• Last updated on November 11, 2022

Taking a broad view of economic freedom, the Supreme Court placed the majority of businesses outside the reach of state regulations.

The 1920 Court Industrial Relations Act of Kansas provided for compulsory arbitration of laborLabor disputes in several key industries and authorized a regulatory commission to decide wages and working conditions in many circumstances. The Supreme Court ruled unanimously that the law violated the freedom of contract as protected by the Fourteenth Amendment. Chief Justice William H. Taft’sTaft, William H.;Wolff Packing Co. v. Court of Industrial Relations[Wolff Packing Co. v. Court of Industrial Relations] opinion for the Court was influential because of its narrow definition of the “affected with a public interest” justification for regulating private businesses. Taft mentioned three categories of affected businesses: those operating under a public grant of privilege, such as public utilities; occupations historically recognized as performing a special service, such as inns or cabs; and powerful businesses, such as monopolies, which without regulation might subject the public to exorbitant charges and arbitrary control.Contract, freedom of;Wolff Packing Co. v. Court of Industrial Relations[Wolff Packing Co. v. Court of Industrial Relations]Business, regulation of;Wolff Packing Co. v. Court of Industrial Relations[Wolff Packing Co. v. Court of Industrial Relations]

For the next decade, Taft’s definition of “affected with a public interest” served as a theoretical basis for striking down numerous state regulations. In Nebbia v. New York[case]Nebbia v. New York[Nebbia v. New York] (1934),[case]Nebbia v. New York[Nebbia v. New York] however, the Court rejected the public interest theory of Wolff Packing Co., and it accepted the idea that states had the authority to regulate all kinds of businesses, large or small.[case]Wolff Packing Co. v. Court of Industrial Relations[Wolff Packing Co. v. Court of Industrial Relations]

Contract, freedom of

Fourteenth Amendment

Munn v. Illinois

Nebbia v. New York

Property rights

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