Article I, Section 8, Clause 3:
[The Congress shall have Power . . . ] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; . . .
Passed on June 16, 1933, the National Industrial Recovery Act (NIRA) marked Congress’s initial effort to address the Great Depression.1 NIRA recognized the existence of “a national emergency productive of widespread unemployment and disorganization of industry” that burdened “interstate and foreign commerce,” affected “the public welfare,” and undermined “the standards of living of the American people.” To alleviate these conditions, NIRA authorized the President to approve “codes of fair competition” if industrial or trade groups applied for such codes, or to prescribe such codes if there were no applications. Among other things, NIRA required the codes to provide certain guarantees respecting hours, wages, and collective bargaining.2
In A. L. A. Schechter Poultry Corp. v. United States,3 the Supreme Court held the Live Poultry Code to be unconstitutional. Although practically all poultry Schechter handled came from outside the state, and hence via interstate commerce, the Court held that once the chickens arrived in Schechter’s wholesale market, interstate commerce in them ceased. Although NIRA purported to govern business activities that “affected” interstate commerce, Chief Justice Charles Hughes interpreted “affected” to mean “directly” affect commerce. He stated:
[T]he 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, . . . there would be virtually no limit to the federal power and for all practical purposes we should have a completely centralized government.4
In short, the Court appeared to have returned in Schechter to the rationale of the Sugar Trust case.5
Congress next attempted to address the Depression through the Agricultural Adjustment Act of 1933 (AAA).6 The Court, however, set the AAA aside in United States v. Butler on the grounds that Congress had attempted to regulate production in violation of the Tenth Amendment.7
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Footnotes
- 1
- 48 Stat. 195.
- 2
- Id.
- 3
- 295 U.S. 495 (1935).
- 4
- Id. at 548. See also id. at 546.
- 5
- In United States v. Sullivan, 332 U.S. 689 (1948), the Court interpreted the Federal Food, Drug, and Cosmetic Act of 1938 to apply to a retailer’s sale of drugs purchased from his wholesaler nine months after their interstate shipment had been completed. In an opinion written by Justice Hugo Black, the Court cited United States v. Walsh, 331 U.S. 432 (1947); Wickard v. Filburn, 317 U.S. 111 (1942); United States v. Wrightwood Dairy Co., 315 U.S. 110 (1942); United States v. Darby, 312 U.S. 100 (1941). Justice Felix Frankfurter dissented on the basis of FTC v. Bunte Bros., 312 U.S. 349 (1941). Subsequently, the Court repudiated the Schechter distinction between “direct” and “indirect” effects. Cf. Perez v. United States, 402 U.S. 146 (1971). See also McDermott v. Wisconsin, 228 U.S. 115 (1913), which preceded Schechter by more than two decades.
The Court held, however, that NIRA suffered from several other constitutional infirmities besides its disregard, as illustrated by the Live Poultry Code, of the “fundamental” distinction between “direct” and “indirect” effects, namely, the delegation of standardless legislative power, the absence of any administrative procedural safeguards, the absence of judicial review, and the dominant role played by private groups in the general scheme of regulation.
- 6
- 48 Stat. 31.
- 7
- United States v. Butler, 297 U.S. 1, 63–64, 68 (1936).