 35Copyright © 2004 by Prentice-Hall. All rights reserved. Due Process Clause (continued)  Fifth Amendment Due Process Clause Applies to federal government action Applies to federal government action  Fourteenth Amendment Due Process Clause Applies to state and local government action Applies to state and local government action

3 - 36Copyright © 2004 by Prentice-Hall. All rights reserved. Due Process Clause (continued) There are two types of due process: 1. Substantive Due Process Requires government laws to be clear and not overly broad. Requires government laws to be clear and not overly broad. The test is whether a reasonable person could understand the law. The test is whether a reasonable person could understand the law.

3 - 37Copyright © 2004 by Prentice-Hall. All rights reserved. Due Process Clause (continued) There are two types of due process: (continued) 2. Procedural 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. Requires the government to give a person proper notice and hearing before depriving that person of his or her life, liberty, or property.

3 - 38Copyright © 2004 by Prentice-Hall. All rights reserved. The Privileges and Immunities Clause  Article IV of the Constitution and the Fourteenth Amendment contain a Privileges 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. Corporations are not protected.