1. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved Slides developed by Les Wiletzky PowerPoint Slides to Accompany ESSENTIALS OF BUSINESS AND ONLINE COMMERCE LAW 1 st Edition by Henry R. Cheeseman Chapter 2 Constitutional Law for Business and Online Commerce Chapter 2 Constitutional Law for Business and Online Commerce

2. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 2 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. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 3 Federalism and Delegated Powers (1 of 2)  Federalism  Federalism is the U.S. form of government  The federal government and the 50 state governments share powers  Enumerated powers  Enumerated powers – certain powers delegated to the federal government by the states

4. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 4 Federalism and Delegated Powers (2 of 2)  Any powers that are not specifically delegated to the federal government by the Constitution are reserved to the state governments  State governments are empowered to deal with local affairs

5. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 5 Doctrine of Separation of Powers (1 of 3) legislative branch  Article I of the Constitution established the legislative branch of government The part of the government that consists of Congress:  the Senate  the House of Representatives

6. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 6 Doctrine of Separation of Powers (2 of 3) executive branch  Article II of the Constitution establishes the executive branch of government The part of the government that consists of:  the President  the Vice President The president is selected by the electoral college, not elected by popular vote

7. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 7 Doctrine of Separation of Powers (3 of 3) judicial branch  Article III of the Constitution establishes the judicial branch of the government The part of the government that consists of:  the Supreme Court  other federal courts that may be created by the Congress

8. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 8 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.

9. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 9 Checks and Balances in Our System of Government: (1 of 2) judicial branch  The judicial branch has authority to examine the acts of the other two branches of government and determine whether these acts are constitutional executive branch  The executive branch can enter into treaties with foreign governments only with the advice and consent of the Senate

10. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 10 Checks and Balances in Our System of Government: (2 of 2) legislative branch  The legislative branch is authorized to create federal courts and determine their jurisdiction and to enact statutes that change judicially made law

11. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 11 Supremacy Clause  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

12. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 12 Preemption Doctrine The concept that federal law takes precedence over state or local law.

13. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 13 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.”  Because this clause authorizes the federal government to regulate commerce, it has a greater impact on business than any other provision in the Constitution

14. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 14 Federal Regulation of Interstate Commerce interstate commerce  The Commerce Clause also gives the federal government the authority to regulate interstate commerce  The federal government may regulate: Interstate Interstate commerce that crosses state borders Intrastate Intrastate commerce that affects interstate commerce

15. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 15 State and Local Government Regulation of Business (1 of 2)  Police Power  Police Power – the power of the states to regulate private and business activity within their borders unduly burden interstate commerce  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

16. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 16 State and Local Government Regulation of Business (2 of 2)  State and local governments may regulate: Interstate Interstate commerce Intrastate 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

17. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 17 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  Directndirect  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

18. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 18 The Bill of Rights and Business Bill of Rights  The Bill of Rights provides certain freedoms and protections to individuals and business: Freedom of speech Freedom of speech Freedom of religion Freedom of religion

19. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 19 Freedom of Speech  The right to engage in oral, written, and symbolic speech protected by the First Amendment  The U.S. Supreme Court places speech into three categories: 1. Fully protected 2. Limited protected 3. Unprotected  The U.S. Supreme Court places speech into three categories: 1. Fully protected 2. Limited protected 3. Unprotected

20. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 20 Freedom of Religion  The U.S. Constitution requires federal, state, and local governments to be neutral toward religion: The Establishment Clause The Establishment Clause – prohibits the government from either establishing a state religion or promoting one religion over another The Free Exercise Clause The Free Exercise Clause – prohibits the government from interfering with the free exercise of religion in the United States

21. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 21 The Fourteenth Amendment  Added to the U.S. Constitution in 1868  Prohibits discriminatory and unfair action by the government  Three clauses have important implications for business: Equal Protection Clause Equal Protection Clause Due Process Clause Due Process Clause Privileges and Immunities Clause Privileges and Immunities Clause

22. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 22 The Equal Protection Clause (1 of 3)  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

23. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 23 The Equal Protection Clause (2 of 3)  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

24. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 24 The Equal Protection Clause (3 of 3)  The Supreme Court has adopted three different standards for reviewing equal protection cases: Strict Scrutiny Test Strict Scrutiny Test – applied to classifications based on race Intermediate Scrutiny Test Intermediate Scrutiny Test – applied to classifications based on protected classes other than race (e.g., sex or age) Rational Basis Test Rational Basis Test – applied to classifications not involving a suspect or protected class

25. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 25 Due Process Clause Due Process Clauses  The Fifth and Fourteenth Amendments both contain Due Process Clauses  These clauses provide that no person shall be deprived of “life, liberty, or property” without due process of the law  Fifth Amendment Clause  Fifth Amendment Clause – applies to federal government action  Fourteenth Amendment Clause  Fourteenth Amendment Clause – applies to state and local government action

26. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 26 Types of Due Process Substantive Due Process  Requires government laws to be clear and not overly broad  The test is whether a reasonable person could understand the law Substantive Due Process  Requires government laws to be clear and not overly broad  The test is whether a reasonable person could understand the law 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 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

27. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 02 - 27 The Privileges and Immunities Clause Privileges and Immunities Clauses  Article IV of the Constitution and the Fourteenth Amendment contain Privileges and Immunities Clauses  Prohibit states from enacting laws that unduly discriminate in favor of their residents  These clauses apply only to citizens Corporations are not protected