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60.

CHAPTER IV.

THE FEDERAL POWER OF REGULATION IN INTERSTATE

COMMERCE.

No judicial formulation of extent of power.

61. The supremacy of federal regulation.

62. Federal regulation of employes performing both intrastate and interstate service.

63. The federal regulating power and state corporations.

64. Limitations upon the federal authority in interstate commerce. 65. Prohibition as a means of regulation.

66.

67.

Regulation of commerce through the taxing power.

The federal power of granting corporate charters.

68. Federal incorporation as a means in the exercise of the commerce power.

69.

Relation of the states to federal corporations.

70. The requirement of federal franchise for business corporations in interstate commerce.

71. The development of the latent federal power in the regulation of commerce.

60. No judicial formulation of extent of power.-The exercise of the federal power, as new conditions develop in interstate and foreign commerce, does not require any "new nationalism" in the expansion of the constitution by amendment or judicial construction. Fortunately the framers of the constitution wisely stated the federal power in language so broad and comprehensive, that it is as clearly applicable to the complex conditions and agencies of the commerce of the present day as was the simple conditions and agencies when the constitution was adopted.1 The constitution of the United States marks only the great outlines of power to be possessed by the government without attempting to enumerate in detail and specify each and every one. This great principle of constitutional law is happily illustrated in the simple and comprehensive phrase of the commerce clause.

Until recent years we were compelled to rely, in determining the possible limits of the federal power in interstate commerce, upon the language of the court in deciding the limits of the authority of the states; but the activity of federal legislation of late has presented directly the question of the authority of congress.

1 See U. S. v. Debs, Sec. 1, supra. 2 Marshall, C. J., McCullough v.

Maryland, 4 Wheat. 316, 4 L. Ed. 579.

The supreme court has frequently declined to formulate a general rule as to the precise line where the power of congress begins and the power of the state ends. It was on this question of the conflict between the admitted powers of the federal government and the states that Chief Justice Marshall said that the power and the restriction on it, though quite distinguishable, when they did not approach each other, may well, like the intervening colors between white and black, approach so nearly as to perplex the understanding, as colors perplex the vision in making the distinction between them."

This extent of the federal power was directly presented in the Lottery cases, where there was a close division of the court; but it was said in the prevailing opinion that the whole subject was too important, and the question suggested by its consideration too difficult of solution to justify any attempt to lay down a rule for determining in advance what legislation could be enacted under the commerce clause of the constitution.

§ 61. The supremacy of federal regulation.-While no general judicial rule as to the extent of the federal power in interstate commerce has been formulated, one principle has been distinctly declared by the supreme court, and that is the supremacy of the federal power over state legislation where exercised as appropriate means in the regulation of interstate

commerce.

This supremacy is illustrated when congress acts in that class of cases, wherein the court has adjudged that the state have a concurrent power of legislation in the non-action of congress; that is, where congress has exercised its power of regulation by non-action. There is thus a wide legislative discretion in congress to determine when a subject is capable of uniform legislation in interstate commerce; and when it is so determined, all state legislation in respect to such matters, inconsistent therewith, ceases to have force, whether formally abrogated or not, and the regulations prescribed by congress alone control. It is for the supreme court to determine, when a question arises, as to whether a state law is thus abrogated 2 Brown v. Maryland, 12 Wheat. 419, 6 L. Ed. 678 (1827).

1 Welton v. Missouri, 91 U. S. 275, 23 L. Ed. 347 (1875); Hall v. DeCuer, 95 U. S. 485, 24 L. Ed. 547 (1876).

8 See Lottery Cases, supra.

by the exercise of the power by congress. The power thus exercised by the states will in this way be suspended until the national control is abolished by congress, and the subject is thereby, by the non-action of congress, again left under the control of the states.1

As repeatedly declared by the supreme court the power to regulate commerce is vested in congress as absolutely as it would be in a single government, and is limited only by the constitution. The paramount authority of congress, when it legislates in interstate commerce, is recognized by the decisions of the state courts in declaring the statutes of their own states abrogated by the action of congress.3

§ 62. Federal regulation of employes performing both intrastate and interstate service.-Congress cannot, as was determined in the first Employers' Liability case, legislate directly concerning the liability of railroads to their employes, engaged in intrastate traffic, but it is no objection to legislation enacted for the protection of interstate employes, that such employes owing to the conditions of railroad service, also rendered service in intrastate operations. Thus, it was urged against the constitutionality of the Hours of Service Law of 1907, limiting the hours of service of interstate employes, that the interstate and the intrastate operations of the interstate railroads were so interwoven, that it was utterly impracticable to divide their employes in such manner, that the duties of those, who are engaged in connection with interstate commerce, shall be confined to that commerce exclusively. But the supreme court said that congress could not be thus denied the effective exercise of its constitutional authority. The length of hours of service of railroad employes had a direct relation to the efficiency of the human agencies, upon which protection to life and property of passengers as well as employes necessarily depends.. If then it is assumed

1 Reid v. Colorado, 187 U. S. 137, 47 L. Ed. 108 (1902).

2 Lottery Cases, supra. This supremacy of the Federal power was also illustrated in the decision by the supreme court (October, 1911) in the case of Southern Railway, that the Safety Act was applicable to all equipment of an interstate railroad whether

at the time carrying state or interstate traffic. See infra, § 508.

8 See supra, § 35, as to effect of Hours of Service Act in Wisconsin and Missouri, and Employer's Liability Act in Arkansas and Georgia.

4 B. & O. R. R. Co. v. Interstate Commerce Commission, 220 U. S. 94, 55 L. Ed. (1911). In this

that congress can limit the hours of labor of employes engaged in interstate transportation, it followed that this power could not be defeated by prolonging the period of service, through other requirements of the carrier, or by the commanding of duties relating to interstate and intrastate operations. This principle that the federal authority, when appropriately exercised, is not impaired by incidental application of such regulation to intrastate service, is seen to be of far reaching importance when the complex conditions of railroad service are considered. An interstate railroad system is operated as a unit irrespective of state boundaries, has but one corps of officers and employes, and one equipment, and its operating employes are engaged in whatever capacity the exigencies of the service required. This was forcibly illustrated in the unanimous opinion of the supreme court, holding, without dissent, that congress could penalize the absence of required safety appliances on cars of an interstate highway, whether used in moving state or interstate traffic, the court saying that the menace was not merely to that car and train but to others.2

1

63. The federal regulating power and state corporations. While the regulating power over interstate commerce is vested in congress, transportation agencies whereby that commerce is carried on, railroad, express, telegraph and telephone companies are incorporated or organized under state laws, so that congress has no visitorial or charter power over them. These state organizations are, however, the agencies recognized and adopted by congress for carrying on interstate commerce, and the power of regulation is as effective over railroad operations, as if the corporations were organized by the federal government.

The federal government has also controlled and terminated the corporate life of state corporations for violation of federal law. In the Northern Securities case, a holding com

case the court sustained the order of the Commission of March 3, 1908, requiring monthly reports under oath, showing the instances where employes subject to the act had been on duty for a longer period than that allowed.

1 This principle of federal supremacy has been discussed in

connection with regulation of state rates in cases of alleged interference with interstate commerce. See infra, Chapter VI.

2 See Southern R. Co. v. U. S., 32 Sup. Ct. Rep. 2 (Oct. 30, 1911), affirming 164 Fed. 347. See infra, § 508.

& Infra, § 76.

2

eral law. In the Northern Securities case, a holding company organized under the laws of New Jersey, with the charter power to hold and acquire the stocks of other companies, was adjudged an unlawful combination in restraint of interstate commerce in its holding of the stocks of competing interstate railways, and its dissolution was decreed and enforced by the federal courts.

The prohibitions and penalities of the Anti-Trust Act have been enforced against state business corporations engaged in interstate commerce,' and corporations offending against that act have been dissolved by the federal courts, as unlawful combinations. The production of the corporate books and papers of state corporations before federal grand juries and other investigating bodies has been enforced, and congress has imposed an excise tax upon the doing of business as a corporation under state laws.3

Although the power of regulation of interstate business has been thus effectively exercised over interstate railroad operations, the control of the capitalization of the railroads and other corporations acting as federal agencies in interstate commerce remains in the states whereunder they are incorporated. It has been urged that the control by the federal government of interstate rates cannot be effective, without the control of the stocks and bond issues of the carriers; and that the exercise of the state authority in limiting such securities issued. by an interstate railroad may interfere with and embarrass interstate commerce, when the issue of such securities is essential for raising funds for necessary facilities in interstate traffic. In other words such a control may concern not only the state of incorporation, but all the states in which the railroad is operated, and therefore may become a subject of federal and not state control.*

1 Infra, chapter V.

2 Infra, § 348.

8 Infra, § 66.

4 Under section 16 of the Commerce Court Act of June 18, 1910, the president appointed a commission of which President Arthur T. Hadley of Yale University was chairman, to investigate questions pertaining to the issu

ance of stocks and bonds by railroad corporations subject to the provisions of the act to regulate commerce, and the power of congress to regulate or affect the same." See report of this commission transmitted by the president to congress, Dec. 1911, Appendix, supra.

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