THE CONCEPT OF FREEDOM IN INTERSTATETRADE::;

It is the purpose of this article to draw a comparison betweenthe interpretation of the constitutional guarantee of freedom ofinter-State trade in the United States and in Australia in order tosee whether there is only a formal difference in constitutionalarrangement or whether the distinction between them is a realone in approach and emphasis. It is prop,osed, therefore, to dealwith the American position in the first part of this article and todiscuss the Australian position in the latter part.

In most cases political federation and the creation of a com­mon market go hand in hand. The United States was no excep­tion. Indeed it was the desire to put an end to the commercialrivalry between the States that was one of the prime causes forcalling the Convention which drafted the Constitution in 1787.

It is a commonplace that one of the greatest advantagesexpected of the new Constitution was the free trade area whichit would create.1 Nevertheless there is not in the Constitution anydirect declaration of this freedom to be found. True there are anumber of provisions which prevent the creation of fiscal barriers.But there is nothing on the face of the Constitution which wouldprevent the States from creating non-tariff barriers to interstatetrade and intercourse.:!

It seems reasonably clear that the Founding Fathers expectedthat the Commerce Clause would provide the machinery by whichthe free trade area would be created. It is not quite clear, though,in what manner they expected this to be achieved.

But on the whole, Madison, in the Convention and subse­quently in the Federalist Papers,3 seems to have been of theopinion to which he still adhered many decades later: that theCommerce Clause in its interstate aspect was largely negative ineffect and designed mainly to ensure by its own force free tradeamongst the States.4

Those delegates who, like Hamilton, took a more positiveview of the commerce power,5 were less concerned with the issuewhether the power was exclusive or not. They seem to haveenvisaged some positive action on the part of Congress laying

* This article is part of a thesis submitted for the degree of S.].D. in theUniversity of Michigan.

1. Warren, Charles, The illaking of the ConstItution, pp. 567, 569. See alsoHamilton and Adair, The Power to Govern, Ch. II.

2. A right of free egress and ingress had been secured expressly by theterms of the Articles of Confederation (Article IV), but these provisionswere not repeated in the Constitution.

3. No. 42, pp. 305, 306.4. Letter to ]. C. Cabell, February 13, 1829, Tf/ritings of James 111adison,

Congressional edn .. Vol. IV, p. 15.5. The F{7deralist, No. II.

318 The University of Queensland LazlJ Journal

down a general policy for the area of the new Federation.6 Thispolicy then would prevail by virtue of a broadly interpretedfederal supremacy. Though they expected Congress to steer inthe direction of free trade, this was an issue for Congress todetermine and not a policy emanating from the Constitutionitself.

It is impossible in retrospect to say which of these views,if any, found favour with a majority of delegates.7

FREEDOM OF TRADE AS CONGRESSIONAL POLICY

It is not until the decision in Gibbons v. Ogden8 that theSupreme Court definitely related the constitutional freedom ofpassage to the Commerce Clause.

The argument of Webster in attacking the ~ew York steam­boat monopoly introduced one point which ""ras to influence theinterpretation of the Commerce Clause for good: The identifica­tion of the Commerce Clause as the source of the right of freeegress and ingress across State borders. His opponent, Emmett,argued for the traditional interpretation of 'commerce' as mean­ing trade and not transportation and movement, except in so faras they were part of the course of trade.9 Ironically, counsel forthe State monopoly by arguing for concurrent State power overinterstate communication were forced to concede the existence ofa broad and paramount Federal power over commerce, as Web­ster was quick to point out.10 In doing so Emmett and his col­leagues were following the Hamiltonian tradition. On the otherhand, Webster, by concentrating on the negative aspects of anexclusive power was in reality proposing to the Court a moreliberal version of the Madison concept.

It must, therefore, have been surprising to both sides whenthe majority opinion of Marshall C.]., instead of accepting Web­ster's narrow and negative interpretation of the Commerce Clause,

6. ]. E. Kallenbach, Federal Cooperation with the States under the CommerceClause, p. 14.

7. Abel in The Commerce Clause in the Constitutional Convention and inContemporary Comment (1940) 25 Minn. L.R. 432. 481-494, comes tothe conclusion that the majority of the Convention shared the view thatthe commerce power was exclusive and his general conclusion is also thatits scope was intended to be narrow. But, it is submitted, that he con­fuses the sentiment of a group with that of the entire Convention. Cf.]. B. Sholley, The lVegative Implications of the Commerce Clause (1936)3 U. of Chi. L. R. 556, 559-565. See also Warren, The Making of theConstitution, p. 570. In 1786 the Pinckney Comnlittee of the Constitu­tional Convention had recommended that the power be exclusive. Ibid., at569. Kallenbach, op. cit. n. 6, comes to the conclusion that some, but byno means all, of the members of the Convention considered the CommerceClause as conferring an exclusive power on Congress. Ibid., at 14-16.The issue was, in his view, underplayed for fear it would split the Con­vention. Abel. op. cit. 481, admits the latter.

8. 9 Who 1 (1824).9. Id. at 89.

10. Id. at 19.

The Concept of Freedom in Interstate Trade 319

sketched a wide commercial power of which transportation andintercourse were only a part.11 Thus he combined both the inter­pretation urged by Emmett and that urged by Webster. Farfrom regarding the clause as embodying only a negative guaranteeof free passage, the Chief Justice made it clear that the commercepower could be used to prohibit trade as well as to encourageit.12

However the most remarkable feature of his opinion was thebroad scope he gave the commerce power. Both sides hadadmitted that domestic activities which merely 'affected' interstatecommerce were exclusively within the competence of the States.Marshall, however, drew a distinction between 'the completelyinterior traffic of a state', and 'that commerce which concernsmore states than one'.13 Furthermore he declared that the federalpower did not stop at the State line but 'it must be exercisedwithin the territorial jurisdiction of the several states'.14

So far the acceptance of Hamilton's views might have ledhim to accept the views of the respondent monopolists and tohave declared this wide power to be concurrent. Indeed the ratiodecidendi is based on a clash between a Federal statute grantingthe appellant's vessel a license to navigate and the New Yorkmonopoly. Yet, at the same time the Chief Justice appeared togive support to the either/or view expressed by Webster. Thushe said:

It has been contended by the counsel for the appellant, that,as the word 'to regulate' implies in its nature, full powerover the thing to be regulated, it excludes, necessarily, theaction of all others that would perform the same operationon the same thing. That regulation is designed for the entireresult, applying to those parts which remain as they were,as well as to those which are altered. It produces a uniformwhole, which is as much disturbed and deranged by chang­ing what the regulating power designs to leave untouched, asthat on which it has operated.There is great force in this argument, and the court is notsatisfied that it has been refuted.15

This immediately raised the dilemma between the actualexistence of widespread State regulation of commerce on the onehand and constitutional theory on the other. Obviously a wideand exclusive federal power would result in anarchy, even if onlytemporary. Webster had solved this problem by postulating twolevels of federal power over commerce, one being that of a narrow

11. Id. at 189.12. Id. at 191-193, Johnson ]. was even more explicit at 227.13. Id. at 194.14. Id. at 196.15. Id. at 209.

320 The University of Queensland Law Journal

exclusive power and the other being that of a broader concurrentpower. Besides he had been at pains to restrict the scope of thefederal power in its totality.

To Marshall such a bisected structure was illogical. For himthe whole of the federal commerce power must be exclusive.Accordingly he sought to solve the dilemma by a process ofabstract classification in contrast to the division by subject matterwhich Webster's proposals would have entailed. In Marshall'sconception it was the power which was exclusive, but not theoperation of the power in the world of fact and circumstance. Thisis well illustrated by the following passage from his opinion:

It is obvious that the government of the Union, in the exer­cise of its express powers, that, for example, of regulatingcommerce with foreign nations and among the states, mayuse means that may also be employed by a state, in theexercise of its acknowledged powers; that, for example, ofregulating commerce within the state. If Congress licensesvessels to sail from one port to another, in the same state,the act is supposed to be, necessarily, incidental to the powerexpressly granted to Congress, and implies no claim of adirect power to regulate the purely internal commerce of astate, or to act directly on its system of police. So, if a state,in passing laws on subjects acknowledged to be within itscontrol, and with a view tu those subjects, shall adopt ameasure of the 5an1e character with one which Congress mayadopt, it does not derive its authority from the particularpower which has been granted, but from some other, whichremains with the state, and may be executed with the samemeans. All experience shows that the same measures, ormeasures scarcely distinguishable from each other, may flowfrom distinct powers; but this does not prove that the powersthemselves are identical.16

In these terms he explains a situation in which the interstatecommercial power rests exclusively with Congress, but in whichthe subject of interstate commerce may be regulated by the Statesif this is relevant to their control over the domestic economy ortheir power to protect the physical and moral well-being of theircitizens. In case of conflict between the operations of these twosets of powers, federal authority prevails. '... the law of thestate, though enacted in the e.xercise of powers not controverted,must yield to it'.17

Despite some ambiguities in his phraseology, Marshall wasfar from suggesting that the commerce power of Congress and

16. Id. at 204.17. Id. at 211.

The Concept of Freedom in Interstate Trade 321

the police powers of the States were mutually exclusive. Essen­tially it is the action of Congress and not the bare existence ofthe commerce power, which will take a particular field out of thereach of State power. It was only because Congress had assumedcontrol over navigation that the State monopoly could not prevailin Gibbons v. Ogden.

As a result, the freedom of egress and ingress whichdestroyed the New York monopoly was a by-product ofMarshall's formulation of a broad commerce power. It may bethat had the Federal Navigation Act not been enacted, he stillwould have held the monopoly void as a regulation of interstatecommerce. However he did not say so. It certainly is apparentfrom his opinion that the States could restrict freedom of inter­course, provided the enactment so restricting had a local relevanceand did not conflict with federal policy. Indeed this is borne outby his subsequent decision in Willson v. Black Bird Creek l\larshCO.1S

Marshall's opinion therefore was based on a theory offederal supremacy. The exclusion of State authority depends notso much on the force of the Commerce Clause per se J but on thepolicy declared by Congress either expressly or by necessaryimplication, when it legislates under the Clause. This, of course,represents Hamilton's conception of Congress as the arbiter ofthe national commercial area. Indeed at one stage of his opinionhe seems to imply that Congress may extend the boundaries ofState power by giving the States authority to regulate the con­duct of pilots within the 'bays, inlets, rivers, harbors and portsof the United States'.19

The Marshall Court had been favourable to the expansionof federal power. After his death a reaction set in. Where theMarshall Court had been anxious to preserve the Union fromundue interference on the part of the States, so the Taney Courtwas anxious to maintain the greatest possible autonomy for theStates.

The result of the determinations by the Taney Court wasto restrict the constitutional right of free passage to muchnarrower confines than Madison had ever envisaged. The prac­tices which were upheld in New York v. Miln20 and in theLicense Cases2l were those which Madison and the other Found­ing Fathers had sought to put an end to.

In the 1850's, however, there was a renewed emphasis onfree passage as the result of federal power rather than as alimited constitutional right. Curtis J. speaking for the majority in

18. 2 Pet. 245 (1829).19. 9 Who 1, 207, 208 (1824).20. 11 Pet. 102 (1837).21. 5 How. 504 (1847).

322 The University of Queensland Law Journal

Cooley v. Board of Port Wardens 22 revived the concept of acommerce power with both an exclusive and a concurrent aspect.The former category included those subjects which were 'in theirnature national, or admit only of one uniform system, or planof regulation'. The latter extended over an undefined mass of localmatters, including pilotage in local waters, which affected inter­state commerce.

At first sight this delayed acceptance of Webster's argumentsmight appear as a compromise between those who had arguedfor an exclusive power and those who had regarded the com­merce power as concurrent. In reality the opinion marks a returnto the Hamiltonian concept, though adopting a pragmatic test ofpower rather than the misunderstood conceptual classification ofMarshall. Curtis J. re-asserted the paramountcy of Congressionalauthority. This appears from his opinion in two respects:

It firstly admitted by necessary implication that the test ofpower was suitability for positive national regulation and notmerely the need to secure a negative right of free passage.Furthermore Curtis J. suggested that the power of Congress wasnot limited to interstate movement, but extended over localmatters which had 'an intimate connection with, and an import­ant relation to, the general subject of commerce with foreignnations and among the several States'.23

Though the opinion of Curtis J. clearly envisaged the role ofCongress as the arbiter of national commerce, it was not so clearas to the source of the freedom of interstate trade. It wouldappear that in matters of national importance a freedom of tradeexisted by force of the Constitution which only Congress couldaffect. But in the same year the Supreme Court gave countenanceto the idea that freedom of interstate trade was a product of thewill of Congress. In Pennsylvania v. ~Vheeling and BelmontBridge CO.24 the majority opinion upheld the right of free naviga­tion on the Ohio as against State-authorized structures obstruct­ing it, by reference to Congressional legislation.25 This deferenceto Congressional policy became all the clearer after Congress hadexpressly declared the structure to be no obstruction to navigationon the Ohio and the Court accepted this.26

However for the first thirty years the Supreme Court wasmore concerned with limiting the power of the states to isolatethemselves from the national economy than with seeking arationale for the exercise of their supervisory power. For in theabsence of positive action on the part of Congress, this function

22. 12 How. 299, 319 (1852).23. Ibid., at 316, 317.24. 13 How. 518 (1851).25. Ibid., at 565, 566..26. PennsY'lvan~a v. Wheeling & Belmont Bridge Co. (No.2) 18 How. 421

(1855).

The Concept of Freedom in Interstate Trade 323

had fallen to the court in much the same manner as in Marshall'sday.

The first extension beyond pre-Civil War practice was theoutlawing of discrimination against interstate trade and traders.Early State practice had countenanced this, provided the dis­crimination took place at least one stage removed from the cross­ing of the border. However in Tf'ard v. M aryland27 a statuteregulating the local sale of goods, but discriminating against out­of-State vendors of imported goods was held invalid.

The next step was the extension of the right of free entry tothe continuation of the journey through the State entered to thepoint of destination. In Reading Railroad Co. v. Pennsylvania28

the Court held invalid a general non-discriminatory tax imposedon all carriers in Pennsylvania per tonnage of weight carried, sofar as merchandise travelling to or from out-of-State points wasconcerned.

So far the Court had maintained a freedom of interstatemovement, but it had drawn the line at creating a freedom ofinterstate enterprise. This issue arose in Robbins v. Shelby Tax­ing District.29 Here the Court was faced with a State license feeon 'drummers' which made no distinction between intra- andinterstate commerce, though a distinction was made between theShelby T'axing District, a sub-division of the State of Tennessee,and the rest of the world. Nevertheless the Court held the taxinvalid in so far as it was sought to be imposed on 'drummers'for out-of-State principals. The Court spelled out not only animmunity from State legislation, but even hinted at a right of acitizen to carryon interstate trade f~ee from any interference orrestraint on the part of the States.30 The majority opinion quiteclearly proceeded on the premise that such a right exists and thatit extends to every activity which is essential to make such aright effective,3! subject to the police power of the State which isno longer a sweeping carry-all of State autonomy, but a rathercircumscribed power with limited objectives.32 With Robbins' Casethe process which had begun with the State Freight Tax Cases iscompleted: freedom of passage has become freedom of interstateenterprise.

Once more the Court had to turn to the question from whencethis entrepreneurial freedom came. On the one hand there werethose who believed that the Commerce Clause embodied only anegative prohibition against discrimination and obstacles to inter­state trade, vesting in Congress no more positive power than was

27. 12 Wall. 418 (1870).28. 15 Wall. 232 (1872).29. 120 U.S. 489 (1886).30. Ibid., at 496, 497 per Bradley].31. Ibid., at 494, 495.32. Ibid., at 493.

324 The Univers-ity of Queensland Law Journal·

required to enforce this prohibition. On the other hand were thosewho held with Hamilton that this freedom was a byproduct ofCongressional power, that it was derived from an implied will ofCongress. This will could be implied even from the 'silence ofCongress'.

Apparently without sensing any contradiction between them,both principles were set out by Bradley J. in support of his con­clusion in Robbins v. Taxing District of Shelby County:33

1. The Constitution of the United States having given toCongress the power to regulate commerce, not only withforeign Nations, but among the several States, that power isnecessarily exclusive whenever the subjects of it are nationalin their character, or admit only of one uniform system, orplan of regulation.2. Another established doctrine of this court is that, where thepower of Congress to regulate is exclusive, the failure ofCongress to make express regulations indicates its will thatthe subject shall be free from any restrictions or imposi­tions; ...

The inconsistency lies of course, as many commentators havepointed out,34 in the fact that if Congressional power is exclusiveno expression of its will is required to keep the States out. Ifsuch an expression is required, however much implied, then Con­gressional power may be paramount, but it certainly is notexclusive.

The antecedents of the 'silence of Congress' doctrine gostraight back to Marshall's approach to the State monopoly inGibbons v. Ogden.35 Indeed it represents a revival in new guiseof Hamilton's theory that the commerce power or any aspectthereof only becomes exclusive in its operation if Congress desiresthis. Such a desire need not appear in express words, but maybe apparent from the general policy pursued by Congress.

It followed that, if Congress did express an intention thatits power should not be exclusive, but that a State should beallowed to interfere with the freedom of interstate trade, theCourt should give effect to this policy. In fact they had alreadydone so in the Wheeling Bridge Cases.36 After 1890 such author­isations became commonplace and were consistently upheld.:~7

33. 120 U.S. 487, 492, 493 (1886).34. See Ge.vit, Thl' Commerce Clause at pp. 16-21 and Kallenbach, op. cit.

n. 6 at pp. 46-50. Both come to the conclusion that the 'silence' theoryis one of Congressional paramountcy and not of exclusive power. See also:Bikle, The Silence of Congress (1927) 4] H.L.R. 200: l.A.C. Grant, StatePo·wer to prohibit Interstate Commerce (1937) 26 Cal. L.R. 34, 58.

35. Grant, op. cit. n. 34, at 52, 53.36. Supra nn. 24-26.37. Wilkerson v. Rahrer 140 U.S. 545 (1891); Clark Distilling Co. v. Western

Maryland R. Co. 242 U.S. 311 (1917).

The Concept of Freedom in Interstate Trade 325

It is true that the apparent conflict between the 'exclusivepower' doctrine and the theory of 'the silellce of Congress' wasnever formally resolved. The Court continued to act as if bothwere consistent, but in effect the former was subordinated to thelatter. The test formulated by Curtis J. became a test for Con­gressional presumptions, subject to amendment by the expressedwill of Congress. So far then as the Commerce Clause was con­cerned general opinion at the turn of the century viewed Con­gressional power as supreme and Congress as the arbiter betweenthe legitimate domains of Union and States in the field of inter­state commerce.38

This is not to say that Congressional power was unlimited.The somewhat restricted concept of interstate commerce of thatperiod imposed its limitations. Besides, there was the effect ofthe new interpretation of the Fifth Amendment to be considered.When this Amendment was turned into a Charter of entrepre­neurial liberties under the slogan of 'Freedom of Contract', refer­ence to a much more limited freedom of interstate trade becamesuperfluous.39 Hence, whilst the traditional restraints worked outunder the Commerce Clause, continued to be applied to theStates,40 there was little need to consider whether the freedomembodied in that clause also prevailed against the Congress. Inthe few cases prior to 1917 where Congressional legislation basedon the Commerce Clause failed to gain the approval of theSupreme Court, it failed because its scope exceeded the thencurrent concept of interstate commerce, or because it offendedagainst the standards then held to be embodied in the FifthAmendment.41 Only in dissenting judgments was any suggestionto be found that the Commerce Clause contained a guarantee offreedom of interstate trade which could prevail even against theexpress \vill of Congress.

FREEDOM-OF E~NTERP'RISE AS A CONSTITUTIONALPOLICY

The turn of the century marks the beginning of a counter­offensive against this notion of Congressional supremacy.

This can be noted in the opinions of the dissenting minorityin Champion v. Ames,42 who agreed that 'the power to regulate

38. Cooke F. H., Nature and Scope of th~ Power to regulate Commerce,(1911) 11 Col. L.R. 51, seemed of the opinion that Congress could prohibitcommerce but that its power in this regard was not absolute. Howeverthe restrictions, if any, flowed from the Fifth Amendment and not from theCommerce Clause. Parkinson, Thomas 1. Congressional Prohibitions ofInterstate Commerce (1916) 16 Col. L.R. 367 expressed a similar view.See also Calvert. Regulation of Commerce, pp. 52, 53.

39. Adair v. U.S. 208 U.S. 161 (1908).40. Allgeyer v. Louisiana 165 U.S. 578 (1897).41. Or for both these reasons as in Adair v. U.S., supra n. 39.42. 188 U.S. 321, 373 (1902).

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interstate commerce ... was intended to secure equality andfreedom in commercial intercourse as between the States, not topermit the creation of impediments to such intercourse;' At mostCongress could prohibit the transportation of persons and thingswhich were in themselves injurious to transactions of interstatecommerce. Hence, subject to the police powers of Congress and ofthe States, interstate trade was to be free, i.e. immune fromundue obstruction.

This then is a revival of the Madisonian concept, but arevival which was concerned not so much with State autonomy,as had been the Taney Court, but with entrepreneurial freedom.It could be said that just as the Court had in the past used theconcept of expended federal power to safeguard this freedomfrom undue State interference at a time when the Congressionalcommerce power lay dormant, so the minority now chose torestrict the purposes for which this power could be used, not sothat the States might gain, but in order to create an area ofimmunity from both sides. To the minority and those who agreedwith them, Madison's freedom of passage had become a freedomof enterprise.

This is very much apparent in the majority opinion inHammer v. Dagenhart.43 In that case the limitations of the FifthAmendment had been urged upon the Court, but the majorityopinion did not base its findings upon that constitutional barrier.Instead it based its rejection of the Congressional legislation out­lawing interstate transportation of goods made by child labouron two grounds. The first ground was that the commerce powerdid not extend to the internal regulation of the States' manu­factures. However this was not sufficient to dispose of the case,for, as Holmes J. pointed out, all Congress had done was toprohibit trade across State lines.44

Thus the Court, as an essential part of its holding, alsoformulated the proposition that the power to regulate does notinclude the power to prohibit.45 The earlier cases were disting­uished on the ground that 'in each of these instances the use ofinterstate transportation \vas necessary to the accomplishment ofharmful results'.46 The underlying philosophy of the majorityopinion is apparent from its penultimate sentence: '... if Con­gress can thus regulate matters entrusted to local authority byprohibition of the movement of commodities in interstate com­merce, all freedom of commerce will be at an end ...'.47

43. 247 U.S. 251 (1917).44. Ibid., at 277.45. Ibid., at 270, 271.46. Ibid., at 271.47. Ibid., at 276.

The Concept of }'reedom in Interstate Trade 327

However Hammer v. Dagenhart was an aberration as soonas the judgment "vas pronounced.48 It is the only Supreme Courtdecision in which a freedom of interstate trade is held to exist asa constitutional right per se derived from the Commerce Clause.

The celebrated series of decisions in which the New Deallegislation of President Roosevelt was rejected,49 achieved thesame result but in a much more indirect way. In those decisionsthe Supreme Court was far from asserting a constitutional rightof free enterprise under the Commerce Clause or even animmunity from restrictive legislation. It seems implicit in theirholdings that the federal laws which they held invalid couldtheoretically have been passed by the State legislatures. Yet thepractical impossibility of obtaining the cooperation of the 48States meant that their rulings in effect established a freedom ofinterstate enterprise.

Of this difficulty the Court was aware in Schechter Corpn. v.U.S.,50 but it rejected the consideration as irrelevant.51 Thus ina purely negative form did laissez-faire make its last appearanceunder the Commerce Clause, not as a lack of power, but as theresult of practical difficulties in securing State cooperation.

This reluctance of the Court to secure freedom of enterpriseon any dogmatic ground is explained by the fact that it had in aseries of subsequent cases virtually reaffirmed the Hamiltonianthesis. It became increasingly difficult to explain Hammer v.Dagenhart after the Court permitted Congress to close the Stateborders to white-slavers 52 and bigamists,53 to stolen motorcars54 and fugitive felons, and finally to convict-made goods. 55

Hammer v. Dagenhart was long dead when it was formally buriedin U.S. v. Darby.56

In the lastnamed case Stone C.]. made it clear that, if therewas a constitutional inability in Congress to prohibit interstatecommerce, it flowed from some other limitation and not from theCommerce Clause. 'Whatever their motive and purpose, regula­tions of commerce which do not infringe some constitutionalprohibition are within the plenary power conferred on Congressby the Commerce Clause'.57

48. Ribble, National and State Power over Commerce, p. 174.49. Retirement Board v. Alton R.R. Co. 295 U.S. 330 (1934); Schechter

Corpn. v. U.S. 295 U.S. 495 (1935); U.S. v. Butler 297 U.S. 1 (1936);Carter v. Carter Coal Co. 298 U.S. 238 (1935).

50. 295 U.S. 495 (1935).51. Ibid., at 549.52. U.S. v. Hill 248 U.S. 420 (1918).53. U.s. v. Simpson 252 U.S. 465 (1919).54. Brooks v. U.S. 267 U.S. 432 (1925).55. JPhitfield v. Ohio 297 U.S. 431 (1936).56. 312 U.S. 100 (1940).57. Ibid., at 115.

328 The University of Queensland Law Journal

THE CONSTITUTIONAL PROTEC1'ION OF THENATIONAL COMMON MARKET

With the eclipse of the no-man's land doctrine the powersof the States as well as those of Congress moved up to fill thevacuum.58 However whilst the Commerce Clause implies nobarrier on the power of Congress, there still remains a disabilityin the States to 'impede the free flow of commerce'. In accord­ance with the decisions afore-mentioned, any such restrictionshould be the result of the will of Congress. But the 'will of Con­gress' theory having progressed from fiction to reality, so far asthe power of Congress is concerned, seems to have disappearedas a reason for invalidity. As a result the Supreme Court has hadgreat difficulty in finding a satisfactory rationale for the continu­ing restraint on State power.

The simplest explanation is that offered by Black J. in hisdissenting opinion in Southern Pacific Co. v. Arizona.59 Takingthe doctrine of Congressional paramountcy as his starting point,that learned Justice took the view that it was for Congress andnot for the Courts to set aside undue State burdens on interstatetrade. Ho\vever he made one qualification: State discriminationagainst interstate commerce is invalid without the interventionof Congress. Hence the problem of the source of this protectionstill remains.

The majority of the Court in the Arizona Train Case soughtto justify its more activist approach in accordance with Congres­sional paramountcy. Its opinion imported the fiction of a Con­gressional delegation to the courts of the functions:

... to formulate the rules thus interpreting the commerceclause in its operation, doubtless because it [meaning Con­gress] has appreciated the destructive consequences to thecommerce of the nation if their protection were withdrawn,and has been aware that in their application state laws willnot be invalidated without the support of relevant factualmaterial which will afford a sure basis for an informedjudgment. Meanwhile, Congress has accommodated its legis­lation, as have the states, to these rules as an establishedfeature of our constitutional system. There has thus beenleft to the states wide scope for the regulation of matters oflocal state concern, even though it in some measure affectsthe commerce, provided it does not materially restrict thefree flow of commerce across state lines, or interfere with itin matters with respect to which uniformity of regulation isof predominant national concern.60

58. See, Duckworth v. Arkansas 314 U.S. 390 (1941); Parker v. Brown 317U.S. 341 (1943).

59. 325 U.S. 761 (1945) at 784 et seq.60. Ibid., .at 770. See also Dowling, Interstate Commerce and State Power

(1940) 27 Va. L.R. 1, 16.

The Concept of Freedom in Interstate Trade 329

This theory, it is true, does not explain the authority for thedelegation of this quasi-legislative power to the courts, but itimplies a ratification by Congress of the rules which the SupremeCourt had worked out in the past under a variety of theories.

Another explanation elnerges from the opinion of Cardozo J.in Baldwin v. Seelig.61 According to this theory the Constitutioncreated an economic union of the entire nation. Of this free tradearea Congress is the guardian; it may take steps to extend it orto modify it at discretion. But the States must not impose barriersto the free flow of commerce, by customs barriers or by disguisedequivalents.

This free trade ~area doctrine goes further than the rightof free passage of the early nineteenth century, for it entails animmunity of interstate enterprise from burdensome state legisla­tion. Thus the Supreme Court held invalid in Baldwin v. Seeliga New York scheme purportedly rationalizing the milk industrywithin the State, but in effect sheltering local milk producers fromout-of-State competition.

In Hood v. Du klond62 the Supreme Court had to deal withthe converse situation, namely, a New York scheme designed togive local consumers priority in access to local milk supplies overand above the needs of out-of-State buyers. In holding the schemeto be invalid, the majority restated the principle of Cardozo J.in the following words:

Our system, fostered by the Commerce Clause, is that everyfarmer and every craftsman shall be encouraged to produceby the certainty that he will have free access to every marketin the Nation, that no home embargoes will withhold hisexports, and no foreign state will by customs duties or regu­lations exclude them. Likewise, every consumer may look tothe free competition from every producing area in the Nationto protect him from exploitation by any. Such was the visionof the Founders; such has been the doctrine of this Courtwhich has given it reality.

However this lack of State power is quite different from aconstitutional right to free interstate enterprise, for as the Courtpoints out in the same case:

We have no doubt that Congress in the national interestcould prohibit or curtail shipments of mil~ in interstatecommerce, unless and ,until local demands are met. Nor dowe know of any reason why Congress may not, if it deemsit in the national interest, authorize the states to placesimilar restraints on the movement of articles of commerce.63

61. 294 U.S. 511 (1934).62. 336 U.S. 525 (1948).63. Ibid., at 542.

330 The University of Queensland Law Journal

Thus the disability of the States to restrict unduly interstatecommerce is placed on a constitutional basis, independently of thewill of Congress. This theory has received a substantial amountof judicial support.64

The cases dealing with State taxation of interstate commercedisplay a similar divergence of opinion between those who wouldmaintain in the absence of Congressional legislation the traditionalimmunities from State taxation,65 and those led by Black J. whowould leave the matter largely to legislative adjustment in theabsence of discrimination.66 At present the conflict is far fromsettled and judicial history has seen some remarkable shifts ofopinion.67 But in this field also there is authority supporting aconstitutional basis for the immunity of interstate trade fromcertain types of state taxation. Thus the majority stated in Port­land Cement Co. v. Minnesota: 68

It has long been established doctrine that the CommerceClause gives exclusive power to the Congress to regulateinterstate commerce, and its failure to act on the subject inthe area of taxation nevertheless requires that interstate com­merce shall be free from any direct restrictions of impositionsby the States.

On the one side in this conflict stand those who like Frank­furter J. take an 'absolutist' view and consider interstate tradeper se out of the range of State taxing power, except ,vhere thattrade at the same time presents some distinctly local features.The highwater mark of this view is probably the holding inFreeman v. Hewitt J

69 that a State may not tax 'the very processof inter-state commerce' however slight the actual interferenceresulting therefrom. Thus the majority held that the State ofIndiana could not levy gross income tax on income derived fromthe sale by a broker in New York of certain securities owned byan Indiana resident, even though the broker after sale hadremitted the gross receipts from the sale, less expenses and com­mission, to the vendor in Indiana. On the other hand, Black J.who dissented without opinion would no doubt have upheld thetax in the absence of discrimination.70

64. E.g. in Freeman v. Hewitt 329 U.S. 249, 252 (1946). Joseph v. Carter &Weekes 330 U.S. 422 (1947). This concept was anticipated by McKennaJ. in Oklahoma v. Kansas Natural Gas Co. 221 U.S. 229 (1910).

65. This idea is represented by the dissent of Frankfurter J. in Capital Grey­hound Lines v. Brice 339 U.S. 542, 548 (1950), and also in the opinionsof Frankfurter J. in1vlcLeod v. Dilworth 322 U.S. 327 (1943) and Free­man v. Hewitt 329 U.S. 249 (1946).

66. See his dissent in Gwin Prince v. Henneford 305 U.S. 434, 442 (1939); andhis majority opinion in Capital Greyhound Lines v. Brice, supra n. 65.

67. Edward L. Barrett Jr., "Substance" v. "Form" in the Application of theCommerce Clause to State Taxation (1953) 101 U. of Penna. L.R. 740.

68. 358 U.S. 450, 458 (1959).69. 329 U.S. 249 (1946).70. See the dissent of Douglas J. ibid., at 286.

The Concept of Freedom in Interstate Trade 331

An intermediate view, as expressed by Rutledge J. in Free­man v. Hewitt, agrees that the protection of interstate trade isconstitutional in origin.71 To this Justice, however, the protectiondid not depend on any mechanical test, but on the pragmatictest of whether State taxes have the effect of blocking or imped­ing the flow of interstate trade.72

It is this latter view which has now prevailed. In PortlandCement Co. v. Minnesota the majority upheld a State tax, eventhough it had found it to be imposed on corporate income derivedexclusively from interstate commerce, provided it was fairlyapportioned to business activities within the State. In coming tothis view a remarkable synthesis has taken place. It is true thatthe majority has come round to a view much more favourable toState autonomy in the absence of federal legislation. To thisextent Black's 'hands-off' policy appears to have prevailed. Butat the same time Black and his supporters on the Court seem tohave accepted not only a constitutional basis for the protectionfrom State interference with interstate commerce, but have alsoagreed that this protection extends to non-discriminatory legisla­tion which can be said to 'burden' interstate commerce.73 Bywatering down his doctrinal wine a majority has been found tofavour greater State autonomy.

This policy has had effects beyond the problem of taxation.The majority applied these same principles to uphold local regula­tions of interstate commerce in Huron Portland Cement Co. v.Detroit.74 Once more the test to be applied in the absence offederal pre-emption is stated to be: whether the State regulationsin question are unduly burdensome on interstate commerce.75

Ironically the Court has returned to a balancing approach,not unlike that adopted in the Arizona Train Case) though thistime with the balancing done in favour of the States. The Courtnow seems to agree with Black J., despite vague traditionalformulas to the contrary, that the federal commerce power is notexclusive in the sense in which Curtis J. meant it. That is to say,there are no specific subjects from which the States are excludedper se. This is clear from the latest pronouncement by the Courton this subject in Colorado Anti-Discrimination Commission v.Continental Airways,76 where the Court held that an interstateairline was subject to a Colorado law forbidding racial discrimina­tion in the hiring of employees:

71. Id. at 263, 264.72. Id., at 270.73. Bibb v. Navajo Freight Lines 359 U.S. 520 (1959). See, Mendelson,

Recent Developnunts in State Power to regulate and tax Interstate Com­merce (1950) 98 U. of Penna. L.R. 57.

74. 362 U.S. 440 (1960).75. Ibid., at 443, 444.76. 372 U.S. 714, 719 (1963).

332 The University of Queensland Law Journal

The line separating the powers of a State from the exclusivepower of Congress is not always distinctly marked; courtsmust examine closely the facts of each case to determinewhether the dangers and hardships of diverse regulationjustify foreclosing a State from the exercise of its traditionalpowers.

The Court's opinion then proceeds to show that the field ofracial discrimination was not per se foreclosed to the States. Thosecases which seenled to support this conclusion,77 were explainedon the ground that the regulations in question would have im­posed undue burdens. Variations in commercial policy betweenthe States might constitute undue burdens, but attempts by theStates to act in aid of national policy would certainly not be inthis category. If it becomes a question depending on the outcomeof 'a particularized inquiry into the existence of a burden oncommerce' in each case, it would appear to be highly misleadingto speak of an exclusive power to regulate matters of nationalinterest in commerce. There is little doubt that in 1963 thesubject of racial discrimination in interstate transport was amatter in which national uniformity would seem to be requiredand yet the State of Colorado was permitted to exercise a con­current power. The true position, it is submitted, is that the powerof the States over interstate commerce is concurrent, except thatthe States may not discriminate against or impose undue burdenson, interstate commerce. If the language of exclusive power isstill in any way apt, then it can be said that the Congress has theexclusive power to impose such burdens or to authorise the imposi­tion of such burd~ns.78 But this is a far cry from the distinctionoriginally drawn by Curtis J. The present position therefore, isone in which the Madisonian concept of a negative constitutionalrestraint has become linked with the Hamiltonian concept ofCongressional paranl0untcy over national commerce.

In summary the position then appears to be as follows:

The States may not burden unduly the free flow of com­merce except with the consent of Congress. 'Burden' in this con­text means more than discrimination; it is essentially an economicconcept. That is to say, the Court has no preconceived ideas asto what constitutes a burden, but judges solely by the impactwhich legislation imposing duties or imposts makes on interstatetrade and traders.79

77. Ibid., at 719-721.78. Prudential Insurance Co. v. Benjamin 328 U.S. 408, 434 (194-5); State

Board of Insurance v. Todd Shipyards 370 U.S. 451 (1962).79. Bibb v. Navajo Freight Lines, supra n. 73; Huron Portland Cement Co.

v. Detroit, supra n. 74; Colorado Anti-Discrimination Commission v. Con­tinental Airlines, supra n. 76; A1nerican Oil Co. v. J./eill 380 U.S. 451(1965) .

The Concept of Freedom in Interstate Trade 333

In doing so the Court has returned to the aim which wascommon to both Hamilton and Madison: the preservation of afree trade area from particularistic or eccentric State policies. Ofcourse the national economy today is more sophisticated than itwas in 1787, and such policies are no longer confined to theimposition of custom tariffs and embargoes, but as in 1787 theprotection of the Commerce Clause is essentially a protection ofthe totality of interstate trade and only incidentally a protectionof the individual trader. Thus in Parker v. Brown)80 the questionwas not whether the California marketing scheme interfered withthe freedom of the producers of raisins to sell their crop inter­state, but rather whether the scheme operated 'without substan­tially impairing the national interest in the regulation of com­merce by a single authority and without materially obstructingthe free flow of commerce'.81

II.

When the Australian Founding Fathers assembled in the1890's to draft a Federal Constitution for Australia, it was to beexpected that they would be guided by American experience. Liketheir United States counterparts they were anxious to create oneeconomic unit. Unlike their American predecessors, however, theyintended to be specific about it. Section 92 of the Constitutionprovides:

On the imposition of uniform duties of customs, trade, com­merce and intercourse among the States, whether by means ofinternal carriage or ocean navigation, shall be absolutelyfree.

These ,vords were deliberately left vague and untechnical;.. a little bit of laymen's language' as they were described by

Sir George Reid82 at the close of the proceedings in Melbournewhen final attempts by lawyer-members of the Convention to givethe clause a more precise wording, were defeated. As a result theclause is as helpful as is the vague understanding which existedat the American Convention of 1787 that there should be somesort of economic unity. It does not tell us how that unity is to beachieved and to what extent it should be enforced.

The impression one derives from reading the Debates of theConvention is that the Founding Fathers had a Madisonian con­cept of their handiwork. They were not prepared to surrender theinternal autonomy of the States any further than was strictlynecessary. To that purpose section 92 was only to have a rela­tively limited effect. In the same fashion the federal commerce

80. 317 U.S. 341.81. 1bid., at 363.82. Record of the Debates of the Federal Convention, Third Session,

Melbourne, 1898, at 2367.

334 The University of Queensland Law Journal

power bestowed by section 51 (i) was to be read in conjunctionwith section 92 to which it was clearly subordinate.83 Hence thepower of Federal Parliament was to encourage interstate com­munication, not to restrain it. As Barton said in Melbourne:

. . . the trade and commerce clause is for the purpose ofpermitting the Commonwealth, by legislation, to secure thosethings which are secured by way of declaration in clause 89(now section 92), namely, uninterrupted trade and commerce.

This he concludes to be 'the fullest extent of the strengthand construction of trade and commerce clause.'84

What the Founding Fathers had in mind was the creation ofone economic unit through which trade would flow without regardto frontiers, but subject to non-discriminatory regulation on thepart of the States whose powers in the commercial field were toremain paramount. To the Commonwealth fell the duty andpower to keep the channels of communication across the bordersopen and, if necessary, to facilitate such cOlnmunication.

It would be wrong, though, as some have suggested,85 toconfine the operation of section 92 to the banning of tariffs. TheFounding Fathers were painfully aware that discrilnination couldtake subtler forms and much of the opposition to attempts atmore careful definition arose from this desire to outlaw the moredisguised forms of protectionism as well.86 However section 92was not intended to confer upon interstate trade an immunityfrom measures to which the domestic trade was equally subject.

The decision of the High Court in Fox v. Robbins87 showedthat the High Court was not prepared to tolerate State protection­ist measures which, though not imposed at the point of entryinto the State, nevertheless imposed a burden on the sale of out­of-State goods to which the local product was not subjected.88

83. Professor F. R. Beasley, The Commonwealth Constitution; section 92,Its History in the Federal Conventions (1948) 1 U. of West Austr. Ann.L.R. 97 at 280, 281 argues that the sense of the Convention was that sec­tion 92 did not bind the Commonwealth. With respect, it is submitted, thatthis is not correct. Only Cockburn of South Australia wished to free theCommonwealth from the operation of this section, but his attempts wereunsuccessful. Melbourne Debates, supra, at 1020. See: Sherwood R. L.,Section 92 in the Federal Conventions-A Fresh Appra.isal (1958) 1 Melb.U .L.R. 331. And see the express denial by Isaacs of federal power tocreate interstate barriers in Sydney Debates, Second Session, 1897, at1038 and by Barton, ibid., at 1053.

84. Melbourne Debates, ibid., at 501, 502.85. Notably Lord Wright, Section 92-A Problem Piece (1954) 1 Syd. L.R.

145 and G. Sawer in G. W. Paton (ed.), The Commonu'ealth of Australia,at p. 71.

86. See: Quick and Garran, Annotated Constitution of the Australian Com­monwealth, at p. 845; Harrison Moore, Commonwealth of Australia, 2nded., at p. 565; Beasley, Ope cit. supra. n. 83, at 433. And see the suggestionby Dixon K.C. before the Royal Commission on the Constitution in1927 (Minutes of Evidence, p. 778) that the real purpose of s.92 was toprevent discrimination on the part of the States. See also the final sub­mission of Mr. Nicholas tp the same effect, ibid., at p. 1693.

87. (1909) 8 C.L.R. 115.88. Ibid., at 120 per Griffith C,J.

The Concept of Freedom in Interstate Trade 335

Barton ]., the former Leader of the Convention, pointed out thatthe impost in question had the same effect as one collected at theborder, but he hastened to assure that he did not mean to sug­gest that the States were disabled from taxing imported goodsequally with other goods.89

The first Justices of the High Court then had little doubtthat discrimination, at the border or further removed, was themain subject of the annihilating force of section 92. Nor did theCourt see section 92 as the source of a constitutional right vestedin the individual trader to be free from State action. To the con­trary the Court was somewhat uncertain of the effect which theinvalidity of the discriminatory licensing fee had upon the com­plaining trader.

ISAACS & TIlE MECHANICAL }'ORMULA

It might seem surprising that Isaacs J. should become thechampion of a broad mechanical formula. At the Convention hehad advocated a narrow rephrasing of section 92. In New SouthWales v. Commonw'ealth90 he seemed enamoured of the purposivetest. It is only in his dissent in Duncan v. Queensland that theapproach he was to take eventually becomes fully apparent.91 Andeven there a qualification has to be made, for in DuncanJs CaseIsaacs J. still maintained his often reiterated view that section92 was binding upon the Commonwealth as well as upon theStates.92

Essentially his approach is that of postulating a freedom ofinterstate trade from laws directed at commerce as such. Thequestion of validity or invalidity is to depend upon classificationaccording to this formula. The purposive approach is dismissedsomewhat contemptuously as an inquiry into legislative (mensreaJ.93

This new interpretation found its first application in W. &A. McArthur Ltd. v. Queensland.94 T'he Queensland statute therein question fixed maximum prices for the sale of certain com­modities without discrimination as to place of origin.95 Themajority held that the statute could have no application to atransaction between a resident of New South Wales and a localbuyer where it was a term of the contract that the goods shouldbe supplied from New South Wales to the buyer in Queensland.

89. Ibid., at 124.90. (1915) 20 C.L.R. 54, at 98, 99.91. (1916) 22 C.L.R. 556, 620-622.92. Ihid. ('t b";'O and 624. See also: Fox v. Robbins, supra ll. 87, at 128;

1'1 S If/. v. Com1non'Z.oealth, supra n. 90, at 95 and 100; Foggitt lones v.N S.W. (191f)) 21 C.L.R. 357, 365.

91 . (191 ?;) 22 C.L.R. 556, at 624.94. (1920)?8 C.L.R. 530.9~ The mel io"ity did find that there' "-"'8 in the application of t 11e Act a

'r1""r rlisc'ilnination in f8vour (If c:' 1,~ in Queensland' but the point was(qn<:,C'" 1 1 r Ole;; l1n'lece~e;;"'rv 1-0 r L ' '1 1,.' (Ibid., at 543.)

336 The University of Queensland Lau' Journal

The leading judgment \vas essentially the work of Isaacs J.,though the names of the then Chief Justice, Knox, and Starke J.were associated with it. His basic proposition is that the State isincompetent to restrain interstate trade, commerce and intercourseeither directly as such or as part of trade, commerce and inter­course as a whole.96 This does not mean that the State cannotreach a person engaged in such activities at all, since 'ordinarydomestic laws not directed to trade and commerce are under itsown control'.97 It is a question of defining the protected area andthen of determining whether a protected activity is restrained bya law which can be classified as commercial in nature. In view ofIsaacs' J. previous rejection of any purposive test, the law inquestion must be classified by reference to its 'legal' nature andnot by reference to anything which the legislature might havehad in mind.

For, despite some vague reference to the 'civil rights' of theplaintiff,98 section 92 was seen as creating an immunity not aright. It imposed a limitation on the constitutional powers of theState legislature and executives comparable in effect to thatimposed on them by the doctrine of extra-territoriality. But theCommonwealth Parliament was not so restrained.99 In other wordsits power under section 51 (i) is seen as exclusive and the'absolute freedom' of section 92 is subject to Federal restraint.

In summary the meaning of section 92 is:... that from the moment the Commonwealth assumedlegislative control on a national basis of the customs, allState interference with inter-State trade and commerceshould for ever cease, and for that purpose Australia shouldbe one country.!

This view is in line with the Hamiltonian approach of Isaacs]. in general, such as he had expressed the same year in theEngineers Case.2 Even if it is at variance with the views he hadexpressed on earlier occasions, it was at least consistent with thenationalistic interpretation of the Constitution which he hadgradually come to adopt.

However, to say that the framework erected by him bore astrong American imprint, does not mean that his approach was inall respects the same as that followed by the United StatesSupreme Court. True to British judicial tradition Isaacs J.sought to establish a mechanical formula according to which thevalidity of State action could be tested regardless of purpose. Not

96. Ib'ld., at 550-553.97. Ibid., at 552.98. Ibid., at 540.99. Ibid., at 556.

1. Ibid., at 557, 558.2. Amalgamated Society of Engineers v. Adelaide Steamship Co. (1920) 28

C.L.R. 129.

The Concept of Freedom in Interstate Trade 337

even the laudable purpose of protecting its citizens from diseaseentitled a State to erect a barrier at its frontier. 3 Hence there wasno room in Australian jurisprudence for a State police power.

AN ECONOMIC INTERPRETATION OF SECTION 92

In the absence of Commonwealth legislation to fill up thevacuum a slow retreat took place towards a constitutional positioncomparable with that occupied by the concurrent State powerover matters of local concern in United States jurisprudence. 'Theambiguity of judicial expression in the American cases helpedthis development along. As had been pointed out by a learnedAmerican commentator,4 the Supreme Court has often used theterm 'State regulation of interstate commerce' in the narrow senseof a State trespass on the area covered by the exclusive power ofCongress whilst at the same time the expression has been usedto refer to the permissible regulation of local aspects of interstatecommerce by the States. It is the distinction which in the UnitedStates is sometimes summed up in the words 'direct' and 'indirect'.This distinction was adopted by the High Court in Roughley v.New South Wales, ex parte Beavis. rJ In themselves the words areinnocuous and Isaacs J. himself had spoken of laws 'directed atcommerce', but in the context in which they were used by themajority they required an investigation into the 'object' orpurpose of the legislation. Thus in ex parte Nelson (No. 1)6 aState statute which in the name of quarantine barred the entryinto the State of stock from areas where infectious disease wasrife, was upheld because 'In truth, the object and scope of theprovisions are to protect the large flocks and herds of New SouthWales against contagious and infectious diseases ... '.7 Isaacs J.in accordance with his absolutist views dissented.s

By manipulating the distinction between 'direct' and 'indirect'interference with interstate commerce, the High Court managedto restore to the States a large area of competence without osten­sibly introducing the 'police power' concept. This approach on thepart of the majority reflects the general ret~eat from Isaacs'nationalistic views after 1920. As a result, the reasoning of IsaacsJ. in McArthur's Case9 remained a nine days wonder. Themajority of the High Court consistently upheld State regulationof interstate trade provided it could be justified with reference tosome purpose which the Court considered to be legitimate concernof the State.

3. Ex parte Nelson (No.1) (1928) 42 C.L.R. 209, 236-238.4. Gavit, The Commerce Clause, at pp. 17-19..5. (1928) 42 C.L.R. 162, 179 per Knox C.].; 194-197 per Higgins ]. Isaacs

]. djssented. Ibid., at 191.6. (1928) 42 C.L.R. 209.7. Ibid., at 218, 219.8. Ibid., at 234, 235.9. Supra n. 94.

338 The University of Queensland Law Journal

In the circumstances the nature of the freedom which section92 protected became obscure. The High Court had little difficultyin cases where a State indulged in obvious discrimination againstthe produce of a sister State as was the case in Tasmania v.Victoria. IO Nor would it tolerate attempts to divert produce fromthe local Australian market for export.11 But these decisions failedto make clear whether section 92 preserved a constitutional rightof the individual to trade across State lines or whether the testwas a purely economic one designed to preserve the unity of thecommon market. The dominant view on the Bench of that periodwas that of Evatt J. \vho came probably closest to the intentionsof the Founding Fathers. He argued in R. v. VizzardI2 thatsection 92 was not inserted to preserve an exclusive area of powerto the Federal Parliament or to preserve the economic freedom ofthe individual trader; its purpose was to preserve the economicunity of the Nation. 'Absolute freedom is ascribed to trade, tocommerce and to intercourse, and is not ascribed to traders orto travellers, considered merely as individuals'.13

The forbidden purpose therefore is not the destruction of theright of the individual trader, but the discrimination against thecommerce of a sister State, whether this is done by direct meansor by an elaborate scheme, the purpose of which can only becomeclear with the aid of extrinsic evidence.14 Thus Evatt J. stood atthe other extreme from Isaacs J. His approach would involve theCourt in avowed statesmanship in striking a balance betweenState autonomy, including the right to experiment with new formsof social and economic organization, and the preservation of thefree-trade area created by the Constitution.

The only true dissenter in this period was Dixon J. Aloneamong his brethren he continued the search for a logical formula.To Dixon J. it seemed irrelevant to inquire into the 'scope, objectand purpose of the challenged law'.l5 Nor may the Court, likethe United States Supreme Court, consider the question of'reasonableness' of the State legislation having regard to the legiti­mate interests of the State.16 The protection of section 92 isabsolute and not to be qualified. The test is purely conceptual:

'Free' must at least mean free of a restriction or burdenplaced upon an act because it is commerce, or trade, or inter­course, or because it involves movement into or out of theState. By this I mean that the application of the restriction or

10. (1935) 52 C.L.R. 157.11. Peanut Board v. Rockhampton Harbour Board (1933) 48 C.L.R. 266.12. (1933) 50 C.L.R. 30.13. Ibid., at 94.14. E.g. in Facuum Oil Co. Pty. Ltd. v. Queensland (1934) 51 C.L.R. 108,

135. 136.15. Such as Rich J. in R. v. Fizzard, supra n. 12, at 51, 52.16. /fl1'llard v Rawson (1933) 48 C.L.R. 316, 332.

The Concept of Freedom in Interstate Trade 339

burden to the act cannot be made the consequence of thatact's being of a commercial or trading character, or of itsinvolving intercourse between two places, or of its involvingmovement of persons or things into or out of the State.17

In essence this formula represents a more elaborate versionof the test favoured by Isaacs J. In this, as in so many otherrespects, Dixon J. appears as Isaacs J .'s intellectual heir and theonly Justice willing or able to understand him. However, whilstDixon J. shared many of Isaacs J .'s logical positions, he did notseek to relate them to a comprehensive interpretation of the Con­stitution, as Isaacs J. had done. In other words, Dixon J. agreedwith Isaacs J .'s logical reasoning, but not necessarily with themotivation which lay behind such reasoning. Thus Dixon J.together with his brethren on the Bench came to share a growingbelief that Isaacs J. had been wrong in excluding the Common­wealth from the operation of section 92.18 As a matter of logicalinference such a conclusion seemed to him unjustified. To hisbrethren, of course, the exclusion of the Commonwealth seemedof little use now Federal exclusiveness had been effectivelydestroyed.

Evatt J.'s 'economic' interpretation received its apotheosis inLord Wright's opinion on behalf of the Privy Council in James v.Commonw'ealth. 19 Not only did the Board demolish the logicalstructure of Isaacs J.'s judgment in McArthur's Case,20 theirLordships also accepted the view that section 92 was mainlydifected at discrimination against the trade of other States, how­ever indirect and however disguised. Their disapproval ofMcArthur's Case and the express approval they gave to passagesfrom Evatt J.'s judgment in Vizzard's Case21 all indicate theirindebtedness to the reasoning of that Justice. On the facts theBoard had little difficulty in rejecting a Federal statute whichprohibited interstate traffic in dried fruits except by license, suchlicense only being obtainable on evidence that the majority of thegrower's produce was intended for overseas export. The freedomof passage which was vindicated was that of the dried fruit, notthe constitutional right of James to conduct interstate trade. TheirLordships, like the Founding Fathers, thought in terms of laisser­passer, not laisser-faire.

The High Court accepted the Privy Council decision as avindication of Evatt's position and therefore in the succeedingyears allowed the States and the Commonwealth fairly wide

17. Ibid., at 333, 334.18. O. Gilpin Ltd. v. Commissioner for Road Transport (N.S.W.) (1935) 52

C.L.R. 189, 205.19. R. v. Jl'izzard, supra n. 12, at 88 and 95 per Evatt J.; O. Gilpin Ltd. v.

,Comm. for Road Transport, supra n. 18, at 212 per Dixon J.20. (1936) 55 C.L.R. 1.21. (1936) 55 C.L.R. 1, at 50, 51.

340 The University of Queensland Law Journal

scope in arranging the economic affairs of the Nation.22 Indeedthe High Court upheld marketing legislation which forced alltrade into a particular channel, depriving individual producers ofthe right to market their produce interstate as they pleased, pro­vided the scheme did not result in a dimunition of the flow oftrade across the border.23 Socialism and section 92 were clearlyconsidered to be compatible.

THE DIXONIAN TRIUMPH

After the resignation of Evatt ]. in 1940 the High Courtdisplayed a tendency to revert back to ancient heresies. Thereremained current the idea of a constitutional right of the individ­ual to cross or to conduct business across the border, which wasimmune from legislation directed against it as such. Legislation ofthis kind was characterized as 'prohibitory', as opposed to legisla­tion which merely 'regulated' the manner of exercising this rightin a non-discriminatory manner.24 In a sense it could be said thatlegislation which selected interstate trade and those engagedtherein for special treatment, merely by reason of the fact that itwas interstate trade, discriminated against such trade accordingto the test laid down by Lord Wright.25 But the reasoning inAustralian National Airways v. Commonwealth26 hinted at aconstitutional right of the individual to engage in interstate trade.

The Bank N ationalisation Case27 raised a question of quitea different order. The nationalisation of all private trading banksin Australia by the Commonwealth had on the face of it nothingwhatever to do with State borders. Nor was it enacted by wayof subterfuge to discourage interstate trade. As Latham C.].pointed out in his dissent, the legislation could only offend againstsection 92, if the Court \vere prepared to return to AfcArthur'sCase28 and hold that any law, however general in its application,could not apply so as to restrict or burden the conduct of inter­state communication.29

However the majority proceeded to emasculate James v.Commonwealth30 just as the earlier High Court had emasculated

22. See, Riverina Transport Pty. Ltd. v. J7ictoria (1937) 57 C.L.R. 327,affirming motor transport regulation by the States; Hartley v. Walsh(1937) 57 C.L.R. 372, upholding State Act compelling producers of driedfruit to have all their produce packed at registered packing sheds.

23. Milk Board (N.S.W.) v. Metropolitan Cream Pty. Ltd. (1939) 62 C.L.R.116, 130-135 per Latham C.j., 153 per E.vatt ].; Andrews v. How'ell(1941) 65 C.L.R. 255.

24. Graturick v. Johnson (1945) 70 C.L.R. 1; A.N.A. v. Commonwealth(1945) 71 C.L.R. 29. Cf. Brandeis ]. in Buck v. Kuykendall 267 U.S.307, 314 (1925).

25. Gratwick v. Johnson, supra, n. 24, at 13, 14; .I1.N.A. v. Commonwealth,supra n. 24, at 61 per Latham C.j., 78 per Starke ]., 110 per \Villiams ].

26. Supra n. 24.27. Bank of New South Wales v. Commonwealth (1948) 76 C.L.R. 1.28. (1920) 28 C.L.R. 530.29. (1948) 76 C.L.R. 1,235-240. See also McTiernan J. at 397.30. (1936) 55 C.L.R. 1.

The Concept of Freedom in Interstate Trade 341

McArthur's Case. The approach of Rich J. with whom most ofthe majority agreed, was to stipulate a constitutional right of theindividual to conduct his business across State lines. Legislationwhich restricted this right could only be justified by, reference tosome 'legitimate' object of the Commonwealth or State.31 Sincethe prohibition to the private trading banks to carryon their busi­ness in Australia had no such redeeming feature, it failed in hisHonour's opinion.

Dixon J. was equally consistent, but in this case his reasoningwas negative rather than positive. His Honour found it necessaryto concede that 'Juristically it is doubtless true that section 92does not confer private rights upon individuals'. But if the effectof section 92 can better be described as an immunity, it is animmunity enjoyed not by interstate commerce considered as aneconomic phenomenon, but as an activity and 'as such ... freefor people to engage in.'32

His Honour also accepted Lord Wright's condemnation ofIsaacs J.'s statements in McArthurJs Case, but he toned down theeffect thereof:

What, as it seems to me, the judgment in James v. Common­wealth has corrected is the error of applying the conception offreedom where there was no real burden upon and no realobstruction to passing from one State to another or dealingacross State lines and in addition the failure to recognize thatregulation of trade, commerce and intercourse is compatiblewith freedom of inter-State passage or converse.33

With this statement even Evatt J. might have agreed. Theterms 'burden' and 'regulation' are capable of many meanings·.To Evatt J. this meaning was largely economic in character. ButDixon J. dismissed the economic test:

To take the volume or flow of inter-State banking businessindependently of the freedom of private banks to transact it,and make the inquiry vvhether the law closing them has apurpose or a necessary tendency to reduce the volulne orflow, is, I think, to raise an irrelevant consideration. It is,moreover, a consideration of an economic and not a legalcharacter.34

From Dixon J.'s reasoning it is clear that the question iswhether the impugned legislation 'burdens' interstate trade includ­ing the activities of those engaged in such trade. The test of'burden' must be one which involves only 'legal' considerations.

31. (1948) 76 C.L.R. 1, 293-295 per Rich and Williams ]]., at 324 perStarke ]. However Dixon ]. condemned any reference to 'legislative mensres'. (Ibid., at 387).

32. Ibid., at 388.33. Ibid., at 385.34. Ibid., at 388.

342 The University of Queensland Law Journal

With this his Honour clearly refers to his analytical test as enun­ciated in Gilpin's Case.3 '5 But for the moment his Honour sufficedby saying that prohibition of all private banking was a fortiorisuch a 'burden'.36

The opinion of the Privy Council on appeal37 betrays theinfluence of Dixon ]. in much the same measure as Lord Wrighthad been influenced by Evatt]. Not only did the Board agree withall the 'disagreements' of Dixon ]. in the High Court,38 it gavestrong impetus to his analytical test by agreeing that the 'object'or 'purpose' of the legislation was irrelevant. With Dixon ]. theBoard agreed that section 92 conferred an immunity upon whichindividuals could rely.39

However their Lordships were unable to give much positiveguidance. The best they could do, was to paraphrase the passagefrom the judgment of Dixon]. referred to earlier: 40

... it seems that two general propositions may be accepted:(1) that regulation of trade commerce and intercourse amongthe States is compatible with its absolute freedom and (2)that section 92 is violated only when a legislative or executiveact operates to restrict such trade commerce and intercoursedirectly and immediately as distinct from creating someindirect or consequential impediment which may fairly beregarded as remote.41

It was only on his elevation to the Chief Justiceship, that DixonJ. achieved predominance on the Bench and set out to give thewords 'regulation', 'burden' (or 'impediment') and 'direct' inter­pretations in accordance with his own analytical approach.

This took place in a very gradual fashion. In the first fewcases the High Court concentrated exclusively on the questionwhether the activities which the impugned legislation seeks torestrain fall within the concept of interstate trade, commerce andintercourse.42 A transaction which falls outside this conception isprima facie outside the protection of section 92.43

35. Supra, n. 18.36. (1948) 76 C.L.R. 1, 387-388.37. (1949) 79 C.L.R. 497. Since their Lordships had held that they lacked

jurisdiction to entertain the appeal by reason of section 74 of the Con­stitution, their opinion lacks authority formally, but it has been givenweight in subsequent decisions and opinions of the High Court and of theBoard itself.

38. Ibid., at 635.39. Ibid.40. Supra, n. 33.41. (1949) 79 C.L.R. 497, 639.42. Fergusson v. Stevenson (1951) 84 C.L.R. 421; Cam and Son Pty. Ltd. v.

Chief Secretary of lVew South Wales (1951) 84 C.L.R. 442; Reg. v.Wilkinson (1952) 85 C.L.R. 467.

43. Carter v. Potato ]I;Jarketing Board (1951) 84 C.L.R. 460; Wt'lcox MofflinLtd. v. New South Wales (1952) 85 C.L.R. 488,519; Wragg v. New SouthIVales (1953) 88 C.L.R. 353; Grannall v. Kelloway and Son Pty. Ltd.(1955) 93 C.L.R. 36, 52; Grannall v. Marrickville Margarine Pty. Ltd.(1955) 93 C.L.R. 55.

The Concept of Freedom in Interstate Trade 343

It is only in Hospital Provident Fund j:Jty. Ltd. v. Victoria44

that the Court was compelled to define the circumstances in whicha law, which as a matter of fact makes an impact on an inter­state activity, does so as a matter of law. Dixon C.]. did this byredefining in analytical terms the vague pronouncements of thePrivy Council:

When in the Commonwealth v. Bank of New South Wales·Hi

their Lordships of the Privy Council lay it down as a generalproposition that section 92 is violated only when a legislativeor executive act operates to restrict inter-State trade com­merce and intercourse directly and immediately as disting­uished from creating some indirect or consequential impedi­ment which may fairly be regarded as remote, the kind ofdistinction upon which this case appears to me to turn issuggested.If a law takes a fact or an event or a thing itself formingpart of trade commerce or intercourse, or forming an essentialattribute of that conception, essential in the sense that with­out it you cannot bring into being that particular exampleof trade commerce or intercourse among the States, and thelaw proceeds, by reference thereto or in consequence thereof,to impose a restriction, a burden or a liability, then thatappears to me to be direct or immediate in its operation orapplication to inter-State trade commerce and intercourse,and, if it creates a real prejudice or impediment to inter­State transactions, it will accordingly be a law impairing thefreedom which section 92 says shall exist.46

Here one can witness the production of a purely 'legal' test osten­sibly designed to avoid any evaluation of conflicting interests.Here is a definition which will invalidate any legislation or execu­tive act which falls within its scope regardless of intrinsic meritor circumstance. Hence its effect can only be described as animmunity47 despite its bias towards laisser-faire.

The Privy Council when it made its formulation in the BankN ationalisation Case had still expressed itself in the purposivelanguage of the then majority of the High Court. Now Dixon C.].had poured his analytical wine into the bottle of purposive term­inology thereby preserving a continuity of terminology going backto beyond James v. Commonwealth48 but otherwise preservingvery little else. Like all prior revolutions it only required theformal endorsement of the Privy Council and this came in Hughes& Vale Pty. Ltd. v. Neu' South Wales (No. 1).49

44. (1953) 87 C.L.R. 1.45. (1959) 79 C.L.R. 497, at 639.46. (1953) 87 C.L.R. 1, 17.47. Wragg v. New South Wales (1953) 88 C.L.R. 353, 386 per Dixon C.].48. (1936) 55 C.L.R. 1.49. (1954) 93 C.L.R. 1.

344 The University of Queensland Law Journal

Nevertheless even Dixon J.'s formulation was not altogetherwatertight against evaluations of factual impact and connection.In the first place his Honour had added to the requirements thatthe activity in question must be a part of the concept of interstatecommerce and that the law in issue must make a 'direct' impactthereon, a third qualification: 'if it creates a real prejudice orimpediment to inter-State transactions'. This was his Honour'stranslation of the prohibition-regulation antithesis of Latham C.J.and the Privy Council. But to Dixon C.J. the area of permissibleregulation fell within a far narrower compass. Just as prohibitionhad been widened to 'burden', so regulation was narrowed toinclude only non-burdensome rules.50

However, this still left the Court with the necessity to evaluatethe impact of the rule in question. In Hughes & Vale Pty. Ltd. v.New South Wales (No. 2)51 the Chief Justice did indeed makean attempt to distinguish between 'regulation' and 'burden'according to a logical formula by distinguishing between lawsregulating essential attributes of an interstate transaction and lawsregulating incidentals of the interstate transaction such as trafficregulations. Speaking of the latter he said: 'Laws for the govern­ment of such incidents "regulate" the inter-State transportation ofgoods by motor vehicle and are likely to be consistent with thefreedom of trade commerce and intercourse among the States.52

However, it is submitted, that this formulation merely masksthe real evaluation. For in determining what is 'essence' and whatis 'incident' the Court really determines whether the regulation inquestion is a necessary part of that 'freedom under the law' whichsection 92 postulates or a direct attack upon that freedom itself.As his Honour himself admits, regulation of 'incidents' can beused in such a way as to impose a real burden on interstate trade.And this can only be determined as a question of fact and ofdegree. .

The second difficulty arising out of the main formula bearsdirectly upon this realisation that a law the impact of which isaccording to the formula 'indirect', may as a matter of fact sub­stantially interfere with interstate trade. At first the High Courtconsidered factual impact completely irrelevant.53 At most it wasprepa~ed to concede that there could be matters which, thoughnot part of the concept of interstate trade, were yet forming anessential attribute thereof.54, This 'essential attribute, not formingpart ~f the concept', as put forward in the Hospital ProvidentFund Case) must not be confused with the division between the

50. Hughes & rale Pty. Ltd. v. New South Wales (No.2) (1955) 93 C.L.R.127, 159-161 per Dixon C. l., McTiernan and Webb lJ.

51. Ibid.52. Ibid., at 163.53. Hospital Provident Fund Pty. Ltd. v. Fictoria, supra n. 44. But see, Bank

of New South Wales v. Commonwealth (1948) 76 C.L.R. 1.54. Supra n. 46.

The Concept of Freedom in Interstate Trade 345

essence and the incidents of interstate trade mentioned in Hughes&-Vale (No.2). 'Essential attribute' in the first sense has beenused to describe either things which are essential in a physicalsense to an interstate transaction, such as trucks,55 or attributeswhich are essential to the legal efficacy of the transaction, suchas lawful possession56 or ownership.57

However, once more, it can be asked whether these logicalconumdrums serve much purpose. What is really meant, it seems,is that on the one hand certain activities, which at first sight seemto be independent of an interstate transaction are nevertheless sointimately connected therewith as to form part and parcel thereof,such as drjving a truck on an interstate journey. In other casesthe use of the essential attribute concept flows from a realisationthat a State may, by striking at ownership or possession, preventinterstate trade from coming into being. Or conversely the Statemay regulate domestic transactions in such a manner as effectivelyto prevent importation by private individuals.58 If the impact ofsuch legislation is sufficiently immediate on an interstate dealing,i.e. if the legislation by force o~ its own provisions prevents theexportation or the importation in question and not merely byforce of economic or social consequence,59 then it has been saidthat the law is a mere 'circuitous device' to do indirectly whatcannot be done directly.6o Even if the Court ignores economiccausation it has shown itself prepared to acknowledge that a lawwhich in form selects as its criterion an event falling outside thedefinition of interstate trade, may yet in substance prohibit inter­state trade.

However it is difficult to draw the exact line between situa­tions such as that occurring in Fish Board v. Paradiso61 on theone hand and that occurring in Grannall v. M arrickville M arg­arine Ply. Ltd.62 on the other hand. It may, of ~ourse, soundplausible to say that a law which prohibits the resale of fishwithin the State in effect prohibits its importation, whilst on theother hand a law which restricts the production. of margarine mayconsequentially limit the amount available for interstate sale, butdoes not penalize such sales directly.63

55. As in Hughes & rale Pty. Ltd. v. New' South lrales (No.2), supra n.50.56. Fergusson v. Wilkinson (1951) 84 C.L.R. 421.57. Clements and Marshall Pty. Ltd. v. Field Peas Marketing Board (ras.)

(1947) 76 C.L.R. 401; on appeal to Full Court 76 C.L.R. 414, 424 perDixon ].

58. Fish B'oard v. Paradiso (1956) 95 C.L.R. 443.59. Wragg v. New South lrales (1953) 88 C.L.R. 353, 386, 387 per Dixon C.].60. Ibid., at 387, 388. See generally: Singh, "Circuitous Means" or "Concealed

Design" and section 92 of the Australian Constitution' (1926), 36 Austr.L.]. 95.

61. Supra n.58.62. (1955) 93 C.L.R. 55.63. It would be otherwise, if production were prohibited altogether. Grannall

v. M61rrickville Margarine Pty. Ltd., supra n.62 at 79, 80. See also, McNeev. Barrow Bros. Pty. Ltd. [1954] V.L.R. 1, 14 per Sholl ].

346 The University of Queensland Law Journal

Yet is could hardly be argued that the acceptance of moneyfor the purchase of a lottery ticket64 is not as essential to thetransaction of investing in an interstate lottery as is the resaleof fish to its importation. Similarly it would seem indisputablethat the printing of a circular containing racing information andsolely intended for interstate customers was essential to that inter­state communication.65 However in both these instances a courthas held that the acceptance of money and the printing of thecircular were not protected by section 92.

These decisions show that no logical distinction can be drawnbetween what is essential to an interstate transaction and whatis not. What really influenced the courts in these instances, it issubmitted, were the same sort of purposive inquiries which theHigh Court used to indulge in openly before the ascendancy ofSir Owen Dixon. A law which has as its object economic regimen­tation will generally fail but a law which seeks to achieve atraditional police purpose such as the discouragement of gamblingwill be treated more kindly.

Hence a formula such as 'essential attribute, not forming partof the concept of interstate trade', like its American counterparts,merely serves to disguise a pragmatic evaluation of the object andpolicy of the legislation in question.

THE ROLE OF THE ANALYTICAL TEST

The Dixonian test falls into three parts: the first two ofthese can be summarised in the words of Fullagar ].: 66

(1) 'whether the acts for which immunity is claimed possess thecharacter of inter-state trade, commerce and intercourse'. Thisquestion can be answered by applying the definition of 'interstatecommerce' which the High Court has worked out over the years.If the answer is negative then cadit questio J if the answer is posi­tive the second question must be posited:(2) 'whether the law from which immunity is claimed possesses, sofar as it affects those acts, the character of an interference withfreedom'. This question must be answered by applying the analyt­ical test of Dixon C.]. as Fullagar ]. did in Mansell v. Beck: 67 Isthe criterion of the law's operation ... either the commercialcharacter, or the inter-State character, of the acts prohibited or oftransactions to which those acts are incidental'?

Once more, if the answer is in the negative, the inquiry comesto an end, but if the answer is positive, a third question must be

64. Mansell v. Beck (1956) 95 C.L.R. 550.65. Jackson v. McLeer [1964] V.R. 374.66. Hughes & Yale Pty. Ltd. v. New South if/ales (No.1) (1953) 87 C.L.R.

49, 97, 98. See also: Grannall v. llJarrickville Margarine Pty. Ltd., supran.62, at 80 per F'ullagar J.

67. (1956) 95 C.L.R. 550, 582.

The Concept of Freedom in Interstate Trade 347

asked, one which may be implicit in Fullagar's second query, butmust be posited separately:(3) 'Does the law or act in question create a real prejudice orimpediment to inter-State transactions' ;68

It is at this stage that any attempt to sum up section 92 purelyin terms of logical analysis breaks down. The Court must no,vcome to grips with the world of reality. This was realised by theCourt in Hughes & Vales Pty. Ltd. v. New South Wales (No.2) :69

The burden or obstruction must be real: it will not be enoughto discover some theoretical or speculative transgression overa metaphysical boundary of an area of immunity plotted fromlogic independently of reality. But no real detraction from thefreedom of interstate trade can be suffered by submitting todirections for the orderly and proper conduct of commercialdealings or other transactions or activities, at all events ifthe directions are both relevant and reasonable and placeinterstate transactions under no greater disadvantage thanthat borne by transactions confined to the State.

As a preliminary question, it must be asked of course,whether the law in question affects interstate trade or commerceat all. A law which by its terms exempts interstate transactionsfrom its operation cannot impose a burden on such transactions,70unless it seeks to do so by circuitous device.71 In most cases theanswer to this question will be apparent on the face of the statuteconcerned.

If the law does affect the interstate activity in question, theCourt must evaluate the nature of the impact. It has been acommonplace that not all laws governing interstate transactionsconstitute a 'real burden'. The passage above cited illustrates thetype of regulation which may be consistent with section 92: thosewhich provide for their orderly and proper conduct, providedthey do not go further than is reasonably required for that pur­pose and are non-discrimin~tory.

Here logical analysis is of very little use. No one can offer adefinition of what regulations are reasonably required for theorderly conduct of any given trade. It is of course true as KittoJ. has pointed out that the Court is not concerned with theweighing of the actual impact, but with 'the question whether thelegislation is of a kind which section 92 assumes may exist aspart of the legal context within which the freedom is to exist'.72

68. Hospital Provident Fund Pty. Ltd. v. Fictoria (1953) 87 C.L.R. 1, 17 perDixon C.].

69. (1955) 93 C.L.R. 127, 160.70. Wilcox Mofflin Ltd. v. l'lew South If/ales (1952) 85 C.L.R. 488.71. Fish Board v. Paradiso, supra n.58.72. Breen v. Snedden (1961) 106 C.L.R. 406, 416.

348 The llniverJity of Queensland Law Journal

Thus in the first instance the Court must look at the legislationin question and ask itself whether it is of a type common in 1901as a method of policing and regulating commerce and inter­course.73 But the Court is not merely to look backward, it is alsoentitled to take into account the nature of the subject matter regu­lated and gauge the reasonableness of the regulation by strikinga balance between the requirements of controlling the dangerswhich that subject matter presents to the public and the freedomof inter-state trade in that subject matter which section 92 postu­lates.74 Thus whilst Kitto J. is undoubtedly correct in saying that'reasonableness' does not import a factual test in the sense of aprecise evaluation of the factual impact on the interstate trans­action, it is nevertheless a test which can only be applied havingregard to the factual circumstances surrounding each restraint.75

Furthermore the Court has repeatedly stressed that a law \vhichat first sight is of a 'reasonable' type may be found as a fact toimpose a burden on interstate trade, e.g. a law imposing a speedlimit may set same at such a low level as to hinder interstatetrade.7ii

Thus the purely analytical inquiry affords the Court onlya prima facie test. If questions 1 and II are answered in theaffirmative and the law or act in question is seen to affect inter­state trade by virtue of its very terms, then prima facie section 92is infringed. However this presumption can be rebutted by show­ing that the impact constitutes reasonable regulation. The onus,it would appear, is on the party seeking to sustain the validity ofthe regulation.77

Conversely, if anyone of the questions is answered in thenegative, then a prima facie assumption of validity of the legisla­tion in question is justified. But this assumption also may berebutted by showing that the law is a mere 'circuitous device'.

Hence the Dixonian test is a mere guide to, rather than anexhaustive definition of, the freedom which section 92 protects.That freedom is both wider and narrower in scope than theanalytical test might lead one to expect.

73. See e.g. the approach taken by Windeyer ]. in Commonwealth Freighters v.Snedden (1959) 102 C.L.R. 280~ 303 where his Honour compared thecharges in question with the road tolls which at common law were upheldas being reasonable.

74. See O'Sullivan v. Truth [19561 S.A.S.R. 58, 77, 78 per Mayo ].; Coombev. Chaston 1960 [S.A.S.R.] 161, 163.

75. Chapman v. Suttie (1963) 110 C.L.R. 321, 344, 345 per Windeyer ].76. Hughes & fale Pty. Ltd. v. New South Wales (No.2) (1955) 93 C.L.R.

127, 163.77. Ibid., at 175, 176. Sec also, Commonwealth Freighters Pty. Ltd. v. Snedden

(1959) 102 C.L.R. 280, 295 per Dixon C.]. This onus must not be confusedwith the onus of proving that a particular transaction forms part of inter­state trade. ~rhe latter onus rests always upon the party alleging same.Colbert v. Torumwal Trading CO. [1964J V.R. 820; Day v. Dyson [1965]V.R. 165.

The Concept of Freedom in Interstate Trade 349

THE NATURE OF THE~ COiVSTITUTIONAL FREEDOMOJ? INTERSTATE TRADE

What then is the freedom which section 92 protects? In thefirst place it is clear that it is not the freedom of the trader perseJ nor the mere 'flow of trade' which is protected. The freedomis that of the activities which make up the concept of trade, com­merce and intercourse among the States. The freedom of theindividual trader exists, not because he has a constitutional rightto engage in interstate trade how and when he pleases, butbecause he is engaged in an activity which is beyond the reachof restraining laws and acts and consequently left free for himto engage in.78 Hence it is better to speak of an immunity ratherthan of a right since the latter term might give the impressionthat section 92 confers a constitutionally protected civil right.

In the secopd plac~ the immunity of activities in interstatetrade, commerce and intercourse represents a claim to equalityof treatment: that is to say, a claim to be immune from discrim­inating burdens imposed upon persons and goods coming fromanother State because they have come from another State.79

In the third place the immunity of activities in interstatetrade, commerce and intercourse represents a claim to a privilege:that is to say, a claim to be immune from non-discriminatorylaws and acts which restrain interstate activities, unless such lawsor acts are part of, or are done in pursuance of, the general lawof the land ( i.e. the law dealing with subjects other than trade,commerce 01 intercourse), or are reasonable regulations for theproper control of such trade, commerce or intercourse (whetherthey deal specifically with interstate trade and intercourse or withthese subjects in general).

In so far as section 92 amounts to a claim to equality, thetest is reasonably simple and not very different from that appliedto State legislation in the United States. If the legislation on theface of it is discriminatory by imposing a heavier burden onout-of-State goods than it imposes on local goods80 or by barringthe entry of goods and persons outright,81 the court will havelittle difficulty in striking it dO\\Tn. In cases where the discrimin­atory treatment is not so apparent, as in the case \\There a statuteimposes a tax upon the first sale of a commodity which is notproduced within the State,82 the court will nevertheless strikedown the impost if sufficient evidence is forthcoming to show

78. Bank of lVew South Wales v. Cont1nonwealth (1948) 76 C.L.R. 1, 388 perDixon C.].

79. Fox v. Robbins (1909) 8 C.L.R. 115; R. v. Smithers; ex parte Benson(1912) 16 C.L.R. 99.

80. Fox v. Robbins, supra n. 79.81. R. v. Smithers, supra n.79.82. Commonwealth Oil Refineries Ltd. v. South Australia (1926) 38 C.L.R.

408; Yacuum Oil Pty. Ltd. v. Queensland (1934) 51 C.L.R. 108.

350 The University of Queensland Law Journal

that in fact the operation of the statute is such as to discriminateagainst the products of another State.83

The problem of drawing a distinction between those non­discriminatory laws which offend against section 92 and thosewhich do not, is quite different. As in the United States it is aquestion of finding a satisfactory way whereby a court can drawa line between legislation which 'burdens' interstate trade andthose laws which are passed in the exercise of the legitimatefunctions of the State. In the United States this has finally led toa balancing test between the impact of the restraint on the inter­state activity and the 'reasonableness' of the objective which theState seeks to attain thereby. The Supreme Court is not con­cerned with 'labels', but with questions of fact and degree.

In Australia, however, the High Court has eschewed orattempted to eschew inquiries into motive, purpose or factualimpact. Hence it has sought to draw the line by a method ofclassification according to the 'legal' effect of the legislation onthe activity in question. In other words, the High Court mustask itself: Does the law in question deal \\rith the activity inquestion by reason of the fact that it is trade, commerce or inter­course?

However this test, if rigidly applied, would result, on theone hand, in the validity of legislation which unreasonablyburdened interstate trade, provided careful draftsmanship wereused, and, on the other hand, wt)uld prevent both the States andthe Cqmmonwealth from passing necessary regulations for theconduct of interstate trade. Accordingly the High Court has cometo realise that the analytical test is no more than a prima facietest: it serves to eliminate many laws which at first sight havenothing whatever to do with interstate trade and intercourse.Conversely it brings into focus the alleged invasion of the pro­tected area. But from then on the Court must have recourse tosomething approaching a purposive inquiry: Is the law reasonablydirected to the achievement of a legitimate object or is it in facta smokescreen to achieve an illegitimate object?

At times, however, the use of the analytical test may savea law from section 92 even though it is obviously directed at therestriction of interstate trade. Two recent examples will suffice:

In Reg. v. Anderson) ex parte Ipec-Air Pty. Ltd.84 the relatorcorporation had applied to the defendant, the Federal Director­General of Civil Aviation for permission to import five aircraftand for a charter licence under the Air Navigation Regulations toconduct an interstate airfreight service. Correspondence showedthat the defendant had been satisfied as to the fitness and capacityof the applicant to conduct such a service. Nevertheless the

83. lf7raf!,g v. New South IPales (1953) 88 C.L.R. 353, 397, 398 per Taylor J.84. (1965) 113 C.L.R. 177.

The Concept of Preeaom in Interstate Trade 351

defenuant refused both the import licence and the charter licenceapplicaLlons in a letter which indicated that he was solely moti­vateu Dy the policy of the federal government that there shouldonly De two air carriers in interstate aviation, namely T'.A.A. andAnsett-A.N.A.

Un an application for a writ of mandamus the High Courtheld that under the terms of the Air Navigation Regulations thedefendant was compelled to issue a charter licence once he wassatisfied that the applicant was capable of properly conductingsuch a service. However in the same breath the Court renderedthe grant of the charter licence nugatory by holding that th~

executive act of refusing the import licence was not a restrictionor burden imposed 'with reference or in consequence of some­thing which itself forms part of interstate trade, commerce orintercourse or in itself supplies some element or attribute essentialto that conception'.85

In other words the importation of aircraft for use in inter­state trade was refused protection since importation into Australiais not a part of interstate trade, even though in the absence of adomestic aircraft industry a refusal to permit the importation ofaircraft is tantamount to a refusal to permit participation in inter­state trade.

Windeyer ]., though concurring with his brethren in theresult, did not share their analytical approach and foreshadowedthat an import ban might in some circumstances contravenesection 92. However in the instant case he considered the connec­tion between the import ban and the conduct of interstate tradeto be 'too remote'.86 His Honour did not explain why it was tooremote.87

The second example is afforded by the decision of the HighCourt in Beal v. Marrickville Margarine Pty. Ltd.88 Here therespondent company had renewed the challenge to the legislationof the State of New South Wales imposing quotas on the produc­tion of margarine for the benefit of the dairy farmers. An earlierchallenge had failed in Grannall v. M arrickville Margarine Pty.Ltd.89 In the present case the company sought not only to re­open the earlier decision but it had also changed its method ofbusiness. At the time of the earlier proceedings it had been thepractice for interstate buyers to order margarine after it had beenmanufactured. The new order form requested the company to'manufacture and supply' a certain quantity of margarine. Theprocess of manufacturing margarine to supply interstate orders

85. Ibid., ]93 per Kitto J.86. Ibid., 204.87. The Privy Council refused leave to appeal.88. (1966) 114 C.L.R. 283.89. (1955) 93 'C.L.R. 55

352 The University of Queensland Law Journal

was kept entirely separate from the manufacture of margarineintended for local consumption.

The High Court unanimously refused to reconsider itsearlier holding. Not only did the court maintain its position thatmanufacture is not commerce, it also held that the margarinecould not enter into interstate commerce until it had come intoexistence even though it had been manufactured specifically tomeet an interstate order.90 Thus the New South Wales legislaturecould effectively restrict interstClte trade in margarine by restrict­ing its production.91

Thus the difference between the American concept of freedomof interstate commerce and that embodied in section 92 is notmerely one of method. There is a basic difference of emphasis.In the United States the freedom of interstate commerce is aby-product of the division of powers between Union and States.This means that the freedom is infringed by a State when with­out the consent of Congress it lays a burden upon interstate com­merce which cannot be justified by reference to any legitimatelocal purpose. The Court proceeds from the assumption that theState has power, unless it can be shown that this power has beenabused.

In Australia section 92 proclaims an absolute freedom, i.e.a freedom from both Federal and State interference. Once a lawis seen to intrude into the forbidden area, the Court proceedsfrom the assumption of freedom unless it can be shown that theintrusion serves a reasonable purpose. As a result the area offreedom in Australia is much broader than that in the UnitedStates.92

PETER NYGH*

90. (1966) 114 C.L.R. 283, at 299 per McTiernan A.C.]., at 303 per Kitto J.A similar approach can be seen in Egg and Egg Pulp .11;Jarketing Board v.Rogers [1965] V.R. 723 where it was held that interstate trade in eggsdoes not commence until the eggs were allotted to a particular interstateorder. Consequently a Victorian statute which vested all eggs in a corll­modity board as soon as they were laid could not affect interstate tradesince the creation of the eggs of necessity preceded their allotment tofulfil orders.

91. The Privy Council refused leave to appeal.92. Clements & Alarshall Pty. Ltd. v. Field Peas Jvlarketing Board (Tas.)

(1947) 76 C.L.R. 414, 426 per Dixon J.* LL.M. (Syd.), Senior Lecturer in Law, University ?f Sydney.