Hammer v. Dagenhart, 247 U.S. 251 (1918), was a United States Supreme Court decision involving the power of Congress to enact child labor laws. The Court held regulation of child labor in purely internal (to a single state) manufacturing, the products of which may never enter interstate commerce, to be beyond the power of Congress, distinguishing the Lottery line of cases, which concerned Congressional regulation of harms (e.g. interstate sale of lottery tickets) that required the use of interstate commerce.

Justice Day, for the majority, said that Congress does not have the power to regulate commerce of goods that are manufactured by children, and that the Keating-Owen Act of 1916 was therefore unconstitutional. Drawing a distinction between the manufacture of goods and the regulation of certain goods themselves "inherently evil", the Court maintained that the issue did not concern the power to keep certain immoral products out of the stream of interstate commerce, distinguishing previous cases upholding Congress's power to control lottery schemes, prostitution, and liquor. The Court reasoned that, in those cases, the goods themselves were inherently immoral and thus open to congressional scrutiny. In this case, however, the issue at hand was the manufacture of cotton, a good whose use is not immoral. The Court further held that the manufacture of cotton did not in itself constitute interstate commerce. The Court recognized that disparate labor regulations placed the various states on unequal ground in terms of economic competitiveness, but it specifically stated that Congress could not address such inequality, for it was within the right of states to enact differing laws within the scope of their police powers:

It is further contended that the authority of Congress may be exerted to control interstate commerce in the shipment of childmade goods because of the effect of the circulation of such goods in other states where the evil of this class of labor has been recognized by local legislation, and the right to thus employ child labor has been more rigorously restrained than in the state of production. In other words, that the unfair competition, thus engendered, may be controlled by closing the channels of interstate commerce to manufacturers in those states where the local laws do not meet what Congress deems to be the more just standard of other states. The grant of power of Congress over the subject of interstate commerce was to enable it to regulate such commerce, and not to give it authority to control the states in their exercise of the police power over local trade and manufacture. [4]

"The commerce clause was not intended to give to Congress a general authority to equalize such conditions," the court reasoned. The Court added that the federal government was "one of enumerated powers" and could not go beyond the boundary drawn by the 10th Amendment, which the Court misquotes by inserting the word "expressly":

In interpreting the Constitution, it must never be forgotten that the Nation is made up of States to which are entrusted the powers of local government. And to them and to the people the powers not expressly delegated to the National Government are reserved.

[5]
In our view the necessary effect of this act is, by means of a prohibition against the movement in interstate commerce of ordinary commercial commodities, to regulate the hours of labor of children in factories and mines within the states, a purely state authority. Thus the act in a two-fold sense is repugnant to the Constitution. It not only transcends the authority delegated to Congress over commerce but also exerts a power as to a purely local matter to which the federal authority does not extend.

The ruling of the Court was later overturned and repudiated in a series of decisions handed down in the late 1930s. Specifically, Hammer v. Dagenhart was overruled in 1941 in the case of United States v. Darby Lumber Co., 312 U.S. 100 (1941). The Court in the Darby case sided strongly with Holmes' dissent, which they named "classic". They also recast the reading of the Tenth Amendment, regarding it as a "truism" that merely restates what the Constitution had already provided for, rather than offering a substantive protection to the States, as the Hammer ruling had contended.

The court's 8-1 decision, handed down on January 21, 1895 and written by Chief Justice Melville Weston Fuller, went against the government. Justice John Marshall Harlan dissented.

The court held "that the result of the transaction was the creation of a monopoly in the manufacture of a necessary of life" but ruled that it "could not be suppressed under the provisions of the act". The court ruled that manufacturing—in this case, refining—was a local activity not subject to congressional regulation of interstate commerce. Fuller wrote:

That which belongs to commerce is within the jurisdiction of the United States, but that which does not belong to commerce is within the jurisdiction of the police power of the State. . . . Doubtless the power to control the manufacture of a given thing involves in a certain sense the control of its disposition, but . . . affects it only incidentally and indirectly.

Under the Knight decision, any action against manufacturing monopolies would need to be taken by individual states, making such regulation extremely difficult with regards to out-of-state monopolies because states are prohibited from discriminating against out-of-state goods by, among other things, the Dormant Commerce Clause and Article I section 10 of the U.S. Constitution. The ruling prevailed until the end of the 1930s, when the court took a different position on the national government's power to regulate the economy.

Listerine, for instance, was invented in the nineteenth century as powerful surgical antiseptic. It was later sold, in distilled form, as both a floor cleaner and a cure for gonorrhea. But it wasn't a runaway success until the 1920s, when it was pitched as a solution for "chronic halitosis"— a then obscure medical term for bad breath. Listerine's new ads featured forlorn young women and men, eager for marriage but turned off by their mate's rotten breath. "Can I be happy with him in spite of that?" one maiden asked herself. Until that time, bad breath was not conventionally considered such a catastrophe. But Listerine changed that. As the advertising scholar James B. Twitchell writes, "Listerine did not make mouthwash as much as it made halitosis." In just seven years, the company's revenues rose from $115,000 to more than $8 million.