A Note on the “Evolved Substantial Effect” Test in Finding Constitutionality Under the Commerce Clause & Thoughts on a Better Approach Applicable to the Existing Regime

A Note on the “Evolved Substantial Effect” Test in Finding Constitutionality Under the Commerce Clause & Thoughts on a Better Approach Applicable to the Existing Regime

***** Draft – expect to be updated frequently ******

On their surfaces, the U.S. Supreme Court (“Court”) has developed two concurring/parallel sets of rules in determining whether a regulation made by the Congress should be found constitutional on the basis of the Commerce Clause.  However, as a mater of status quo, the two sets of rules are legally co-existing, and it seems the application of them would be highly subject to the case facts – namely, whether the regulation to be assessed is more similar to the cases under the “rational basis” test or is more comparable to the cases ruled under the “three categories rule” as well as its sub-rule of “substantial effects to the interstates commerce”.

This note will explain that the “two” sets of rules are not exclusive to each other. They are co-existing and became mutually admitted after the conclusion of Gonzales v. Raich, 545 U.S. 1 (2005).  For easier discussion, I would name it a rule of “evolved substantial effect”.  Having said that, due to its inductive nature (as opposed to a rule developed with a deductive logic), the tests set out in this evolved rule remain to be further improved and strengthened, or the debates on constitutionality of any new federal legislation could be heavily affected by the “invented facts” that are just for the purpose of judicial review, which could be prepared by both supporters and opponents of a congress regulation to advance their argument of analogy or distinction.

  1. The “rational basis” rules

The rational basis test was established in Wickard v. Filburn, 317 U.S. 111, and was reiterated by Justice Breyer in her dissenting opinion in United States v. Lopez, 514 U.S. 549 (1995).  Briefly, the court shall consider three factors in assessing if a local activity can be regulated by the Congress (underlines added):

1.1. the Congress’s power to “regulate Commerce . . . among the several States,” U. S. Const., Art. I, § 8, cl. 3, “encompasses the power to regulate local activities insofar as they significantly affect interstate commerce.”

1.2. “in determining whether a local activity will likely have a significant effect upon interstate commerce, a court must consider, not the effect of an individual act (a single instance of gun possession), but rather the cumulative effect of all similar instances…”

1.3. “Courts must give Congress a degree of leeway in determining the existence of a significant factual connection between the regulated activity and interstate commerce…The traditional words “rational basis” capture this leeway. . . Thus, the specific question before us, as the Court recognizes, is not whether the “regulated activity sufficiently affected interstate commerce,” but, rather, whether Congress could have had “a rational basis” for so concluding.

In Wickard, the term “substantial effect” or its synonyms are used by the Court in the following contexts (underlines added):

  • “In the Shreveport Rate Cases, 234 U.S. 342, the Court … found federal intervention constitutionally authorized because of matters having such a close and substantial relationto interstate traffic that the control is essential or appropriate to the security of that traffic, to the efficiency of the interstate service, and to the maintenance of conditions under which interstate commerce may be conducted upon fair terms and without molestation or hindrance.”
  • “[E]ven if appellee’s activity be local, and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effecton interstate commerce, and this irrespective of whether such effect is what might at some earlier time have been defined as “direct” or “indirect.””
  • “It can hardly be denied that a factor of such volume and variability as homeconsumed wheat would have a substantial influenceon price and market conditions.”
  • “The commerce power…extends to those activities intrastate which so affect interstate commerce” (citing United States v. Wrightwood Dairy Co., 315 U.S. 110, 119)
  • “This record leaves us in no doubt that Congress may properly have considered that wheat consumed on the farm where grown, if wholly outside the scheme of regulation, would have a substantial effectin defeating and obstructing its purpose to stimulate trade therein at increased prices.”

In light of the above, it is fair to say that “substantial effect to the interstate commerce” had already been a test in assessing the constitutionality of Congress’s regulations before the Court’s holding in Lopez.

  1. the “three categories of activities” rule developed in Lopez

Lopez established a rule of “three categories of activities” that Congress may regulate under its commerce power: “First, Congress may regulate the use of the channels of interstate commerce. . . . Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities. . . Finally, Congress’ commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce . . ., i.e., those activities that substantially affect interstate commerce.” [citation to be added]

The above reiteration clearly stated that the “substantial effect” test existed prior to the Lopez.  What the Court did in Lopez was to further specify the factors to be considered in finding the substantial effect.  In other words, Lopez did not invent a “substantial effect” test for finding the constitutionality of a regulation but just specified what factors may lead to the finding of “substantial effect.” These factors are set out below:

  1. Factors/means in finding “substantial effects”

Prior to Lopez, the “aggregation doctrine”, a.k.a “the cumulative effect of all similar instances”, has been accepted by Wickard as a powerful means (in favor of Congress) in finding “substantial effects” to the interstate commerce.  Namely, the “aggregation doctrine” has not been a means to establish the “rational basis” in Wickard, but a way to establish the substantial effect or connection to the interstate commerce. Then because there was a substantial effect to the interstate commerce, the congress’s regulation was found being based on a rational basis.

Apart from the aggregation doctrine, Lopez and Morrison provided offered further elements be considered in determining the substantial effects.  They are:

(a) whether the regulated activity is an economic activity;

(b) has the congress’s regulation been supported with sufficient factual findings during the process of legislation;

(c) whether the regulation in question contains jurisdictional element; and

(d) whether the regulated activities are traditionally subject to the state’s power.

Moreover, for the above element (b) of “congress’s findings that can support the regulation”, the court shall consider whether the link between the regulated activity and the alleged substantial effect was attenuated (because of their remote connection). [Citation to be added]

  1. The approach of Gonzalez

In Gonzales, the Court held that the prohibition of homegrown and consumption of marijuana under the Controlled Substances Act (“CSA”) was constitutional and was within the Congress’s power under the Commerce Clause.  The Court based it holding on its finding that the case fact in Gonzalez is comparable to the homegrown of wheat in Wickard.  Namely, (1) the subject matters (homegrown wheat or marijuana) in the two cases are both economic activities; (2) the aggregation of homegrown marijuana (by Raich and others similarly situated) has a significant effect on Congress’s capability to eliminate the national illegal marijuana market. [Citation to be added] Furthermore, the Court noted that “we need not determine whether respondents’ activities, taken in the aggregate, substantially affect interstate commerce in factbut only whether a “rational basis” exists for so concluding. . .” (underlines added) [Citation to be added]

On its surface, it appears that Gonzales has “returned” to the earlier rules applied by the Court prior to Lopez.  However, the Gonzales has not abandoned or denied the rules established in Lopez and Morrison.  Instead, the Court employed a legal technique of distinction.  Namely, it distinguished the facts in Gonzalez from those in Lopez and Morrison: “[u]nlike those at issue in Lopez and Morrison, the activities regulated by the CSA are quintessentially economic…Because the CSA is a statute that directly regulates economic, commercial activity, our opinion in Morrison casts no doubt on its constitutionality.” This approach enabled the co-existence of the rules established by Lopez and the rules applied prior to Lopez.

  1. The evolved substantial effect rule

Leaving aside the first two categories of activities that are relatively clearer in finding Congress’s constitutionality in regulating interstate activities, this section summarizes the “evolved substantial effect” rule based on the above discussion.

First Step: the Congress is authorized to regulate intrastate activities that (1) has the economic nature, and (2) may substantially affect the interstate commerce.  If there is no economic nature, then there is no need to consider the next step analysis.

Second Step: in order to find the “substantial effect”, the following factors need to be considered: (1) the economic nature of the regulated activity, (2) the Congress’s findings in supporting its claim of substantial effect, including applying the aggregation approach (but the Court has a final call on evaluating whether the congress’s findings are sufficient [Citation to be added]), (3) the tradition of state/nation separation of powers, and (4) if the regulation in question contains a jurisdictional element.

This evolved rule appeared to be a balance of the power between federal government and state, but it is still logically fractional (from a deductive angle of view).  For example, the above factor (1) under the Second Step analysis duplicates to the factor (1) under the First Step analysis.  This “fraction” is indeed is understandable given the Court had provided its rules in different case contexts.

  1. An issue of power separation between Judiciary and Legislature?

A more controversial issue lies in who (between the Court and Congress) weighs heavier in determining the factor (2) under the above Second Step.

In Lopez, even Justice Souter, who believed that the Congress’s findings in supporting the regulation in question was sufficient, still refused to defer the dispositive power to Congress. In Justice Souter’s dissenting opinion, he did not deny the dispositive power of the Supreme Court.  Instead, he took a position that is on the one hand admitting the capability of congress but on the other hand appeared retaining the judiciary’s final power in deciding whether an activity “substantially affects” the interstate commerce: “The fact of such a substantial effect is not an issue for the courts in the first instance … but for the Congress… Any explicit findings that Congress chooses to make, though not dispositive of the question of rationality, may advance judicial review by identifying factual authority on which Congress relied.” [Citation]. Namely, although he disagreed with the majority in finding the rational basis, he retained the Court’s final power in assessing whether congress’s findings are factually reasonable to a conclusion of substantially affecting the interstate commerce.


In other words, this issue has exceeded the scope of discussions under the umbrella of federalism (in particular, the relationship between Federal Government and States) and has stepped into the regime on separation of power between the judiciary and the legislative branch of the Federal Government.

  1. The defects of analogy/distinction approach

The Court applied an approach of analogy/distinction in Gonzales (so did Justice O’Connor in her dissenting opinion; the only difference is that she believed that Gonzalez facts are comparable to those of Morrison). This approach relieved the Court from analyzing the issue of separation of power with a lawyering technique – arguing similarity/distinction between a new case and certain precedents.  However, for the Commerce Clause disputes, this approach may lead to uncertainty in future cases.  It is anticipable that in any controversial matter, both supporters of a congressional regulation and its opposers would have to focus their efforts in collecting evidence (in practice it could largely become invention of facts) to enable their cases more similar to certain precedents and/or more distinguishable from other precedents.  In extreme circumstances, the merit discussion on the substance of a regulation might have to give its way to the debate on the “appearance” of the regulation and heavily complicate a case.

This has somehow happened to the Obamacare disputes. [to elaborate further]

  1. Conclusion

It seems that Justice Scalia’s approach in his concurring opinion in Gonzales was clearer: Congress’s power to regulate activities having a “substantial effect” on interstate commerce is derived not only from the Commerce Clause, but primarily from the Necessary and Proper Clause, which allows Congress to do whatever it deems necessary to accomplish its regulatory objectives. [Citation]. In other words, leaving the power of data finding to Congress (and just assess if the Congress has ever based its legislation with rationale basis), and then place more focus on legal elements that is naturally more appropriate to be determined by court: i.e. the “economic activity”, the “jurisdictional element” and the tradition of power separation between Federal Government and State.

In conclusion, a better (and more logically self-satisfied) approach appear to be: (a) using “rational basis” rule to determine if Congress has found factual connection between an intrastate activity and interstate commerce, (b) using the rest three elements to assess if the regulation in question has restrained itself in merely solving interstate commerce-related matter.