Defending Economic Liberty

April 2000

Defending Economic Liberty: Part Two

By Dana Berliner

Last issue, we discussed the three claims that we use most commonly in our economic liberty cases: the equal protection, due process, and privileges or immunities clauses of the Fourteenth Amendment. In this issue, we explain two other challenges that IJ is using for the first time in our newest economic liberty case challenging New York’s restrictions on Internet and out-of-state wine sales. (See page 6.) Both the Commerce Clause and the Privileges and Immunities Clause were intended to prevent exactly what New York is doing-discriminating against businesses from other states.

The Congress shall have Power to regulate Commerce among the several States. U.S. Constitution Article I. Section 8. The Commerce Clause of the Constitution gave Congress the right to regulate interstate commerce. Its purpose was to give the new, federal government the ability to oversee relations between the states and to prevent each state acting, as it had before the Constitution, like its own tiny country. But what was intended to be a constitutional provision to preserve peace and harmony among the states has instead become the major justification for federal government excesses. In perhaps the most notorious case, the U.S. Supreme Court found that Congress could regulate a tiny patch of wheat in one state, on the grounds that other wheat traveled in interstate commerce. In recent years, however, the Supreme Court has limited the ability of Congress to regulate activities that do not substantially affect interstate commerce. In the future, IJ may use the Commerce Clause to attack a federal regulation that impinges upon a very local business. Our brand-new New York wine case uses a different aspect of the Commerce Clause to advance the economic liberty of small wineries. Implied in the idea that Congress regulates interstate commerce is the rule that the states may not regulate interstate commerce. That rule is referred to by courts as the “dormant” or “negative” commerce clause. New York and other states have laws that make it illegal for out-of-state wineries to sell or advertise wine directly to New York consumers, even though New York wineries engage in such sales. Because states may not regulate interstate commerce, we are challenging New York’s policies under the dormant commerce clause. Moreover, as Internet shopping becomes more and more popular, dormant commerce clause violations by state regulators trying to protect local businesses are bound to increase. And IJ will be there to fight these unconstitutional regulations.

The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States. U.S. Constitution Article IV, Section 2.

The Privileges and Immunities Clause (not to be confused with the Privileges or Immunities Clause of the Fourteenth Amendment) also prohibits states from discriminating against out-of-state businesses. Our wine case alleges that New York’s laws violate this part of the Constitution by setting up a system that discriminates against out-of-state businesses. There are so many parts of the Constitution designed to protect economic liberty that we just couldn’t squeeze them all into these two issues, so look in our next newsletter for more tools that IJ plans to use in defending the right of entrepreneurs to earn an honest living.

Dana Berliner is a senior attorney for the Institute for Justice.