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CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE SECOND CIRCUIT
MR. JUSTICE CARDOZO, concurring
MR. CHIEF JUSTICE HUGHES
delivered the opinion of the Court.
1. Extraordinary conditions, such as an economic crisis, may call for extraordinary remedies, but they can not create or enlarge constitutional power. P. 528.
2. Congress is not permitted by the Constitution to abdicate, or to transfer to others, the essential legislative functions with which it is vested. Art. I, § 1; Art. I, § 8, par. 18. Panama Refining Co. v. Ryan, 293 U.S. 388. P. 529.
3. Congress may leave to selected instrumentalities the making of subordinate rules within prescribed limits, and the determination of facts to which the policy, as declared by Congress, is to apply; but it must itself lay down the policies and establish standards. P. 530.
4. The delegation of legislative power sought to be made to the President by § 3 of the National Industrial Recovery Act of June 16, 1933, is unconstitutional (pp. 529 et seq. ); and the Act is also unconstitutional, as applied in this case, because it exceeds the power of Congress to regulate interstate commerce and invades the power reserved exclusively to the States (pp. 542 et seq. ).
5. Section 3 of the National Industrial Recovery Act provides that "codes of fair competition," which shall be the "standards of fair competition" for the trades and industries to which they relate, may be approved by the President upon application of representative associations of the trades or industries to be affected, or may be prescribed by him on his own motion. Their provisions are to be enforced by injunctions from the federal courts, and "any violation of any of their provisions in any transaction in or affecting interstate commerce" is to be deemed an unfair method of competition within the meaning of the Federal Trade Commission Act and is to be punished as a crime against the United States. Before approving, the President is to make certain findings as to the character of the association presenting the code and absence of design to promote monopoly or oppress small enterprises, and must find that it will "tend to effectuate the policy of this title." Codes permitting monopolies or monopolistic practices are forbidden. The President may "impose such conditions (including requirements for the making of reports and the keeping of accounts) for the protection of consumers, competitors, employees and others, and in the furtherance of the public interest, and may provide such exceptions and exemptions from the provisions of such code," as he, in his discretion, deems necessary "to effectuate the policy herein declared." A code prescribed by him is to have the same effect as one approved on application. Held:
(1) The statutory plan is not simply one of voluntary effort; the "codes of fair competition" are meant to be codes of laws. P. 529.
(2) The meaning of the term "fair competition" (not expressly defined in the Act) is clearly not the mere antithesis of "unfair competition," as known to the common law, or of "unfair methods of competition" under the Federal Trade Commission Act. P. 531.
(3) In authorizing the President to approve codes which "will tend to effectuate the policy of this title," § 3 of the Act refers to the Declaration of Policy in § 1. The purposes declared in § 1 are all directed to the rehabilitation of industry and the industrial recovery which was the major policy of Congress in adopting the Act. P. 534.
(4) That this is the controlling purpose of the code now before the Court appears both from its repeated declarations to that effect and from the scope of its requirements. P. 536.
(5) The authority sought to be conferred by § 3 was not merely to deal with "unfair competitive practices" which offend against existing law, or to create administrative machinery for the application of established principles of law to particular instances of violation. Rather, the purpose is clearly disclosed to authorize new and controlling prohibitions through codes of laws which would embrace what the formulators would propose, and what the President would approve or prescribe, as wise and beneficant measures for the government of trades and industries, in order to bring about their rehabilitation, correction and improvement, according to the general declaration of policy in § 1. Codes of laws of this sort are styled "codes of fair competition." P. 535.
(6) A delegation of its legislative authority to trade or industrial association, empowering them to enact laws for the rehabilitation and expansion of their trades or industries, would be utterly inconsistent with the constitutional prerogatives and duties of Congress. P. 537.
(7) Congress can not delegate legislative power to the President to exercise an unfettered discretion to make whatever laws he thinks may be needed or advisable for the rehabilitation and expansion of trade and industry. P. 537.
(8) The only limits set by the Act to the President's discretion are, that he shall find, first, that the association or group proposing a code imposes no inequitable restrictions on admission to membership and is truly representative; second, that the code is not designed to promote monopolies or to eliminate or oppress small enterprises and will not operate to discriminate against them; and third, that it "will tend to effectuate the policy of this title," -- this last being a mere statement of opinion. These are the only findings which Congress has made essential in order to put into operation a legislative code having the aims described in the "Declaration of Policy." P. 538.
(9) Under the Act, the President, in approving a code may impose his own conditions, adding to or taking from what is proposed, as "in his discretion" he thinks necessary "to effectuate the policy" declared by the Act. He has no less liberty when he prescribes a code on his own motion or on complaint, and he is free to prescribe one if a code has not been approved. P. 538.
(10) The acts and reports of the administrative agencies which the President may create under the Act have no sanction beyond his will. Their recommendations and findings in no way limit the authority which § 3 undertakes to vest in him. And this authority relates to a host of different trades and industries, thus extending the President's discretion to all the varieties of laws, which he may deem to be beneficial in dealing with the vast array of commercial activities throughout the country. P. 539.
(11) Such a sweeping delegation of legislative power finds no support in decisions of this Court defining and sustaining the powers granted to the Interstate Commerce Commission, to the Radio Commission, and to the President when acting under the "flexible tariff" provisions of the Tariff Act of 1922. P. 539.
(12) Section 3 of the Recovery Act is without precedent. It supplies no standards for any trade, industry or activity. It does not undertake to prescribe rules of conduct to be applied to particular states of fact determined by appropriate administrative procedure. Instead, it authorizes the making of codes to prescribe them. For that legislative undertaking it sets up no standards, aside from the statement of the general aims of rehabilitation, correction and expansion, found in § 1. In view of the broad scope of that declaration, and of the nature of the few restrictions that are imposed, the discretion of the President in approving or prescribing codes, and thus enacting laws for the government of trade and industry throughout the country, is virtually unfettered. The code-making authority thus sought to be conferred is an unconstitutional delegation of legislative power. P. 541.
6. Defendants were engaged in the business of slaughtering chickens and selling them to retailers. They bought their fowls from commission men in a market where most of the supply was shipped in from other States, transported them to their slaughterhouses, and there held them for slaughter and local sale to retail dealers and butchers, who in turn sold directly to consumers. They were indicted for disobeying the requirements of a "Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and about the City of New York," approved by the President under § 3 of the National Industrial Recovery Act. The alleged violations were: failure to observe in their place of business provisions fixing minimum wages and maximum hours for employees; permitting customers to select individual chickens from particular coops and half-coops; sale of an unfit chicken; sales without compliance with municipal inspection regulations and to slaughterers and dealers not licensed under such regulations; making false reports and failure to make reports relating to range of daily prices and volume of sales. Held:
(1) When the poultry had reached the defendants' slaughterhouses, the interstate commerce had ended, and subsequent transactions in their business, including the matters charged in the indictment, were transactions in intrastate commerce. P. 542.
(2) Decisions which deal with a stream of interstate commerce -- where goods come to rest within a State temporarily and are later to go forward in interstate commerce -- and with the regulation of transactions involved in that practical continuity of movement, are inapplicable in this case. P. 543.
(3) The distinction between intrastate acts that directly affect interstate commerce, and therefore are subject to federal regulation, and those that affect it only indirectly, and therefore remain subject to the power of the States exclusively, is clear in principle, though the precise line can be drawn only as individual cases arise. Pp. 544, 546.
(4) If the commerce clause were construed to reach all enterprises and transactions which could be said to have an indirect effect upon interstate commerce, the federal authority would embrace practically all the activities of the people, and the authority of the State over its domestic concerns would exist only by sufferance of the Federal Government. Indeed, on such a theory, even the development of the State's commercial facilities would be subject to federal control. P. 546.
(5) The distinction between direct and indirect effects has long been clearly recognized in the application of the Anti-Trust Act. It is fundamental and essential to the maintenance of our constitutional system. P. 547.
(6) The Federal Government can not regulate the wages and hours of labor of persons employed in the internal commerce of a State. No justification for such regulation is to be found in the fact that wages and hours affect costs and prices, and so indirectly affect interstate commerce; nor in the fact that failure of some States to regulate wages and hours diverts commerce from the States that do regulate them. P. 548.
(7) The provisions of the code which are alleged to have been violated in this case are not a valid exercise of federal power. P. 550.
76 F. (2d) 617, reversed in part; affirmed in part.
CERTIORARI, on the petition of defendants in
a criminal case, to review the judgment below in so far as it
affirmed convictions on a number of the counts of an indictment;
and, on the petition of the Government, to review the same judgment
in so far as it reversed convictions on other counts. The indictment
charged violations of a "Live Poultry Code," and conspiracy
to commit them.
Congress has set up no intelligible policies
to govern the President, no standards to guide and restrict his
action, and no procedure for making determinations in conformity
with due process of law.
When Congress has prescribed (1) a reasonably
inteligible policy; (2) a reasonably definite standard for administrative
action in carrying out that policy, and (3) an administrative
procedure complying with the requirements of due process of law,
administrative action in accordance therewith does not involve
any unconstitutional exercise of legislative power.
Such permissible administrative action is of
two kinds: (a) when the policy which has been laid down by Congress
is not to be effective at once or under all conditions and circumstances,
a determination in accordance with the standard laid down by Congress
as to when the conditions or circumstances have come into existence
which Congress has said shall make the law operative, and (b)
the carrying out of the policy of Congress by filling in details
or making subordinate rules and regulations in accordance with
the standard laid down by Congress. Examples of the first class
are Field v. Clark, 143 U.S. 649 and Hampton & Co. v. United
States, 276 U.S. 394. Examples of the second class are Buttfield
v. Stranahan, 192 U.S. 470; Union Bridge Co. v. United States,
204 U.S. 364; United States v. Shreveport Grain & Elevator
Co., 287 U.S. 77; United States v. Grimaud, 220 U.S. 506.
The Interstate Commerce Act and the Federal
Radio Act provide clear standards for administrative action. Chesapeake
& Ohio Ry. Co. v. United States, 283 U.S. 35; Avent v. United
States, 266 U.S. 127; New York Central Securities Corp. v. United
States, 287 U.S. 12; Federal Radio Comm'n v. Nelson Bros. Co.,
289 U.S. 266. Cf. United States v. Chemical Foundation, 272 U.S.
1. There the standards laid down by Congress were far more definite
than mere public interest.
In each and all of these cases the statute
had reference to a particular subject-matter fully described,
defined and limited.
Furthermore, in nearly if not all of the cases
in which this Court has passed upon alleged illegal delegations
of legislative power, the legislation was operative either in
a field where Congress is not required to accord judicial review
(Crowell v. Benson, 285 U.S. 22, 50) or in a field of actual or
natural monopoly (railroads and radio broadcasting). In a field
of the former character the rights of private property may be
seriously affected by governmental action; but no person has the
constitutional right to protest against such government acts as
are involved in tariff-making, the conduct of foreign relations
generally, or the operation of government-owned property; or against
those acts necessary to the carrying on of war, such as the seizure
of enemy property. In cases of monopoly the right of government
regulation is necessarily primary, and private rights subordinate.
If, in truth, the vast domain of all private
business is open to regulation by Congress in the manner contemplated
in the Recovery Act, then it is surely true that private citizens
directly affected are entitled to have Congress itself lay down
the legislative policies with definiteness, declare definite standards
which are capable of guiding administrative action and properly
restricting it, and to have provision made for quasi-judicial
administrative procedure properly conforming to due process of
law. Otherwise dictatorship is surely here, for the fact is that
the Recovery Act attempts to override and ignore not only the
limitations of the commerce clause, but the prohibition against
illegal delegation of legislative power and the constitutional
guarantees of substantive due process under the Fifth Amendment
as well. It is a bold and unparalleled piece of legislation of
the most sweeping and drastic character.
It can not be denied that, if the past decisions
of this Court still mean what they say, not even Congress (much
less its delegates) has constitutional authority to fix minimum
wages for purely private businesses, even when the declared purpose
is protection of health and morals, and even when the regulation
is restricted to women and children and to a field in which Congress
has the unquestioned power of control. Adkins v. Children's Hospital,
261 U.S. 525. It can not be denied that the decisions of this
Court with respect to maximum hours of labor go no further than
to say that a legislature may restrict the hours of labor in limited
situations to 8, 9 or 10 hours, and that the constitutionality
of this restriction is definitely predicated solely upon a health
relationship.
The Recovery Act throws overboard all these
"old fashioned" limitations; it does not even restrict
minimum wages to women or children; it does not restrict them
to particular industrial applications; it takes no account of
the health or morals factors. In its administration it is common
knowledge that this bold attempt to dictate has spread out into
every conceivable trade, industry, business or occupation, whether
interstate or intrastate, even to barber shops and clothes pressing
establishments. In the case of maximum hours of labor not the
slightest attempt has been made in the statute, or in its administration,
to relate the fixing of maximum hours to individual health. No
consideration has been paid to the question whether or not the
public has any real interest in the businesses, trades, occupations
or industries regulated. The regimentation has been all pervasive
and all inclusive, and liberty of contract has been utterly ignored.
It must be admitted that even in the case of
public utilities having monopolistic privileges, such as the railroads,
the electric and gas companies, etc., any power to fix minimum
wages has been recognized only once by this Court, and then only
as a purely temporary measure to tide over a special and limited
situation. Wilson v. New, 243 U.S. 332. It is now proposed to
discard all limitations under the theory of a general emergency,
and to relate the fixing merely to the vague concept of public
welfare.
The decision in the oil cases clearly demonstrates
an illegal delegation of legislative power in § 3 of the
Recovery Act. Panama Refining Co. v. Ryan and Amazon Petroleum
Corp. v. Ryan, 293 U.S. 388, 418.
Closely in point are People v. Klinck Packing
Co., 214 N.Y. 121, and Gibson Auto Co. v. Finnegan, (Wis.) 259
N.W. 420.
The Recovery Act prescribes no constitutional
method or procedure for ascertaining what are unfair methods of
competition, and in this respect totally differs from the Federal
Trade Commission Act.
Section 3 of the Recovery Act makes no provision
for notice to persons in the industry, particularly those not
members of the applicant trade or industrial association; and
no provision whatsoever is expressly made for a hearing to determine
whether the provisions in the proposed code are properly contained
therein. No evidence is required to be taken and no findings of
fact are required to be made by the President, except some that
have no relation at all to the fairness or unfairness of most
of the practices prohibited. The President is free to act in a
purely arbitrary manner. He need not say why he acts. Nevertheless,
as a result of the formulation of a code by an unofficial trade
body in this manner and the approval thereof by the President,
the wide range of prohibitions contained in such a code as the
Live Poultry Code, all become criminal offenses.
Section 7 requires certain labor provisions
to be inserted in every code which the President approves. The
statute can, however, be searched from beginning to end and no
clue will be found to the problem of what other provisions may
be inserted. It does not seem that it was intended that the provisions
of the codes were to be restricted to what was deemed "unfair
competition" at common law or to what have been declared
"unfair methods of competition" by the courts in construing
the Federal Trade Commission Act. The evident intention was to
allow the freest latitude in formulating so-called codes of fair
competition in order that the unofficial ideas of preponderant
majorities in particular trades and industries, if they happened
to coincide or could be made to coincide with the President's
idea of "fair competition," might be enacted into law.
This Court has in no uncertain way prescribed
the procedure required to make administrative action conform to
due process of law. Interstate Commerce Comm'n v. Louisville &
N.R. Co., 227 U.S. 88; United States v. Abilene & Southern
Ry. Co., 265 U.S. 274; Crowell v. Benson, 285 U.S. 22; Wichita
R. & L. Co. v. Public Utilities Comm'n, 260 U.S. 48, 59; Southern
Ry. Co. v. Virginia, 290 U.S. 190.
The President has made no findings of fact
to bring his action in approving the code within any policy or
standard which the Act may contain. Panama Refining Co. v. Ryan,
293 U.S. 388. See also Florida v. United States, 282 U.S. 194,
215; United States v. Baltimore & Ohio R. Co., 293 U.S. 454;
United States v. Chicago, M. & St. P.R. Co., 294 U.S. 50.
Furthermore, there are obviously no administrative
findings of any kind whatsoever which relate the provisions of
the Live Poultry Code to any of the alleged policies set forth
in § 1 of the Recovery Act. In none of the administrative
documents referred to is there any statement that such findings
as may have been made were made upon the basis of the "evidence"
introduced at the public hearing.
If § 1 were the only guide, there is no
action conceivable which the President could not take with respect
to the regulation of industry and have it fit into one or more
of the pigeon-holes provided in § 1. The alleged standards
of § 1 do not in any way make more definite or limit the
wholly unlimited authorization in § 7 for "maximum hours
of labor" and "minimum rates of pay."
Certainly no decision of this Court, or of
any other so far as we are aware, has ever held that hours of
labor or rates of pay to workmen have any relation to the well-known
concepts of "unfair competition" or "unfair methods
of competition." See Howe Scale Co. v. Wyckoff 198 U.S. 118;
Hanover Co. v.
Metcalf, 240 U.S. 403, 412; Federal Trade Comm'n
v. Gratz, 253 U.S. 421, 427-8.
The Recovery Act authorizes the President to
re-delegate the almost illimitable powers conferred on him by
the Act to various commissions, bureaus, officers, and other agencies.
The result is that these various bodies and functionaries have
the power to make the laws of the United States. It is common
knowledge that it is impossible for an ordinary citizen to know
what these laws are, not only because of their tremendous volume,
but also because they are constantly shifting and changing, and
because nowhere can be found a comprehensive collection of the
thousand and one enactments which are almost daily ground out
by these agencies and which in many cases are unintelligible and
inconsistent. See Report of the Special Committee of Administrative
Law, 57th Annual Meeting of the American Bar Assn., pp. 215-216.
The scope of the Recovery Act is evidenced
by the codes enacted thereunder.
In no less than 17 cases, the Recovery Act
or its application has been declared unconstitutional during the
past two years by United States District Courts from Florida to
Idaho. Purvis v. Bazemore, 5 F. Supp. 230; United States v. Suburban
Motor Service Corp., 5 F. Supp. 798; United States v. Lieto, 6
F. Supp. 32; United States v. Smith, District Court, Eastern District
of Texas, Feb. 26, 1934; Hart Coal Corp. v. Sparks, 7 F. Supp.
16; United States v. Mills, 7 F. Supp. 547; United States v. Gearhart,
7 F. Supp. 712; United States v. Eason Oil Co., 8 F. Supp. 365;
United States v. Belcher, 104 C.C.H., par. 7247; United States
v. Kinnebrew Motor Co., 8 F. Supp. 535; United States v. George,
104 C.C.H., par. 7298; Table Supply Stores v. Hawking, 9 F. Supp.
888; United States v. Superior Products Co., 9 F. Supp. 943; United
States v. Weirton Steel Co., 10 F. Supp. 55; United States v.
National Garment Co., 10 F. Supp. 104; The Acme, Inc. v. Besson,
10 F. Supp. 1.
The briefest reflection convinces that if the
theory is once accepted that the Constitution confers a power
of undetermined extent to regulate anything and everything which
"affects" interstate commerce, and that the question
of what does affect it is to be determined as a matter of economic
fact in each particular case, then the Constitution has been amended
by statute into a document which would never have been adopted
or ratified originally, and -- what is more serious -- the whole
theory upon which our system of government is founded and upon
which it has been maintained is gone.
Under the construction of the commerce clause
now advanced by the Government, the United States loses its character
as "a government of laws, and not of men," and the doctrine
of enumerated powers is gone.
Acceptance of the Government's view as to the
extent of the commerce clause is inconsistent with the maintenance
of our dual system of government.
If the Government's view as to the scope of
the commerce power be accepted, the field of individual liberty,
heretofore regarded as secure from governmental encroachment in
certain fundamental aspects, will be greatly restricted and potentially
subject to complete extinction.
The minimum wage and maximum hour provisions
of the code are beyond the purview of the commerce clause and
are in contravention of the Fifth Amendment.
Production, whether by way of manufacture,
mining, farming or any other activity, is not commerce and is
not subject to regulation under the commerce clause. In so holding
in previous cases this Court has been guided by the consideration
that to hold otherwise would be destructive of our dual system
of government and extend to the Federal Government the power to
nationalize industry. Gibbons v. Ogden, 9 Wheat. 1, 189; Kidd
v. Pearson, 128 U.S. 1; United States v. Knight Co., 156 U.S.
1; United Mine Workers v. Coronado Coal Co., 259 U.S. 344; Heisler
v. Thomas Colliery Co., 260 U.S. 245; United Leather Workers v.
Herkert, 265 U.S. 457; Oliver Iron Co. v. Lord, 262 U.S. 172,
178-179; Utah Power & Light Co. v. Pfost, 286 U.S. 165; Champlin
Rfg. Co. v. Corporation Comm'n, 286 U.S. 210; Chassaniol v. Greenwood,
291 U.S. 584, 587; Hammer v. Dagenhart, 247 U.S. 251.
The cases under the Interstate Commerce Act,
Antitrust Act and Federal Trade Commission Act are not in point.
Swift & Co. v. United States, 196 U.S. 375; Stafford v. Wallace,
258 U.S. 495; Chicago Board of Trade v. Olsen, 262 U.S. 1; and
Tagg Bros. & Moorhead v. United States, 280 U.S. 420, distinguished.
The argument that regulation of wages and hours
may be sustained because of the necessity for uniformity in all
the States, finds no support in the Constitution, and the conception
of federal power upon which it rests has already been rejected
by this Court. McCulloch v. Maryland, 4 Wheat. 316, 405; Kansas
v. Colorado, 206 U.S. 46, 81-82.
In the final analysis the contention made rests
upon a non-existent power in the Federal Government to enact any
act deemed by it necessary or desirable to promote the general
welfare.
The wage and hour provisions of the code are
in violation of the Fifth Amendment.
The "straight killing" provision
is void because neither a regulation of interstate commerce nor
a regulation sustainable under any definition of fair competition,
and because violative of the Fifth Amendment.
The code provisions forbidding the sale of
unfit poultry, requiring inspection in accordance with local inspection
laws, and forbidding sale to any persons other than those licensed
under local license laws are not regulations of interstate commerce
or within the purview of the commerce clause.
The code provision requiring filing of reports
is not within the commerce clause.
The penal provision of the Recovery Act is
wholly vague and indefinite and hence unconstitutional and void.
Mr. Donald R. Richberg and Solicitor General
Reed, with whom Assistant Attorney General Stephens and Messrs.
Charles H. Weston, M. S. Huberman, Walter L. Rice, G. Stanleigh
Arnold, Golden W. Bell, Carl McFarland, and Phillip Buck were
on the brief, for the United States.
The New York market dominates the live poultry
industry, and determines the prices in other markets as well as
the prices received by shippers and farmers.
Each of the practices which the Code regulates
affects substantially the price, quality and volume of poultry
shipped into this market. The sale of unfit poultry in competition
with wholesome grades brings down the price structure for all
grades, the effect being disproportionate to the relative amount
of unfit poultry sold. A principal reason is the resulting distrust
on the part of the consumers, who are generally unable to distinguish
good from unfit poultry before it is dressed. It is estimated
that if unfit poultry could be excluded from the market by effectively
prohibiting its sale in New York, there would be an increase of
about 20 per cent. in the consumption and shipment of live poultry.
Failure to inspect, and sales to unlicensed
dealers, produce the same consequences as does sale of unfit poultry,
since these practices facilitate such sale. Selective killing,
i. e., selling, likewise demoralizes the price structure by depressing
the price for good poultry rejected from coops by the earliest
purchasers at the slaughterhouse. The practice of selective killing
or selling has also tended to prevent the development of grading
before shipment on the basis of quality, and so has prevented
an accurate price basis for poultry as sold by farmers or other
shippers.
The payment of unduly low wages, and the exaction
of a long working week, contribute in the same way to the adverse
effects on the price structure, and the quality and volume of
live poultry shipped into New York. Because of the unusually sharp
competition in this industry, and the close margin on which slaughterhouse
operators work, any saving in wage costs is translated into a
reduction in price. The effect is to lower the price, to induce
the sale of unfit and inferior grades of poultry by competitors,
and so to cause a diversion of trade and shipments from live to
dressed poultry, and to induce a progressive breakdown of the
live poultry market.
The court below apparently proceeded on an
a priori and erroneous distinction between the labor and other
practices prohibited, with respect to their effect on interstate
commerce. Although the question was treated as one of degree,
the majority of the court did not suggest that there was no evidence
to support the finding of the jury that violation of the labor
provisions produced the same consequences as violation of the
other provisions in question.
Under the decisions of this Court, the Code
provisions which the petitioners violated are within the commerce
power of the Congress.Local No. 167 v. United States, 291 U.S.
293, indicates that, under the facts of this industry, the practices
of the wholesale slaughterhouses are so closely related to the
preceding interstate movement that, from the standpoint of federal
regulation, whether under the Sherman Act or otherwise, it makes
no difference what parts of their business are "in"
interestate commerce, and what parts, if any, are on the fringe
of such commerce but necessary to its proper functioning. Irrespective
of the extent to which the slaughterhouse operators are engaged
"in" interstate commerce, their practices are subject
to federal regulation. The effect of those practices on the national
price and on the interstate movement of poultry is no less than
the effect of the local activities in a dominant market regulated
under the Grain Futures Act, or the Packers and Stockyards Act,
or the Sherman Act. Board of Trade v. Olsen, 262 U.S. 1; Stafford
v. Wallace, 258 U.S. 495; United States v. Patten, 226 U.S. 525.
Moreover, the effect of the practices on the quality of the goods
shipped and on the trustworthiness of goods in interstate commerce
affords an additional basis for federal regulation. Thornton v.
United States, 271 U.S. 414; United States v. Ferger, 250 U.S.
199.
Citing and discussing: United States v. Delaware
& Hudson Co., 213 U.S. 366; Coronado Coal Co. v. United Mine
Workers, 268 U.S. 295; Federal Trade Comm'n v. Western Meat Co.,
272 U.S. 554; Northern Securities Co. v. United States, 193 U.S.
197; Federal Trade Comm'n v. Royal Milling Co., 288 U.S. 212;
Federal Trade Comm'n v. Algoma Lumber Co., 291 U.S. 67; Swift
& Co. v. United States, 196 U.S. 375; Tagg Bros. & Moorhead
v. United States, 280 U.S. 420; American Column & Lumber Co.
v. United States, 257 U.S. 377; United States v. Trenton Potteries
Co., 273 U.S. 392; Colorado v. United States, 271 U.S. 153; Florida
v. United States, 292 U.S. 1; Federal Trade Comm'n v. Keppel &
Bro., 291 U.S. 304; Houston, E. & W.T.R. Co. v. United States,
234 U.S. 342; Railroad Comm'n v. Chicago, B. & Q.R. Co., 257
U.S. 563.
Cases which hold that a state tax upon or regulation
of manufacture or production does not burden interstate commerce
because manufacture and production are not interstate commerce,
do not fix the permissible limits of the commerce power of Congress.
See Kidd v. Pearson, 128 U.S. 1; Heisler v. Thomas Colliery Co.,
260 U.S. 245; Utah Power & Light Co. v. Pfost, 286 U.S. 165.
Distinguished: United Mine Workers v. Coronado Coal Co., 259 U.S.
344; United Leather Workers v. Herkert & Meisel Co., 265 U.S.
457.
Petitioners are importers of poultry from other
States and Congress may regulate their handling and sale of such
poultry. Leisy v. Hardin, 135 U.S. 100, 110, 111; See also Heymann
v. Southern Ry. Co., 203 U.S. 270; Rosenberger v. Pacific Express
Co., 241 U.S. 48; Baldwin v. Seelig, Inc., 294 U.S. 511; Greater
New York Live Poultry Chamber of Commerce v. United States, 47
F. (2d) 156; Swift & Co. v. United States, 196 U.S. 375, 398-399;
Stafford v. Wallace, 258 U.S. 495; Tagg Bros. & Moorhead v.
United States, 280 U.S. 420.
The intermediate delivery of the poultry to
the receivers at the railroad terminals does not break the interstate
character of the movement from shippers in other States to slaughterhouse
operators. Binderup v. Pathe Exchange, 263 U.S. 291, 309; Peoples
Natural Gas Co. v. Public Service Comm'n, 270 U.S. 550.
Intrastate transactions can be regulated by
the Federal Government where those transactions are so interwoven
with interstate commerce that the latter can not be effectively
regulated without control of the former. Minnesota Rate Cases,
230 U.S. 352; Houston, E. & W. T.R. Co. v. United States,
234 U.S. 342.
The minimum wage and maximum hour provisions
of the Code are not controlled by the decision in Hammer v. Dagenhart,
247 U.S. 251. See also Brooks v. United States, 267 U.S. 432,
438.
Regulation may be valid when Congress intended
to act and did act under its commerce power although regulation
of the same kind could not be supported under this power when
Congress intended to act and did act under some other power. Cf.
Board of Trade v. Olsen, 262 U.S. 1; Hill v. Wallace, 259 U.S.
44. Legislation enacted for a purpose within constitutional power
is valid although other ends not within such power were sought
to be attained. Stephenson v. Binford, 287 U.S. 251, 276.
It is submitted that what practices and conditions
materially affect interstate commerce, so as to be within federal
control, is a question of fact. Trade practices and labor conditions,
which in normal times would have only an indirect and incidental
effect upon interstate commerce, may substantially burden interstate
commerce during a period of overproduction, cutthroat competition,
unemployment, and reduced purchasing power. See Richmond Hosiery
Mills v. Camp, 7 F. Supp. 139, 144; Southport Petroleum Co. v.
Ickes, 61 Wash. L. Rep. 577. The issue presented for determination
here should not be prejudiced by the fact that, nearly twenty
years earlier, when economic conditions were altogether different,
a bare majority of this Court concluded that a statute with wholly
different objectives was not within the federal commerce power.
The provisions of the Code are supported also
on an independent ground: they are in one aspect part of a comprehensive
effort by Congress to remedy the breakdown of interstate commerce
which culminated in 1933. In this view, practices which contribute
to a sharp decline in wages, prices and employment, contribute
to a frustration of commerce among the States and are subject
to federal regulation in the interest of protecting and promoting
that commerce. Atchison, T. & S.F. Ry. Co. v. United States,
284 U.S. 248, 260; Appalachian Coals, Inc. v. United States, 288
U.S. 344, 372.
Congress alone could deal effectively with
the causes contributing to the breakdown of interstate commerce.
Nor could the situation have been met by separate action of the
States. It would have been impossible to obtain prompt and uniform
action by the individual state legislatures; and applied to interstate
commerce, their legislation would be invalid. Baldwin v. Seelig,
Inc., 294 U.S. 511.
It was not intended that the Constitution should
substitute for the barriers of the States the chaos of uncontrollable
excesses of competition affecting commerce among the States. The
solution which the framers of the Constitution provided was the
regulatory power of the Federal Government. That power was meant
to be exercised over "the commerce which concerns more States
than one." Minnesota Rate Cases, 230 U.S. 352, 398; Gobbons
v. Ogden, 9 Wheat. 1, 194. Congress must have power to deal with
activities and practices which, because of their widespread character
and effect, contribute substantially to the impairment of interstate
commerce as a whole.
The contention is not that Congress may control
any form of activity which may conceivably to some degree affect
interstate commerce, or that an economic crisis confers such power.
The contention rests upon the facts. The depressed state of the
national economy made it evident that interstate commerce was
demoralized and endangered by acts which under other conditions
might not seriously affect it. Because of this effect and this
danger, Congress could bring those acts within its regulatory
power under the commerce clause. Wilson v. New, 243 U.S. 332,
348. This is but an application to an unusually exigent situation
of the now familiar principle that the facts which call forth
legislative measures may be determinative of the validity of an
exercise of legislative power. Stafford v. Wallace, 258 U.S. 495,
513; Nashville, C. & St. L. Ry. Co. v. Walters, 294 U.S. 405.
An additional basis on which the wage and hour
provisions rest is that they are reasonable means for the prevention
of labor disputes arising out of those subjects, and so are adapted
to protecting interstate commerce from the burdens caused by labor
disturbances. Cf. In re Debs, 158 U.S. 564; Duplex Printing Press
Co. v. Deering, 254 U.S. 443; American Steel Foundries v. Tri-City
Central Trades Council, 257 U.S. 184; Coronado Coal Co. v. United
Mine Workers, 268 U.S. 295; Bedford Cut Stone Co. v. Stone Cutters
Assn., 274 U.S. 37; Pennsylvania R. Co. v. Railroad Labor Board,
261 U.S. 72, 79; Texas & New Orleans R. Co. v. Brotherhood
of Clerks, 281 U.S. 548, 565. The power to take preventive measures
is as available as the power to provide remedies. See Stafford
v. Wallace, 258 U.S. 495, 520; Texas & New Orleans R. Co.
v. brotherhood of Clerks, 281 U.S. 548.
The Recovery Act and the provisions of the
Code fully satisfy the requirements of the due process clause
of the Fifth Amendment. No effort was made by the petitioners
to sustain the burden of demonstrating that the Recovery Act is
arbitrary, capricious, or unreasonable in its provisions. The
provisions of the Code are shown to bear a substantial relation
to the regulation of interstate commerce. Moreover, the restrictions
imposed by the Code embody the judgment of a substantial portion
of the industry as to what is both necessary and reasonable.
The procedure followed in the adoption of the
Code fully satisfies the requirements of the Act and of due process
of law.
In Panama Refining Co. v. Ryan, 293 U.S. 388,
this Court did not pass upon the validity of § 3 (a) of the
Recovery Act, but indicated that it presented a different problem
of delegation from that raised by § 9 (c).
Section 3 (a) of the Recovery Act authorized
the President to approve codes of "fair competition"
after making certain prescribed findings. The words "fair
competiton" set the primary standard for presidential action.
Fair competition -- or the antithetical expression "unfair
methods of competition" -- has been used in the Federal Trade
Commission Act and in the Tariff Act of 1922 as a basis for administrative
and judicial action. Federal Trade Comm'n v. Keppel & Bro.,
291 U.S. 304; Frischer & Co. v. Elting, 60 F. (2d) 711, cert.
den., 287 U.S. 649. Under the Recovery Act the President is to
be guided in approving rules of fair competition by the codes
submitted by representative groups in the industries affected.
There is authority for such a resort to business experience and
judgment. St. Louis & Iron Mountain Ry. Co. v. Taylor, 210
U.S. 281, 286-287; Butte City Water Co. v. Baker, 196 U.S. 119,
126-127; Erhardt v. Boaro, 113 U.S. 527.
It is not, of course, material that the rules
of fair competition submitted by industry and approved by the
President may be broader in scope than the "unfair methods
of competition" condemned by this Court under the Federal
Trade Commission Act. The purpose of Congress in the Recovery
Act clearly included the prohibition of practices regarded by
industry as unfair because of their tendency to destroy the price
structure without economic justification. Moreover, the codes
were clearly intended to prohibit the practice now considered
the most harmful and unfair of all methods of competition -- the
exploitation of employees through the cutting of wages and lengthening
of hours of labor. See §§ 1, 4 (b), and 7. In determining
whether a delegation of authority to the Executive is a valid
one, the question is not whether the primary standard has the
same meaning as in a prior statute, but whether there is an adequate
policy or standard prescribed for the Executive. The standard
in the Recovery Act would seem more definite than that in the
Federal Trade Commission Act.
Fair competition is given further meaning and
substance by the requirement in § 3 (a) that the codes will
tend to effectuate the policy set forth in § 1 of the Act.
All of the policies there set forth point toward a single goal
-- the rehabilitation of industry and the industrial recovery
which unquestionably was the major policy of Congress in adopting
the National Industrial Recovery Act. The requirement that the
President find that codes of fair competition will tend to effectuate
the policy there laid down both (1) sets a limit upon his power
to approve codes and (2) gives additional substance and meaning
to the phrase "fair competition" by serving as a guidepost
to what the codes of fair competition contemplated by the Act
were to include.
In many cases this Court has upheld standards
no more specific than "unfair competition," when given
content and meaning by other sections or by the general purpose
of the statute in which they were used, e.g., New York Central
Securities Corp. v. United States, 287 U.S. 12 (public interest).
Other cases in which the use of general expressions
as a standard has been upheld are: Federal Radio Comm'n v. Nelson
Bros. Co., 289 U.S. 266, 285 (public convenience, interest or
necessity); Avent v. United States, 266 U.S. 127, and United States
v. Chemical Foundation, 272 U.S. 1 (in the public interest); Colorado
v. United States, 271 U.S. 153, 168, and Chesapeake & Ohio
Ry. Co. v. United States, 283 U.S. 34, 42 (certificates of public
convenience and necessity); Tagg Bros. & Moorhead v. United
States, 280 U.S. 420 (just and reasonable commissions); Wayman
v. Southard, 10 Wheat. 1 (in their discretion deem expedient);
Buttfield v. Stranahan, 192 U.S. 470 (purity, quality, and fitness
for consumption); Union Bridge Co. v. United States, 204 U.S.
364 (unreasonable obstruction to navigation); Mahler v. Eby, 264
U.S. 32 (undesirable resident).
In many cases statutes containing grants of
authority expressed in permissive language have been upheld, although
in all of them the objection could have been made that the statute
did not compel the administrative agency to act even after making
findings or determining what was necessary to comply with the
standard established. See United States v. Grimaud, 220 U.S. 506;
Interstate Commerce Comm'n v. Goodrich Transit Co., 224 U.S. 194;
Intermountain Rate Cases, 234 U.S. 476; First Binford, 286 U.S.
374; National Bank v. Union Trust Co., 244 U.S. 416; Avent v.
United States, 266 U.S. 127; United States v. Chemical Foundation,
272 U.S. 1; Sproles v. BINFORD 286 U.S. 374; New York Central
Securities Corp. v. United States, 287 U.S. 12.
In the case at bar the President is clearly
to be guided by the policies and standards found in the Act in
determining whether to approve codes; and he can not approve codes
without making the findings required by Congress.
The precise degree of detail with which policies
and standards must be defined varies with the subject regulated.
This Court will not permit the doctrine of delegation so to restrict
the power of Congress as to interfere with its ability to legislate.
The leading decisions reflect the importance attributed to the
necessity for the delegation. Wayman v. Southard, 10 Wheat. 1;
Field v. Clark, 143 U.S. 649; Buttfield v. Stranahan, 192 U.S.
470; Union Bridge Co. v. United States, 204 U.S. 364, 386; United
States v. Grimaud, 220 U.S. 506; Avent v. United States, 266 U.S.
127, 130. See also Mutual Film Corp. v. Ohio Industrial Comm'n,
236 U.S. 230, 245; Mahler v. Eby, 264 U.S. 32, 40; United States
v. Chemical Foundation, 272 U.S. 1, 12; Hampton & Co. v. United
States, 276 U.S. 394. The delegation in the Recovery Act would
have been necessary in normal times because of the need for a
flexible procedure which could have differentiated between industries;
it was especially necessary in view of the emergency confronting
Congress at that time, requiring immediate action in many fields.
In the words of the Court, "Without capacity to give authorizations
of that sort we should have the anomaly of a legislative power
which is many circumstances calling for its exertion would be
but a futility." Panama Refining Co. v. Ryan, 293 U.S. 388,
421.
In other sections of the Recovery Act, Congress
has clearly manifested its intention that the codes contain maximum
hour and minimum wage provisions. §§ 7 (a), 7 (c), 4
(b). Since the policy of Congress as to the inclusion of such
provisions is clearly expressed, the remaining question is what
the maximum hours and minimum wages should be for each class of
employment in each industry. The President is to determine these
amounts in accordance with the limitations established by the
Act. The determination of these amounts would seem clearly to
be a matter of administrative detail.
Section 3 (a) of the Recovery Act requires
the President to make certain findings of fact as a condition
of his approval of codes. In approving the live poultry code,
the President made the findings required.
The phrase "in or affecting interstate
commerce" does not render § 3 (f) invalid for indefiniteness,
since these words have been given meaning by judicial decision
and, if any uncertainty as to their meaning exists, it arises
from the nature of the constitutional limitations upon federal
power. Such language, commonly used, as for example in the Sherman
Act, has never been deemed to render a statute invalid for indefiniteness.
[The several remaining specifications of error
were also argued briefly.]
MR. CHIEF JUSTICE HUGHES
delivered the opinion of the Court.
Petitioners in No. 854 were convicted in the
District Court of the United States for the Eastern District of
New York on eighteen counts of an indictment charging violations
of what is known as the "Live Poultry Code," 1
and on an additional count for conspiracy to commit such violations.
2 By demurrer to the indictment
and appropriate motions on the trial, the defendants contended
(1) that the Code had been adopted pursuant to an unconstitutional
delegation by Congress of legislative power; (2) that it attempted
to regulate intrastate transactions which lay outside the authority
of Congress; and (3) that in certain provisions it was repugnant
to the due process clause of the Fifth Amendment.
The Circuit Court of Appeals sustained the
conviction on the conspiracy count and on sixteen counts for violation
of the Code, but reversed the conviction on two counts which charged
violation of requirements as to minimum wages and maximum hours
of labor, as these were not deemed to be within the congressional
power of regulation. On the respective applications of the defendants
(No. 854) and of the Government (No. 864) this Court granted writs
of certiorari, April 15, 1935.
New York City is the largest live-poultry market
in the United States. Ninety-six per cent. of the live poultry
there marketed comes from other States. Three-fourths of this
amount arrives by rail and is consigned to commission men or receivers.
Most of these freight shipments (about 75 per cent.) come in at
the Manhattan Terminal of the New York Central Railroad, and the
remainder at one of the four terminals in New Jersey serving New
York City. The commission men transact by far the greater part
of the business on a commission basis, representing the shippers
as agents, and remitting to them the proceeds of sale, less commissions,
freight and handling charges. Otherwise, they buy for their own
account. They sell to slaughterhouse operators who are also called
market-men.
The defendants are slaughterhouse operators
of the latter class. A. L. A. Schechter Poultry Corporation and
Schechter Live Poultry Market are corporations conducting wholesale
poultry slaughterhouse markets in Brook-lyn, New York City. Joseph
Schechter operated the latter corporation and also guaranteed
the credits of the former corporation which was operated by Martin,
Alex and Aaron Schechter. Defendants ordinarily purchase their
live poultry from commission men at the West Washington Market
in New York City or at the railroad terminals serving the City,
but occasionally they purchase from commission men in Philadelphia.
They buy the poultry for slaughter and resale. After the poultry
is trucked to their slaughterhouse markets in Brooklyn, it is
there sold, usually within twenty-four hours, to retail poultry
dealers and butchers who sell directly to consumers. The poultry
purchased from defendants is immediately slaughtered, prior to
delivery, by shochtim in defendants' employ. Defendants do not
sell poultry in interseate commerce.
The "Live Poultry Code" was promulgated
under § 3 of the National Industrial Recovery Act. 3
That section -- the pertinent provisions of which are set forth
in the margin 4 -- authorizes
the President to approve "codes of fair competition."
Such a code may be approved for a trade or industry, upon application
by one or more trade or industrial associations or groups, if
the President finds (1) that such associations or groups "impose
no inequitable restrictions on admission to membership therein
and are truly representative," and (2) that such codes are
not designed "to promote monopolies or to eliminate or oppress
small enterprises and will not operate to discriminate against
them, and will tend to effectuate the policy" of Title I
of the Act. Such codes "shall not permit monopolies or monopolistic
practices." As a condition of his approval, the President
may "impose such conditions (including requirements for the
making of reports and the keeping of accounts) for the protection
of consumers, competitors, employees, and others, and in furtherance
of the public interest, and may provide such exceptions to and
exemptions from the provisions of such code as the President in
his discretion deems necessary to effectuate the policy herein
declared." Where such a code has not been approved, the President
may prescribe one, either on his own motion or on complaint. Violation
of any provision of a code (so approved or prescribed) "in
any transaction in or affecting interstate or foreign commerce"
is made a misdemeanor punishable by a fine of not more than $
500 for each offense, and each day the violation continues is
to be deemed a separate offense.
The "Live Poultry Code" was approved
by the President on April 13, 1934. Its divisions indicate its
nature and scope. The Code has eight articles entitled (1) purposes,
(2) definitions, (3) hours, (4) wages, (5) general labor provisions,
(6) administration, (7) trade practice provisions, and (8) general.
The declared purpose is "To effect the
policies of title I of the National Industrial Recovery Act."
The Code is established as "a code of fair competition for
the live poultry industry of the metropolitan area in and about
the City of New York." That area is described as embracing
the five boroughs of New York City, the counties of Rockland,
Westchester, Nassau and Suffolk in the State of New York, the
counties of Hudson and Bergen in the State of New Jersey, and
the county of Fairfield in the State of Connecticut.
The "industry" is defined as including
"every person engaged in the business of selling, purchasing
for resale, transporting, or handling and/or slaughtering live
poultry, from the time such poultry comes into the New York metropolitan
area to the time it is first sold in slaughtered form," and
such "related branches" as may from time to time be
included by amendment. Employers are styled "members of the
industry," and the term employee is defined to embrace "any
and all persons engaged in the industry, however compensated,"
except "members."
The Code fixes the number of hours for work-days.
It provides that no employee, with certain exceptions, shall be
permitted to work in excess of forty (40) hours in any one week,
and that no employee, save as stated, "shall be paid in any
pay period less than at the rate of fifty (50) cents per hour."
The article containing "general labor provisions" prohibits
the employment of any person under sixteen years of age, and declares
that employees shall have the right of "collective bargaining,"
and freedom of choice with respect to labor organizations, in
the terms of § 7 (a) of the Act. The minimum number of employees,
who shall be employed by slaughterhouse operators, is fixed, the
number being graduated according to the average volume of weekly
sales.
Provision is made for administration through
an "industry advisory committee," to be selected by
trade associations and members of the industry, and a "code
supervisor" to be appointed, with the approval of the committee,
by agreement between the Secretary of Agriculture and the Administrator
for Industrial Recovery. The expenses of administration are to
be borne by the members of the industry proportionately upon the
basis of volume of business, or such other factors as the advisory
committee may deem equitable, "subject to the disapproval
of the Secretary and/or Administrator."
The seventh article, containing "trade
practice provisions," prohibits various practices which are
said to constitute "unfair methods of competition."
The final article provides for verified reports, such as the Secretary
or Administrator may require, "(1) for the protection of
consumers, competitors, employees, and others, and in furtherance
of the public interest, and (2) for the determination by the Secretary
or Administrator of the extent to which the declared policy of
the act is being effectuated by this code." The members of
the industry are also required to keep books and records which
"will clearly reflect all financial transactions of their
respective businesses and the financial condition thereof,"
and to submit weekly reports showing the range of daily prices
and volume of sales" for each kind of produce.
The President approved the Code by an executive
order in which he found that the application for his approval
had been duly made in accordance with the provisions of Title
I of the National Industrial Recovery Act, that there had been
due notice and hearings, that the Code constituted "a code
of fair competition" as contemplated by the Act and complied
with its pertinent provisions including clauses (1) and (2) of
subsection (a) of § 3 of Title I; and that the Code would
tend "to effectuate the policy of Congress as declared in
section 1 of Title I." 5
The executive order also recited that the Secretary of Agriculture
and the Administrator of the National Industrial Recovery Act
had rendered separate reports as to the provisions within their
respective jurisdictions. The Secretary of Agriculture reported
that the provisions of the Code "establishing standards of
fair competition (a) are regulations of transactions in or affecting
the current of interestate and/or foreign commerce and (b) are
reasonable," and also that the Code would tend to effectuate
the policy declared in Title I of the Act, as set forth in §
1. The report of the Administrator for Industrial Recovery dealt
with wages, hours of labor and other labor provisions. 6
Of the eighteen counts of the indictment upon
which the defendants were convicted, aside from the count for
conspiracy, two counts charged violation of the minimum wage and
maximum hour provisions of the Code, and ten counts were for violation
of the requirement (found in the "trade practice provisions")
of "straight killing." This requirement was really one
of "straight" selling. The term "straight killing"
was defined in the Code as "the practice of requiring persons
purchasing poultry for resale to accept the run of any half coop,
coop, or coops, as purchased by slaughterhouse operators, except
for culls." 7 The charges
in the ten counts, respectively, were that the defendants in selling
to retail dealers and butchers had permitted "selections
of individual chickens taken from particular coops and half coops."
Of the other six counts, one charged the sale
to a butcher of an unfit chicken; two counts charged the making
of sales without having the poultry inspected or approved in accordance
with regulations or ordinances of the City of New York; two counts
charged the making of false reports or the failure to make reports
relating to the range of daily prices and volume of sales for
certain periods; and the remaining count was for sales to slaughterers
or dealers who were without licenses required by the ordinances
and regulations of the city of New York.
First. Two preliminary points are stressed
by the Government with respect to the appropriate approach to
the important questions presented. We are told that the provision
of the statute authorizing the adoption of codes must be viewed
in the light of the grave national crisis with which Congress
was confronted. Undoubtedly, the conditions to which power is
addressed are always to be considered when the exercise of power
is challenged. Extraordinary conditions may call for extraordinary
remedies. But the argument necessarily stops short of an attempt
to justify action which lies outside the sphere of constitutional
authority. Extraordinary conditions do not create or enlarge constitutional
power. 8 The Constitution established
a national government with powers deemed to be adequate, as they
have proved to be both in war and peace, but these powers of the
national government are limited by the constitutional grants.
Those who act under these grants are not at liberty to transcend
the imposed limits because they believe that more or different
power is necessary. Such assertions of extra-constitutional authority
were anticipated and precluded by the explicit terms of the Tenth
Amendment, -- "The powers not delegated to the United States
by the Constitution, nor prohibited by it to the States, are reserved
to the States respectively, or to the people."
The further point is urged that the national
crisis demanded a broad and intensive cooperative effort by those
engaged in trade and industry, and that this necessary cooperation
was sought to be fostered by permitting them to initiate the adoption
of codes. But the statutory plan is not simply one for voluntary
effort. It does not seek merely to endow voluntary trade or industrial
associations or groups with privileges or immunities. It involves
the coercive exercise of the law-making power. The codes of fair
competition which the statute attempts to authorize are codes
of laws. If valid, they place all persons within their reach under
the obligation of positive law, binding equally those who assent
and those who do not assent. Violations of the provisions of the
codes are punishable as crimes.
Second. The question of the delegation of legislative
power. We recently had occasion to review the pertinent decisions
and the general principles which govern the determination of this
question. Panama Refining Co. v. Ryan, 293 U.S. 388. The Constitution
provides that "All legislative powers herein granted shall
be vested in a Congress of the United States, which shall consist
of a Senate and House of Representatives." Art I, §
1. And the Congress is authorized "To make all laws which
shall be necessary and proper for carrying into execution"
its general powers. Art. I, § 8, par. 18. The Congress is
not permitted to abdicate or to transfer to others the essential
legislative functions with which it is thus vested. We have repeatedly
recognized the necessity of adapting legislation to complex conditions
involving a host of details with which the national legislature
cannot deal directly. We pointed out in the Panama Company case
that the Constitution has never been regarded as denying to Congress
the necessary resources of flexibility and practicality, which
will enable it to perform its function in laying down policies
and establishing standards, while leaving to selected instrumentalities
the making of subordinate rules within prescribed limits and the
determination of facts to which the policy as declared by the
legislature is to apply. But we said that the constant recognition
of the necessity and validity of such provisions, and the wide
range of administrative authority which has been developed by
means of them, cannot be allowed to obscure the limitations of
the authority to delegate, if our constitutional system is to
be maintained. Id., p. 421.
Accordingly, we look to the statute to see
whether Congress has overstepped these limitations, -- whether
Congress in authorizing "codes of fair competition"
has itself established the standards of legal obligation, thus
performing its essential legislative function, or, by the failure
to enact such standards, has attempted to transfer that function
to others.
The aspect in which the question is now presented
is distinct from that which was before us in the case of the Panama
Company. There, the subject of the statutory prohibition was defined.
National Industrial Recovery Act, § 9 (c). That subject was
the transportation in interstate and foreign commerce of petroleum
and petroleum products which are produced or withdrawn from storage
in excess of the amount permitted by state authority. The question
was with respect to the range of discretion given to the President
in prohibiting that transportation. Id., pp. 414, 415, 430. As
to the "codes of fair competition," under § 3 of
the Act, the question is more fundamental. It is whether there
is any adequate definition of the subject to which the codes are
to be addressed.
What is meant by "fair competition"
as the term is used in the Act? Does it refer to a category established
in the law, and is the authority to make codes limited accordingly?
Or is it used as a convenient designation for whatever set of
laws the formulators of a code for a particular trade or industry
may propose and the President may approve (subject to certain
restrictions), or the President may himself prescribe, as being
wise and beneficent provisions for the government of the trade
or industry in order to accomplish the broad purposes of rehabilitation,
correction and expansion which are stated in the first section
of Title I? 9
The Act does not define "fair competition."
"Unfair competition," as known to the common law, is
a limited concept. Primarily, and strictly, it relates to the
palming off of one's goods as those of a rival trader. Goodyear
Manufacturing Co. v. Goodyear Rubber Co., 128 U.S. 598, 604; Howe
Scale Co. v. Wyckoff, Seamans & Benedict, 198 U.S. 118, 140;
Hanover Milling Co. v. Metcalf, 240 U.S. 403, 413. In recent years,
its scope has been extended. It has been held to apply to misappropriation
as well as misrepresentation, to the selling of another's goods
as one's own, -- to misappropriation of what equitably belongs
to a competitor. International News Service v. Associated Press,
248 U.S. 215, 241, 242. Unfairness in competition has been predicated
of acts which lie outside the ordinary course of business and
are tainted by fraud, or coercion, or conduct otherwise prohibited
by law. 10 Id., p. 258. But
it is evidence that in its widest range, "unfair competition,"
as it has been understood in the law, does not reach the objectives
of the codes which are authorized by the National Industrial Recovery
Act. The codes may, indeed, cover conduct which existing law condemns,
but they are not limited to conduct of that sort. The Government
does not contend that the Act contemplates such a limitation.
It would be opposed both to the declared purposes of the Act and
to its administrative construction.
The Federal Trade Commission Act ( § 5)
11 introduced the expression
"unfair methods of competition," which were declared
to be unlawful. That was an expression new in the law. Debate
apparently convinced the sponsors of the legislation that the
words "unfair competition," in the light of their meaning
at common law, were too narrow. We have said that the substituted
phrase has a broader meaning, that it does not admit of precise
definition, its scope being left to judicial determination as
controversies arise. Federal Trade Comm'n v. Raladam Co., 283
U.S. 643, 648, 649; Federal Trade Comm'n v. Keppel & Bro.,
291 U.S. 304, 310-312. What are "unfair methods of competition"
are thus to be determined in particular instances, upon evidence,
in the light of particular competitive conditions and of what
is found to be a specific and substantial public interest. Federal
Trade Comm'n v. Beech-Nut Packing Co., 257 U.S. 441, 453; Federal
Trade Comm'n v. Klesner, 280 U.S. 19, 27, 28; Federal Trade Comm'n
v. Raladam Co., supra; Federal Trade Comm'n v. Keppel & Bro.,
supra; Federal Trade Comm'n v. Algoma Lumber Co., 291 U.S. 67,
73. To make this possible, Congress set up a special procedure.
A Commission, a quasi-judicial body, was created. Provision was
made for formal complaint, for notice and hearing, for appropriate
findings of fact supported by adequate evidence, and for judicial
review to give assurance that the action of the Commission is
taken within its statutory authority. Federal Trade Comm'n v.
Raladam Co., supra; Federal Trade Comm'n v. Klesner, supra. 12
In providing for codes, the National Industrial
Recovery Act dispenses with this administrative procedure and
with any administrative procedure of an analogous character. But
the difference between the code plan of the Recovery Act and the
scheme of the Federal Trade Commission Act lies not only in procedure
but in subject matter. We cannot regard the "fair competition"
of the codes as antithetical to the "unfair methods of competition"
of the Federal Trade Commission Act. The "fair competition
of the codes has a much broader range and a new significance.
The Recovery Act provides that it shall not be construed to impair
the powers of the Federal Trade Commission, but, when a code is
approved, its provisions are to be the "standards of fair
competition" for the trade or industry concerned, and any
violation of such standards in any transaction in or affecting
interstate or foreign commerce is to be deemed "an unfair
method of competition" within the meaning of the Federal
Trade Commission Act. § 3 (b).
For a statement of the authorized objectives
and content of the "codes of fair competition" we are
referred repeatedly to the "Declaration of Policy" in
section one of Title I of the Recovery Act. Thus, the approval
of a code by the President is conditioned on his finding that
it "will tend to effectuate the policy of this title."
§ 3 (a). The President is authorized to impose such conditions
"for the protection of consumers, competitors, employees,
and others, and in furtherance of the public interest, and may
provide such exceptions to and exemptions from the provisions
of such code as the President in his discretion deems necessary
to effectuate the policy herein declared." Id. The "policy
herein declared" is manifestly that set forth in section
one. That declaration embraces a broad range of objectives. Among
them we find the elimination of "unfair competitive practices."
But even if this clause were to be taken to relate to practices
which fall under the ban of existing law, either common law or
statute, it is still only one of the authorized aims described
in section one. It is there declared to be "the policy of
Congress" --
"to remove obstructions to the free flow of interstate and foreign commerce which tend to diminish the amount thereof; and to provide for the general welfare by promotion the organization of industry for the purpose of cooperative action among trade groups, to induce and maintain united action of labor and management under adequate governmental sanctions and supervision, to eliminate unfair competitive practices, to promote the fullest possible utilization of the present productive capacity of industries, to avoid undue restriction of production (except as may be temporarily required), to increase the consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment, to improve standards of labor, and otherwise to rehabilitate industry and to conserve natural resources." 13
Under § 3, whatever "may tend to
effectuate" these general purposes may be included in the
"codes of fair competition." We think the conclusion
is inescapable that the authority sought to be conferred by §
3 was not merely to deal with "unfair competitive practices"
which offend against existing law, and could be the subject of
judicial condemnation without further legislation, or to create
administrative machinery for the application of established principles
of law to particular instances of violation. Rather, the purpose
is clearly disclosed to authorize new and controlling prohibitions
through codes of laws which would embrace what the formulators
would propose, and what the President would approve, or prescribe,
as wise and beneficient measures for the government of trades
and industries in order to bring about their rehabilitation, correction
and development, according to the general declaration of policy
in section one. Codes of laws of this sort are styled "codes
of fair competition."
We find no real controversy upon this point
and we must determine the validity of the Code in question in
this aspect. As the Government candidly says in its brief: "The
words 'policy of this title' clearly refer to the 'policy' which
Congress declared in the section entitled 'Declaration of Policy'
-- § 1. All of the policies there set forth point toward
a single goal -- the rehabilitation of industry and the industrial
recovery which unquestionably was the major policy of Congress
in adopting the National Industrial Recovery Act." And that
this is the controlling purpose of the Code now before us appears
both from its repeated declarations to that effect and from the
scope of its requirements. It will be observed that its provisions
as to the hours and wages of employees and its "general labor
provisions" were placed in separate articles, and these were
not included in the article on "trade practice provisions"
declaring what should be deemed to constitute "unfair methods
of competition." The Secretary of Agriculture thus stated
the objectives of the Live Poultry Code in his report to the President,
which was recited in the executive order of approval:
"That said code will tend to effectuate
the declared policy of title I of the National Industrial Recovery
Act as set forth in section 1 of said act in that the terms and
provisions of such code tend to: (a) Remove obstructions to the
free flow of interstate and foreign commerce which tend to diminish
the amount thereof; (b) to provide for the general welfare by
promoting the organization of industry for the purpose of cooperative
action among trade groups; (c) to eliminate unfair competitive
practices; (d) to promote the fullest possible utilization of
the present productive capacity of industries; (e) to avoid undue
restriction of production (except as may be temporarily required);
(f) to increase the consumption of industrial and agricultural
products by increasing purchasing power; and (g) otherwise to
rehabilitate industry and to conserve natural resources."
The Government urges that the codes will "consist
of rules of competition deemed fair for each industry by representative
members of that industry -- by the persons most vitally concerned
and most familiar with its problems." Instances are cited
in which Congress has availed itself of such assistance; as e.g.,
in the exercise of its authority over the public domain, with
respect to the recognition of local customs or rules of miners
as to mining claims, 14 or,
in matters of a more or less technical nature, as in designating
the standard height of drawbars. 15
But would it be seriously contended that Congress could delegate
its legislative authority to trade or industrial associations
or groups so as to empower them to enact the laws they deem to
be wise and beneficent for the rehabilitation and expansion of
their trade or industries? Could trade or industrial associations
or groups be constituted legislative bodies for that purpose because
such associations or groups are familiar with the problems of
their enterprises? And, could an effort of that sort be made valid
by such a preface of generalities as to permissible aims as we
find in section 1 of title I? The answer is obvious. Such a delegation
of legislative power is unknown to our law and is utterly inconsistent
with the constitutional prerogatives and duties of Congress.
The question, then, turns upon the authority
which § 3 of the Recovery Act vests in the President to approve
or prescribe. If the codes have standing as penal statutes, this
must be due to the effect of the executive action. But Congress
cannot delegate legislative power to the President to exercise
an unfettered discretion to make whatever laws he thinks may be
needed or advisable for the rehabilitation and expansion of trade
or industry. See Panama Refining Co. v. Ryan, supra, and cases
there reviewed.
Accordingly we turn to the Recovery Act to
ascertain what limits have been set to the exercise of the President's
discretion. First, the President, as a condition of approval,
is required to find that the trade or industrial associations
or groups which propose a code, "impose no inequitable restrictions
on admission to membership" and are "truly representative."
That condition, however, relates only to the status of the initiators
of the new laws and not to the permissible scope of such laws.
Second, the President is required to find that the code is not
"designed to promote monopolies or to eliminate or oppress
small enterprises and will not operate to discriminate against
them." And, to this is added a proviso that the code "shall
not permit monopolies or monopolistic practices." But these
restrictions leave virtually untouched the field of policy envisaged
by section one, and, in that wide field of legislative possibilities,
the proponents of a code, refraining from monopolistic designs,
may roam at will and the President may approve or disapprove their
proposals as he may see fit. That is the precise effect of the
further finding that the President is to make -- that the code
"will tend to effectuate the policy of this title."
While this is called a finding, it is really but a statement of
an opinion as to the general effect upon the promotion of trade
or industry of a scheme of laws. These are the only findings which
Congress has made essential in order to put into operation a legislative
code having the aims described in the "Declaration of Policy."
Nor is the breadth of the President's discretion
left to the necessary implications of this limited requirement
as to his findings. As already noted, the President in approving
a code may impose his own conditions, adding to or taking from
what is proposed, as "in his discretion" he thinks necessary
"to effectuate the policy" declared by the Act. Of course,
he has no less liberty when he prescribes a code on his own motion
or on complaint, and he is free to prescribe one if a code has
not been approved. The Act provides for the creation by the President
of administrative agencies to assist him, but the action or reports
of such agencies, or of his other assistants, -- their recommendations
and findings in relation to the making of codes -- have no sanction
beyond the will of the President, who may accept, modify or reject
them as he pleases. Such recommendations or findings in no way
limit the authority which § 3 undertakes to vest in the President
with no other conditions than those there specified. And this
authority relates to a host of different trades and industries,
thus extending the President's discretion to all the varieties
of laws which he may deem to be beneficial in dealing with the
vast array of commercial and industrial activities throughout
the country.
Such a sweeping delegation of legislative power
finds no support in the decisions upon which the Government especially
relies. By the Interstate Commerce Act, Congress has itself provided
a code of laws regulating the activities of the common carriers
subject to the Act, in order to assure the performance of their
services upon just and reasonable terms, with adequate facilities
and without unjust discrimination. Congress from time to time
has elaborated its requirements, as needs have been disclosed.
To facilitate the application of the standards prescribed by the
Act, Congress has provided an expert body. That administrative
agency, in dealing with particular cases, is required to act upon
notice and hearing, and its orders must be supported by findings
of fact which in turn are sustained by evidence. Interstate Commerce
Comm'n v. Louisville & Nashville R. Co., 227 U.S. 88; Florida
v. United States, 282 U.S. 194; United States v. Baltimore &
Ohio R. Co., 293 U.S. 454. When the Commission is authorized to
issue, for the construction, extension or abandonment of lines,
a certificate of "public convenience and necessity,"
or to permit the acquisition by one carrier of the control of
another, if that is found to be "in the public interest,"
we have pointed out that these provisions are not left without
standards to guide determination. The authority conferred has
direct relation to the standards prescribed for the service of
common carriers and can be exercised only upon findings, based
upon evidence, with respect to particular conditions of transportation.
New York Central Securities Co. v. United States, 287 U.S. 12,
24, 25; Texas & Pacific Railway Co. v. Gulf, Colorado &
Santa Fe Ry. Co., 270 U.S. 266, 273; Chesapeake & Ohio Ry.
Co. v. United States, 283 U.S. 35, 42.
Similarly, we have held that the Radio Act
of 1927 16 established standards
to govern radio communications and, in view of the limited number
of available broadcasting frequencies, Congress authorized allocation
and licenses. The Federal Radio Commission was created as the
licensing authority, in order to secure a reasonable equality
of opportunity in radio transmission and reception. The authority
of the Commission to grant licenses "as public convenience,
interest or necessity requires" was limited by the nature
of radio communications, and by the scope, character and quality
of the services to be rendered and the relative advantages to
be derived through distribution of facilities. These standards
established by Congress were to be enforced upon hearing, and
evidence, by an administrative body acting under statutory restrictions
adapted to the particular activity. Federal Radio Comm'n v. Nelson
Brothers Co., 289 U.S. 266.
In Hampton & Co. v. United States, 276 U.S. 394, the question related to the "flexible tariff provision" of the Tariff Act of 1922. 17 We held that Congress had described its plan "to secure by law the imposition of customs duties on articles of imported merchandise which should equal the difference between the cost of producing in a foreign country the articles in question and laying them down for sale in the United States, and the cost of producing and selling like or similar articles in the United States." As the differences in cost might vary from time to time, provision was made for the investigation and determination of these differences by the executive branch so as to make "the adjustments necessary to conform the duties to the standard underlying that policy and plan." Id., pp. 404, 405. The Court found the same principle to be applicable in fixing customs duties as that which permitted Congress to exercise its rate-making power in interstate commerce, "by declaring the rule which shall prevail in the legislative fixing of rates" and then remitting "the fixing of such rates" in accordance with its provisions "to a rate-making body." Id., p. 409. The Court fully recognized the limitations upon the delegation of legislative power. Id., pp. 408-411.
To summarize and conclude upon this point:
Section 3 of the Recovery Act is without precedent. It supplies
no standards for any trade, industry or activity. It does not
undertake to prescribe rules of conduct to be applied to particular
states of fact determined by appropriate administrative procedure.
Instead of prescribing rules of conduct, it authorizes the making
of codes to prescribe them. For that legislative undertaking,
§ 3 sets up no standards, aside from the statement of the
general aims of rehabilitation, correction and expansion described
in section one. In view of the scope of that broad declaration,
and of the nature of the few restrictions that are imposed, the
discretion of the President in approving or prescribing codes,
and thus enacting laws for the government of trade and industry
throughout the country, is virtually unfettered. We think that
the code-making authority thus conferred is an unconstitutional
delegation of legislative power.
Third. The question of the application of the
provisions of the Live Poultry Code to intrastate transactions.
Although the validity of the codes (apart from the question of
delegation) rests upon the commerce clause of the Constitution,
§ 3 (a) is not in terms limited to interstate and foreign
commerce. From the generality of its terms, and from the argument
of the Government at the bar, it would appear that § 3 (a)
was designed to authorize codes without that limitation. But under
§ 3 (f) penalties are confined to violations of a code provision
"in any transaction in or affecting interstate or foreign
commerce." This aspect of the case presents the question
whether the particular provisions of the Live Poultry Code, which
the defendants were convicted for violating and for having conspired
to violate, were within the regulating power of Congress.
These provisions relate to the hours and wages
of those employed by defendants in their slaughterhouses in Brooklyn
and to the sales there made to retail dealers and butchers.
(1) Were these transactions "in"
interstate commerce? Much is made of the fact that almost all
the poultry coming to New York is sent there from other States.
But the code provisions, as here applied, do not concern the transportation
of the poultry from other States to New York, or the transactions
of the commission men or others to whom it is consigned, or the
sales made by such consignees to defendants. When defendants had
made their purchases, whether at the West Washington Market in
New York City or at the railroad terminals serving the City, or
elsewhere, the poultry was trucked to their slaughterhouses in
Brooklyn for local disposition. The interstate transactions in
relation to that poultry then ended. Defendants held the poultry
at their slaughterhouse markets for slaughter and local sale to
retail dealers and butchers who in turn sold directly to consumers.
Neither the slaughtering nor the sales by defendants were transactions
in interstate commerce. Brown v. Houston, 114 U.S. 622, 632, 633;
Public Utilities Comm'n v. Landon, 249 U.S. 236, 245; Industrial-Association
v. United States, 268 U.S. 64, 78, 79; Atlantic Coast Line v.
Standard Oil Co., 275 U.S. 257, 267.
The undisputed facts thus afford no warrant
for the argument that the poultry handled by defendants at their
slaughterhouse markets was in a "current" or "flow"
of interstate commerce and was thus subject to congressional regulation.
The mere fact that there may be a constant flow of commodities
into a State does not mean that the flow continues after the property
has arrived and has become commingled with the mass of property
within the State and is there held solely for local disposition
and use. So far as the poultry here in question is concerned,
the flow in interstate commerce had ceased. The poultry had come
to a permanent rest within the State. It was not held, used, or
sold by defendants in relation to any further transactions in
interstate commerce and was not destined for transportation to
other States. Hence, decisions which deal with a stream of interstate
commerce -- where goods come to rest within a State temporarily
and are later to go forward in interstate commerce -- and with
the regulations of transactions involved in that practical continuity
of movement, are not applicable here. See Swift & Co. v. United
States, 196 U.S. 375, 387, 388; Lemke v. Farmers Grain Co., 258
U.S. 50, 55; Stafford v. Wallace, 258 U.S. 495, 519; Chicago Board
of Trade v. Olsen, 262 U.S. 1, 35; Tagg Bros. & Moorhead v.
United States, 280 U.S. 420, 439.
(2) Did the defendants' transactions directly
"affect" interstate commerce so as to be subject to
federal regulation? The power of Congress extends not only to
the regulation of transactions which are part of interstate commerce,
but to the protection of that commerce from injury. It matters
not that the injury may be due to the conduct of those engaged
in intrastate operations. Thus, Congress may protect the safety
of those employed in interstate transportation "no matter
what may be the source of the dangers which threaten it."
Southern Ry. Co. v. United States, 222 U.S. 20, 27. We said in
Second Employers' Liability Cases, 223 U.S. 1, 51, that it is
the "effect upon interstate commerce," not "the
source of the injury," which is "the criterion of congressional
power." We have held that, in dealing with common carriers
engaged in both interstate and intrastate commerce, the dominant
authority of Congress necessarily embraces the right to control
their intrastate operations in all matters having such a close
and substantial relation to interstate traffic that the control
is essential or appropriate to secure the freedom of that traffic
from interference or unjust discrimination and to promote the
efficiency of the interstate service. The Shreveport Case, 234
U.S. 342, 351, 352; Wisconsin Railroad Comm'n v. Chicago, B. &
Q. R. Co., 257 U.S. 563, 588. And combinations and conspiracies
to restrain interstate commerce, or to monopolize any part of
it, are none the less within the reach of the Anti-Trust Act because
the conspirators seek to attain their end by means of intrastate
activities. Cornoado Coal Co. v. United Mine Workers, 268 U.S.
295, 310; Bedford Cut Stone Co. v. Stone Cutters Assn., 274 U.S.
37, 46.
We recently had occasion, in Local 167 v. United
States, 291 U.S. 293, to apply this principle in connection with
the live poultry industry. That was a suit to enjoin a conspiracy
to restrain and monopolize interstate commerce in violation of
the Anti-Trust Act. It was shown that marketmen, teamsters and
slaughters (shochtim) had conspired to burden the free movement
of live poultry into the metropolitan area in and about New York
City. Marketmen had organized an association, had allocated retailers
among themselves, and had agreed to increase prices. To accomplish
their objects, large amounts of money were raised by levies upon
poultry sold, men were hired to obstruct the business of dealers
who resisted, wholesalers and retailers were spied upon and by
violence and other forms of intimidation were prevented from freely
purchasing live poultry. The Teamsters refused to handle poultry
for recalcitrant marketmen and members of the shochtim union refused
to slaughter. In view of the proof of that conspiracy, we said
that it was unnecessary to decide when interstate commerce ended
and when intrastate commerce began. We found that the proved interference
by the conspirators "with the unloading, the transportation,
the sales by marketmen to retailers, the prices charged and the
amount of profits exacted" operated "substantially and
directly to restrain and burden the untrammeled shipment and movement
of the poultry" while unquestionably it was in interstate
commerce. The intrastate acts of the conspirators were included
in the injunction because that was found to be necessary for the
protection of interstate commerce against the attempted and illegal
restraint. Id., pp. 297, 299,300.
The instant case is not of that sort. This
is not a prosecution for a conspiracy to restrain or monopolize
interstate commerce in violation of the Anti-Trust Act. Defendants
have been convicted, not upon direct charges of injury to interstate
commerce or of interference with persons engaged in that commerce,
but of violations of certain provisions of the Live Poultry Code
and of conspiracy to commit these violations. Interstate commerce
is brought in only upon the charge that violations of these provisions
-- as to hours and wages of employees and local sales -- "affected
" interstate commerce.
In determining how far the federal government
may go in controlling intrastate transactions upon the ground
that they "affect" interstate commerce, there is a necessary
and well-established distinction between direct and indirect effects.
The precise line can be drawn only as individual cases arise,
but the distinction is clear in principle. Direct effects are
illustrated by the railroad cases we have cited, as e.g., the
effect of failure to use prescribed safety appliances on railroads
which are the highways of both interstate and intrastate commerce,
injury to an employee engaged in interstate transportation by
the negligence of an employee engaged in an intrastate movement,
the fixing of rates for intrastate transportation which unjustly
discriminate against interstate commerce. But where the effect
of intrastate transactions upon interstate commerce is merely
indirect, such transactions remain within the domain of state
power. If the commerce clause were construed to reach all enterprises
and transactions which could be said to have an indirect effect
upon interstate commerce, the federal authority would embrace
practically all the activities of the people and the authority
of the State over its domestic concerns would exist only by sufferance
of the federal government. Indeed, on such a theory, even the
development of the State's commercial facilities would be subject
to federal control. As we said in the Minnesota Rate Cases, 230
U.S. 352, 410: "In the intimacy of commercial relations,
much that is done in the superintendence of local matters may
have an indirect bearing upon interstate commerce. The development
of local resources and the extension of local facilities may have
a very important effect upon communities less favored and to an
appreciable degree alter the course of trade. The freedom of local
trade may stimulate interstate commerce, while restrictive measures
within the police power of the State enacted exclusively with
respect to internal business, as distinguished from interstate
traffic, may in their reflex or indirect influence diminish the
latter and reduce the volume of articles transported into or out
of the State." See, also, Kidd v. Pearson, 128 U.S. 1, 21;
Heisler v. Thomas Colliery Co., 260 U.S. 2545, 259, 260.
The distinction between direct and indirect
effects has been clearly recognized in the application of the
Anti-Trust Act. Where a combination or conspiracy is formed, with
the intent to restrain interstate commerce or to monopolize any
part of it, the violation of the statute is clear. Coronado Coal
Co. v. United Mine Workers, 268 U.S. 295, 310. But where that
intent is absent, and the objectives are limited to intrastate
activities, the fact that there may be an indirect effect upon
interstate commerce does not subject the parties to the federal
statute, notwithstanding its broad provisions. This principle
has frequently been applied in litigation growing out of labor
disputes. United Mine Workers v. Coronado Coal Co., 259 U.S. 344,
410, 411; United Leather Workers v. Herkert & Meisel Trunk
Co., 265 U.S. 457, 464-467; Industrial Association v. United States,
268 U.S. 64, 82; Levering & Garrigues Co. v. Morrin, 289 U.S.
103, 107, 108. In the case last cited we quoted with approval
the rule that had been stated and applied in Industrial Association
v. United States, supra, after review of the decisions, as follows:
"The alleged conspiracy and the acts here complained of,
spent their intended and direct force upon a local situation,
-- for building is as essentially local as mining, manufacturing
or growing crops, -- and if, by a resulting diminution of the
commercial demand, interstate trade was curtailed either generally
or in specific instances, that was a fortuitous consequence so
remote and indirect as plainly to cause it to fall outside the
reach of the Sherman Act."
While these decisions related to the application
of the federal statute, and not to its constitutional validity,
the distinction between direct and indirect effects of intrastate
transactions upon interstate commerce must be recognized as a
fundamental one, essential to the maintenance of our constitutional
system. Otherwise, as we have said, there would be virtually no
limit to the federal completely centralized government. We must
consider the provisions here in question in the light of this
distinction.
The question of chief importance relates to
the provisions of the Code as to the hours and wages of those
employed in defendants' slaughterhouse markets. It is plain that
these requirements are imposed in order to govern the details
of defendants' management of their local business. The persons
employed in slaughtering and selling in local trade are not employed
in interstate commerce. Their hours and wages have no direct relation
to interstate commerce. The question of how many hours these employees
should work and what they should be paid differs in no essential
respect from similar questions in other local businesses which
handle commodities brought into a State and there dealt in as
a part of its internal commerce. This appears from an examination
of the considerations urged by the Government with respect to
conditions in the poultry trade. Thus, the Government argues that
hours and wages affect prices; that slaughterhouse men sell at
a small margin above operating costs; that labor represents 50
to 60 per cent. of these costs; that a slaughterhouse operator
paying lower wages or reducing his cost by exacting long hours
of work, translates his saving into lower prices; that this results
in demands for a cheaper grade of goods; and that the cutting
of prices brings about a demoralization of the price structure.
Similar conditions may be adduced in relation to other businesses.
The argument of the Government proves too much. If the federal
government may determine the wages and hours of employees in the
internal commerce of a State, because of their relation to cost
and prices and their indirect effect upon interstate commerce,
it would seem that a similar control might be exerted over other
elements of cost, also affecting prices, such as the number of
employees, rents, advertising, methods of doing business, etc.
All the processes of production and distribution that enter into
cost could likewise be controlled. If the cost of doing an intrastate
business is in itself the permitted object of federal control,
the extent of the regulation of cost would be a question of discretion
and not of power.
The Government also makes the point that efforts
to enact state legislation establishing high labor standards have
been impeded by the belief that unless similar action is taken
generally, commerce will be diverted from the States adopting
such standards, and that this fear of diversion has led to demands
for federal legislation on the subject of wages and hours. The
apparent implication is that the federal authority under the commerce
clause should be deemed to extend to the establishment of rules
to govern wages and hours in intrastate trade and industry generally
throughout the country, thus overriding the authority of the States
to deal with domestic problems arising from labor conditions in
their internal commerce.
It is not the province of the Court to consider
the economic advantages or disadvantages of such a centralized
system. It is sufficient to say that the Federal Constitution
does not provide for it. Our growth and development have called
for wide use of the commerce power of the federal government in
its control over the expanded activities of interstate commerce,
and in protecting that commerce from burdens, interferences, and
conspiracies to restrain and monopolize it. But the authority
of the federal government may not be pushed to such an extreme
as to destroy the distinction, which the commerce clause itself
establishes, between commerce "among the several States"
and the internal concerns of a State. The same answer must be
made to the contention that is based upon the serious economic
situation which led to the passage of the Recovery Act, -- the
fall in prices, the decline in wages and employment, and the curtailment
of the market for commodities. Stress is laid upon the great importance
of maintaining wage distributions which would provide the necessary
stimulus in starting "the cumulative forces making for expanding
commercial activity." Without in any way disparaging this
motive, it is enough to say that the recuperative efforts of the
federal government must be made in a manner consistent with the
authority granted by the Constitution.
We are of the opinion that the attempt through
the provisions of the Code to fix the hours and wages of employees
of defendants in their intrastate business was not a valid exercise
of federal power.
The other violations for which defendants were
convicted related to the making of local sales. Ten counts, for
violation of the provision as to "straight killing,"
were for permitting customers to make "selections of individual
chickens taken from particular coops and half coops." Whether
or not this practice is good or bad for the local trade, its effect,
if any, upon interstate commerce was only indirect. The same may
be said of violations of the Code by intrastate transactions consisting
of the sale "of an unfit chicken" and of sales which
were not in accord with the ordinances of the City of New York.
The requirement of reports as to prices and volumes of defendants'
sales was incident to the effort to control their intrastate business.
In view of these conclusions, we find it unnecessary
to discuss other questions which have been raised as to the validity
of certain provisions of the Code under the due process clause
of the Fifth Amendment.
On both the grounds we have discussed, the
attempted delegation of legislative power, and the attempted regulation
of intrastate transactions which affect interstate commerce only
indirectly, we hold the code provisions here in question to be
invalid and that the judgment of conviction must be reversed.
No. 854 -- reversed.
No. 864 -- affirmed.
---- Begin EndNotes ----
1 The full title of the Code is "Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and about the City of New York."
2 The indictment contained 60 Counts, of which 27 counts were dismissed by the trial court, and on 14 counts the defendants were acquitted.
3 Act of June 16, 1933, c. 90, 48 Stat. 195, 196; 15 U.S.C. 703.
4 "CODES
OF FAIR COMPETITION.
"Sec. 3. (a) Upon the application to the
President by one or more trade or industrial associations or groups,
the President may approve a code or codes of fair competition
for the trade or industry or subdivision thereof, represented
by the applicant or applicants, if the President finds (1) that
such associations or groups impose no inequitable restrictions
on admission to membership therein and are truly representative
of such trades or industries or subdivisions thereof, and (2)
that such code or codes are not designed to promote monopolies
or to eliminate or oppress small enterprises and will not operate
to discriminate against them, and will tend to effectuate the
policy of this title: Provided, That such code or codes shall
not permit monopolies or monopolistic practices: Provided further,
That where such code or codes affect the services and welfare
of persons engaged in other steps of the economic process, nothing
in this section shall deprive such persons of the right to be
heard prior to approval by the President of such code or codes.
The President may, as a condition of his approval of any such
code, impose such conditions (including requirements for the making
of reports and the keeping of accounts) for the protection of
consumers, competitors, employees, and others, and in furtherance
of the public interest, and may provide such exceptions to and
exemptions from the provisions of such code, as the President
in his discretion deems necessary to effectuate the policy herein
declared.
"(b) After the President shall have approved
any such code, the provisions of such code shall be the standards
of fair competition for such trade or industry or subdivision
thereof. Any violation of such standards in any transaction in
or affecting interstate or foreign commerce shall be deemed an
unfair method of competition in commerce within the meaning of
the Federal Trade Commission Act, as amended; but nothing in this
title shall be construed to impair the powers of the Federal Trade
Commission under such Act, as amended.
"(c) The several district courts of the
United States are hereby invested with jurisdiction to prevent
and restrain violations of any code of fair competition approved
under this title; and it shall be the duty of the several district
attorneys of the United States, in their respective districts,
under the direction of the Attorney General, to institute proceedings
in equity to prevent and restrain such violations.
(d) Upon his own motion, or if complaint is
made to the President that abuses inimical to the public interest
and contrary to the policy herein declared are prevalent in any
trade or industry or subdivision thereof, and if no code of fair
competition therefor has theretofore been approved by the President,
the President, after such public notice and hearing as he shall
specify, may prescribe and approve a code of fair competition
for such trade or industry or subdivision thereof, which shall
have the same effect as a code of fair competition approved by
the President under subsection (a) of this section.
. . . . .
"(f) When a code of fair competition has been approved or prescribed by the President under this title, any violation of any provision thereof in any transaction in or affecting interstate or foreign commerce shall be a misdemeanor and upon conviction thereof an offender shall be fined not more than $ 500 for each offense, and each day such violation continues shall be deemed a separate offense."
5 The Executive
Order is as follows:
"EXECUTIVE ORDER.
"Approval of Code of Fair Competition
for the Live Poultry Industry of the Metropolitan Area in and
about the City of New York.
"Whereas, the Secretary of Agriculture
and the Administrator of the National Industrial Recovery Act
having rendered their separate reports and recommendations and
findings on the provisions of said code, coming within their respective
jurisdictions, as set forth in the Executive Order No. 6182 of
June 26, 1933, as supplemented by Executive Order No. 6207 of
July 21, 1933, and Executive Order No. 6345 of October 20, 1933,
as amended by Executive Order No. 6551 of January 8, 1934;
"Now, therefore, I, Franklin D. Roosevelt,
President of the United States, pursuant to the authority vested
in me by title I of the National Industrial Recovery Act, approved
June 16, 1933, and otherwise, do hereby find that:
"1. An application has been duly made,
pursuant to and in full compliance with the provisions of title
I of the National Industrial Recovery Act, approved June 16, 1933,
for my approval of a code of fair competition for the live poultry
industry in the metropolitan area in and about the City of New
York; and
"2. Due notice and opportunity for hearings
to interested parties have been given pursuant to the provisions
of the act and regulations thereunder; and,
"3. Hearings have been held upon said
code, pursuant to such notice and pursuant to the pertinent provisions
of the act and regulations thereunder; and
"4. Said code of fair competition constitutes
a code of fair competition, as contemplated by the act and complies
in all respects with the pertinent provisions of the act, including
clauses (1) and (2) of subsection (a) of section 3 of title I
of the act; and
"5. It appears, after due consideration,
that said code of fair competition will tend to effectuate the
policy of Congress as declared in section 1 of title I of the
act.
"Now, therefore, I, Franklin D. Roosevelt,
President of the United States, pursuant to the authority vested
in me by title I of the National Industrial Recovery Act, approved
June 16, 1933, and otherwise, do hereby approve said Code of Fair
Competition for the Live Poultry Industry in the Metropolitan
Area in and about the City of New York.
"FRANKLIN D. ROOSEVELT, "President
of the United States."
"The White House, April 13, 1934."
6 n6 The Administrator for Industrial Recovery stated in his report that the Code had been sponsored by trade associations representing about 350 wholesale firms, 150 retail shops, and 21 commission agencies; that these associations represented about 90 per cent. of the live poultry industry by numbers and volume of business; and that the industry as defined in the Code supplied the consuming public with practically all the live poultry coming into the metropolitan area from forty-one States and transacted an aggregate annual business of approximately ninety million dollars. He further said that about 1610 employees were engaged in the industry; that it had suffered severely on account of the prevailing economic conditions and because of unfair methods of competition and the abuses that had developed as a result of the "uncontrolled methods of doing business"; and that these conditions had reduced the number of employees by approximately 40 per cent. He added that the report of the Research and Planning Division indicated that the Code would bring about an increase in wages of about 20 per cent. in this industry and an increase in employment of 19.2 per cent.
7 The prohibition in the Code (Art. VII, § 14) was as follows: "Straight Killing. -- The use, in the wholesale slaughtering of poultry, of any method of slaughtering other than 'straight killing' or killing on the basis of official grade. Purchasers may, however, make selection of a half coop, coop, or coops, but shall not have the right to make any selection of particular birds."
8 See Ex parte Milligan, 4 Wall. 2, 120, 121; Home Building & Loan Assn. v. Blaisdell, 290 U.S. 398, 426.
9 That section, under the heading "Declaration of Policy," is as follows: "Section 1. A national emergency productive of widespread unemployment and disorganization of industry, which burdens interstate and foreign commerce, affects the public welfare, and undermines the standards of living of the American people, is hereby declared to exist. It is hereby declared to be the policy of Congress to remove obstructions to the free flow of interstate and foreign commerce which tend to diminish the amount thereof; and to provide for the general welfare by promoting the organization of industry for the purpose of cooperative action among trade groups, to induce and maintain united action of labor and management under adequate governmental sanctions and supervision, to eliminate unfair competitive practices, to promote the fullest possible utilization of the present productive capacity of industries, to avoid undue restriction of production (except as may be temporarily required), to increase the consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment, to improve standards of labor, and otherwise to rehabilitate industry and to conserve natural resources."
10 See cases collected in Nims on Unfair Competition and Trade-Marks, Chap. I, § 4, p. 19, and Chap. XIX.
11 Act of September 26, 1914, c. 311, 38 Stat. 717, 719, 720.
12 The Tariff Act of 1930 ( § 337, 46 Stat. 703), like the Tariff Act of 1922 ( § 316, 42 Stat. 943), employs the expressions "unfair methods of competition" and "unfair acts" in the importation of articles into the United States, and in their sale, "the effect or tendency of which is to destroy or substantially injure an industry, efficiently and economically operated, in the United States, or to prevent the establishment of such an industry, or to restrain or monopolize trade and commerce in the United States." Provision is made for investigation and findings by the Tariff Commission, for appeals upon questions of law to the United States Court of Customs and Patent Appeals, and for ultimate action by the President when the existence of any "such unfair method or act" is established to his satisfaction.
13 See Note 9.
14 Act of July 26, 1866, c. 262, 14 Stat. 251; Jackson v. Roby, 109 U.S. 440, 441; Erhardt v. Boaro, 113 U.S. 527, 535; Butte City Water Co. v. Baker, 196 U.S. 119, 126.
15 Act of March 2, 1893, c. 196, 27 Stat. 531; St. Louis, I M. & So. Ry. Co. v. Taylor, 210 U.S. 281, 286.
16 Act of February 23, 1927, c. 169, 44 Stat. 1162, as amended by the Act of March 28, 1928, c. 263, 45 Stat. 373.
17 Act
of September 21, 1922, c. 356, Title III, § 315, 42 Stat.
858, 941.
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