Transcript of Oral Argument on Thursday, May 2, 1935
MR. REED: May it please the Court.
The present controversy is before Your Honors by virtue of the allowance of two writs of certiorari to the Circuit Court of Appeals for the Second Circuit, which court had affirmed in part, and reversed in part, the sentences imposed on all of the defendants in this case.
The defendants below were indicted on 60 counts.
All except the first count were for violations of a certain Code-the Code of Fair Competition for the Live-Poultry Industry of the Greater New York Metropolitan Area.
Their indictment arose because of violations of the Codes, which were prohibited by a certain section of the National Recovery Act, to wit: Section 3(f) of that Act, which reads as follows “(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.”
There was another count to the indictment, based upon the conspiracy statute, with the allegation that these defendants had conspired together to violate the provisions of Section 3(f) and of the Code.
The Code of Fair Competition for the Live-Poultry Industry had various provisions as to certain members of that industry.
The ones which are covered by the counts of the indictment, which have survived the trial in the lower court, are: the one relating to the conspiracy; counts relating to the sale of unfit poultry; counts relating to the sale of uninspected poultry; counts relating to what are called violations of “straight killing” provisions; those which relate to the failure of the defendants to file reports of their business and the amount of commodities that they sold; those relating to the filing of false reports; those relating to minimum wages; those relating to maximum hours of labor; and those relating to the sale of poultry to unlicensed dealers, which is in violation of the Sanitary Code of the City of New York.
On appeal from the District Court, the Circuit Court of Appeals sustained the conviction on 17 of the 19 counts, and reversed the conviction on two counts-the counts relating to minimum wages and maximum hours.
The Government took a writ of certiorari in order to bring before this Court the reversal of the conviction on the two counts relating to wages and hours; and the defendants below have, of course, taken the appeal on the other 17 counts.
The indictments sufficiently, we submit, allege the violations of the Code, and the violations, as either being in or affecting interstate commerce.
It is impossible, of course, to go over each one of the counts of the indictment at this time, but I will speak briefly of the indictment on the 46th count, which relates to a violation of the wage provision.
That count sets out the Code of Fair Competition.
It goes into the question of the interstate character of this business; the amount of the poultry that moves in interstate commerce; the method of handling that poultry; the regulation of commerce under the Code; the transportation of the poultry; the transportation of the poultry under the Code; and specifies in what way there is a violation of that provision of the Code-the wages being less than the wage minimum that has been fixed by the Code; and it alleges how it affects interstate commerce.
The allegation as to how it affects interstate commerce is, in substance, that where a dealer in poultry is left free to hire men at any wages he pleases, in contravention of the minimum-wage provision of the Code-which was 50 cents an hour-by that act is enabled to sell poultry cheaper to consumers and to get constantly lower prices at which he can market his product; and that other dealers in poultry, by reason of the fact that they must compete with the prices at which this poultry dealer is able to market to the public, must call for a constantly decreasing quality of poultry, or themselves reduce the wages of their employees; and that reduction of wages-that reduced quality of poultry-in the effort to be able to sell at a price to meet the competition, in the period through which we are going now, the strong competition in this industry, as well as in others, results not only in changing the price of poultry, but results in affecting the movement in interstate commerce of poultry because the live-poultry price, as we will show later, in all the large cities of the country is governed by the price which live poultry brings in the market in New York City.
The result of that is that when a better grade of poultry has to be sold at a cheaper price, and when less good poultry is brought into New York to create the demand, there is less demand for the good poultry and more demand for the poorer grades of poultry and more of these cheap grades of poultry are shipped to New York; and thus a change occurs in the movement in interstate commerce by these acts of those men.
The defendants have specified as errors that this Act is an unlawful delegation of power.
They say that, inasmuch as it seeks to regulate or remove obstructions to the normal flow of interstate commerce, it is unconstitutional because it is beyond the power of Congress to so legislate.
They say that it is unconstitutional because it deprives those who work, and those who employ, of the liberty of contract under the due process provision of the Fifth Amendment.
They say that the acts which are controlled are purely intrastate acts, and that therefore the power of Congress does not reach out to regulate and control them-and there are a number of procedural objections which may, or may not, become important in the course of the argument.
The Act which we have brought here before Your Honors, the National Industrial Recovery Act, was passed on May 17, 1933-or, rather, it was initiated by a message from the President on that date, and passed shortly afterward.
It was designed to meet the emergency that existed at that time by the removal of obstruct ions to commerce, which were deemed by Congress to have been sufficient to at least in part, if not to a very large extent, have brought about the conditions then existing in the country.
It was also intended to bring about cooperative action between labor and management.
It was sought, through that manner, to eliminate unfair trade practices.
It was hoped that the purchasing power would be increased- because that was one of the declarations of policy in the Act, that the purchasing power would be increased through the N. R. A.
Insofar as the present controversy is concerned, to accomplish this purpose the Congress looked to a policy of voluntary operation of an industry, through codes.
The present Code was one of those adopted, of course, under that Act.
And in the trial in the District Court, it was conceded by the parties-as appears from page 404 of the record-that the Code was adopted in conformity with the Act.
The defendants reserve, of course, the questions as to the constitutionality of the Code and as to the application of the Act.
In the record, and as a part of the indictment, there are letters of the Secretary of Agriculture and of the Administrator of the N. R. A., transmitting to the President the Code and stating that that Code had been adopted by a group of employers representing more than 90 percent of the particular industry.
MR. JUSTICE MCREYNOLDS: Were these particular defendants in this case parties to that Code?
MR. REED: No, sir, they were not.
In answer to your question, I would like also to add that they were present at various transactions leading up to the adoption of the Code-or some of them were-and later on they were sent the notice as to the Code-not to the defendants named in this indictment but to the firm of Schechter & Schechter, who had the same members as the corporation named in this indictment.
The Code undertook to apply rules of fair competition to an industry that had for its central purpose the receipt and distribution of live poultry in the New York City metropolitan area.
I think I should say here that there is nothing in the record to indicate that any of the poultry under discussion in this case was shipped out of New York to any other state.
This live-poultry business of New York is peculiar in this: That New York uses more live poultry than all the rest of the large cines of the country together.
It is the central market for the live-poultry business: and the New York market, as is plainly apparent from the record, dominates and controls the prices of live poultry throughout the United States.
It is shown in the record that New York has been the market for diseased poultry; that it has been the market where uninspected poultry is sold with the greatest freedom, with the result that consumers have become distrustful of live poultry that is marketed there.
And for that reason-we cannot say to what extent, but certainly to some extent-there has resulted the substitution of dressed poultry for live poultry in New York.
And, although the consumption of live poultry and dressed poultry, take, together, has remained somewhat stationary, the percentage of live poultry has fallen some 50 percent.
It is the contention of the Government that the selling of uninspected poultry, the selling of diseased poultry, to unlicensed dealers, and the handling of poultry under conditions that result in wages below the minimum and hours above the maximum, necessarily have affected interstate commerce; that those practices result in price-cutting; and, in the opinion of Judge Manton, he states, the appellee argues that the payment of lower wages permits the employer to sell at a lower price than if he paid higher wages.
The argument is to this effect: Lower wages result in price-cutting which, in turn, affects interstate commerce.
It was also established that sales by wholesale marketmen to unlicensed operators not subject to health department supervision were a further cause of the industry's unfair practices.
To bring a little more clearly before the Court the facts that were developed in the record below, I would like to explain the method of handling live poultry in New York: 73 percent of all carload shipments of poultry in the United States move into the New York area-about three-fourths of all the poultry that moves into New York moves by train, and about one-fourth by truck or express; 35 states contribute poultry to the New York market; 96 percent of all the poultry consumed in New York moves from other states to New York, and of the other 4 percent, a large part consists of Long Island ducks; and of the chickens, some 99 percent of all that are consumed in New York move from other states to New York City.
MR. JUSTICE SUTHERLAND: But not out of New York to other states?
MR. REED: But not out of New York to other states.
The poultry is no longer shipped in coops upon the trains, but moves in what are known as poultry cars, with which, of course, Your Honors are familiar.
They are cars with some 12 compartments in them; and the poultry is put into the car, and then unloaded at the point of terminal.
Those cars come into two places: 75 percent of them come into the New York Central yards in Manhattan, and the other 25 percent come into the New Jersey terminals.
That which goes into New York is sold by commission men to slaughterers, similar to the defendants in this case.
The same is true of the New Jersey terminals.
Practically all that comes into New York is taken from the car, not by the commission men but by the slaughterers, who are those similar to the Schechters in this case.
About 80 percent of the poultry that comes into the New Jersey terminals is loaded there on the trucks of the slaughterhouse operators, and about 20 percent of it is brought into the West Washington Market in New York City, where about one-half of it is transferred to the trucks of the slaughterers; and it is practically all sold within 24 hours.
MR. JUSTICE MCREYNOLDS: To whom is the poultry shipped?
MR. REED: The consignees are the commission men.
MR. JUSTICE MCREYNOLDS: And what do they do with it?
MR. REED: They sell it to the slaughterhouse men, who are the defendants in this case.
MR. JUSTICE MCREYNOLDS: Are these the men who had gotten the shipment of poultry in New York?
MR. REED: Who had gotten at least “a” shipment of the poultry to them.
MR. JUSTICE MCREYNOLDS: Yes.
MR. REED: Now, of course, there are some poultry men who buy poultry in Cincinnati, or Chicago for example, and bring it in, so that they are the purchasers of the poultry.
But the normal method of business is that the shipper from Missouri, for example- which State is the largest contributor-sometimes, consigns, in his own name, to the commission man, notifying the commission man; and in that case, the commission man merely acts as agent.
And in another case-such as that involved in case No.
67 which was before Your Honors some time ago-the commission men act as a conduit for this poultry that moves from the country district to the purchaser-the slaughterhouse operator.
Now that slaughterhouse operator may acquire it from the commission men.
There is evidence here that these particular defendants also purchase their own poultry in points such as Philadelphia and send their own trucks for it; so that they purchased poultry in Philadelphia and brought it in those trucks to their own poultry-slaughtering establishments in New York.
MR. JUSTICE STONE: In the sales by commission men, did I understand you correctly to say that they took place in New York?
Or was it New Jersey?
MR. REED: Some are in New Jersey, but by far the larger percent of the sales take place at the New York Central yards, where the buyers gather in the early morning to buy the poultry from the commission men, who of course are the agents of the shipping men in the country for the sale of that poultry; and it is sold, and the money is remitted to the country dealer.
MR. JUSTICE SUTHERLAND: Does it make any difference in the application of the proper rule of law to the case whether they buy them outside and bring them in, or buy them in New York?
MR. REED: We think not.
MR. JUSTICE BRANDEIS: Who are the men whose wages are in question?
MR. REED: They are the slaughterhouse operators.
MR. JUSTICE BRANDEIS: And those slaughterhouse operators are the purchasers from the commission men?
MR. REED: Yes, sir-they are the purchasers from the commission men.
MR. JUSTICE BRANDEIS: You said some of them brought the poultry there?
MR. REED: Yes, sir.
MR. JUSTICE BRANDEIS: But, with that exception, they are bought from the commission houses?
MR. REED: Correct.
MR. JUSTICE BRANDEIS: And the purchases are made in New York State?
MR. REED: Some of them are made in New Jersey, because they go across the river to receive the poultry at the terminals in New Jersey.
MR. JUSTICE BRANDEIS: In that case, they go over and bring it in themselves into New York State?
MR. REED: They bring it themselves into New York State.
MR. JUSTICE VAN DEVANTER: None of it comes from New York State?
MR. REED: A very small percentage of chickens-less than I percent that is used in New York City.
Of the commission men engaged in this business, there are 22; of slaughterhouse operators, there are about 350.
And then, of course, there are the retail butcher shops and the retail poulterers that sell the product to the ultimate consumer.
MR. JUSTICE BRANDEIS: Are all the wages of all these men also involved?
MR. REED: They are not all involved.
MR. JUSTICE BRANDEIS: It is the slaughterhouse employees that are involved?
They are the only ones?
MR. REED: They are the only ones involved.
It might be pointed out that this poultry is slaughtered in accordance with the Jewish laws, and is Kosher-killed poultry, to a very large degree.
The result of that fact is that the slaughtering takes place after the sale is made by the slaughterhouse operator to the butcher or retailer.
The retailer comes into the slaughterhouse and selects live poultry from the coops into which the poultry has been put after being unloaded from the train and, after purchase from the commission men and prior to the delivery of that poultry on sale, the slaughterhouse operator has the poultry slaughtered and delivers not the live poultry but the slaughtered poultry.
MR. JUSTICE SUTHERLAND: Is everything that the defendants do, which affects the poultry, done after it has passed to them-after the poultry has come to rest in the slaughterhouse?
MR. REED: It has, so far as slaughtering is concerned.
MR. JUSTICE BRANDEIS: That is, the retailer has purchased his poultry alive?
MR. REED: He has purchased his poultry alive.
MR. JUSTICE BRANDEIS: Now who pays for the slaughtering?
MR. REED: The slaughterhouse operator pays for that.
That is a part of the service he renders to the retailer.
MR. JUSTICE BRANDEIS: That is a part of the trade?
MR. REED: That is a part of the trade.
MR. JUSTICE BRANDEIS: First he sells the poultry, and then slaughters it for the retailer's benefit?
MR. REED: Precisely.
However, the custom is so universal that when you say the slaughterhouse does it “for his benefit,” it is actually a part of the transaction.
MR. JUSTICE VAN DEVANTER: He simply does that.
He does not contract to deliver the chicken as a dressed chicken?
MR. REED: No, it is just slaughtered.
This live-poultry business, of poultry sold in New York, in 1927, had a value of $57 million, at an average price of 31 cents for the poultry.
In the year 1933, that value of the poultry sold in New York had fallen to $27 million and the price had fallen to about 14 cents.
I have spoken of the dominant effect of the New York market upon the poultry market of the whole country.
We have, in our brief, furnished certain data in regard to that which will, I am sure, convince the Court that the New York market is the dominating power over the markets of the country.
I would like particularly to call attention to the fact that the New York market, of course, moves from day-to-day.
It is set by a bargain between the buyer and the commission man-or by the slaughterhouse operator on one side, and the commission man on the other.
Quite frequently that price is not a fixed price that they will reach, but merely that they will pay the price that may be the price for that market day.
And there is a reporting service conducted by a disinterested group that reports what prices are for various classes of poultry.
And that organization makes its living by selling that information to the newspapers of the country.
So that, within a few hours after the New York market opens, Boston and Chicago are notified of the prices and the prices, at those points, are adjusted as between the difference in price and freight.
And of course that same information, as to prices, filters back into the country districts.
So that the persons who ship the poultry from the country districts change their prices dependent upon the opening prices in the New York market.
It is the Government's contention that the trade practices that are provided against in this Code have substantially affected the movement in interstate commerce and the price of the poultry throughout the whole country.
There is evidence here that, if unfit poultry could be eliminated from the live-poultry market in New York, there would be an increase of 20 percent in the consumption of live poultry in the city.
We submit that the sale of unfit poultry not only reduces the consumption and therefore the movement in interstate commerce in the country as a whole, but that, as when one retailer is permitted- and does, as the record will show- to buy unfit poultry for sale, if that is so, he can reduce his price.
This being a highly competitive business in the City of New York, the reduction in price must be met by competitor s.
It is easy to see that, when a poulterer in his window says poultry can be bought for 7 or 8 cents a pound when the prices are 14 cents a pound, or can be bought for 14 cents when the price is 30 cents, that that condition forces every dealer to try to meet that price.
And when he does meet it, it means that more low-grade poultry moves into New York in interstate commerce.
So that more low-grade poultry gets into the New York market and results in competition with the higher grade, the higher-grade poultry is in competition with the low-grade or unfit poultry, so that there is a reduction of the quality of the poultry.
The same thing is true, we contend, in regard to uninspected poultry.
And the same thing is true as to what we call in the indictment “straight-killing. ”
Straight-killing means that the poultry purchaser must come into the market and take all the chickens in a coop.
He cannot go and select the choice chickens out of the coop.
If he does select the choice chickens out of the coop, as was the custom at one time, it brings down the prices in the sale of the lower-grade poultry, and the sales of the lower-grade poultry in turn bring down the prices of the higher grades.
May I take up the question, now, of the delegation of legislative power, which is questioned in this proceeding?
This Court has lately had before it, of course, in the case of Panama Refining Co. v. Ryan, 293 U. S.
388, the question of the delegation of power as set out in Section 9(c) of the Industrial Recovery Act.
You have said that it is manifest that the broad outline in Section I of the Act is simply an introduction, leaving the legislative policy as to practice supposed to be declared and defined, if at all, by the subsequent sections of the Act.
The Government submits that the delegation under Section 3(a) of the Act, of the power of the President to approve these methods of fair competition, meets the requirement which this Court laid down in the Panama case.
You have said, in regard to Section 9(c), that Congress did not state that transportation of all that oil was unfair competition.
Congress did not declare those to be the circumstances under which transportation of the petroleum should be forbidden, and did not require the President to make any finding.
Under the language of that section, the President was not required to find anything.
You also said, in that case, that Section 3(a)-and that is the Section under which this Code was approved-provides “for the approval by the President of codes for trades or industries,” and that these are to be codes of fair competition; and that the authority is based upon certain express conditions which require finding by the President.
Under Section 9(c), as I have said, no findings are required.
That case repeated what had been said many times before by this Court, that the delegation was to be such a reasonable delegation of power upon the facts that were before Congress at the time this Act was passed, and to meet the conditions which it was sought to remedy.
We submit that the delegation here meets the requirements as to a legislative policy laid down by Congress, as determined in the Panama case.
MR. JUSTICE MCREYNOLDS: What is that?
I do not understand you.
MR. JUSTICE MCREYNOLDS: Yes.
MR. REED: - is not considered by this Court as being a sufficient declaration of the policy of Congress.
MR. JUSTICE MCREYNOLDS: Considered as being a sufficient declaration of policy?
MR. REED: As being a sufficient declaration of policy.
It is called a declaration of policy, but in its opinion in that case this Court stated that that was not construed to be a sufficient declaration of the policy of Congress; that it was merely an introduction to the Act.
But we urge that, while it may not be a sufficient declaration of policy in and of itself, it is certainly to be read as indicating the intention of Congress for the further, more definite declarations of policy which were stated further on in the Act-particularly in Section 3(a).
We consider that the legislative policy to govern Congress, which was laid down by Congress, the regulation that was to be applied by the President, was commerce, was to be governed by these voluntary codes of fair competition; and that the purpose was to undertake to bring about the creation of self-government in industry.
The question was also raised in the Panama case as to what standards were to guide the President when he came to approve a code of fair competition.
Of course, “fair competition” was the primary standard-a standard not unlike the reasonable rates, or the quality of products and service, that were used in the Inter.
state Commerce Act and the Federal Trade Commission Act.
Furthermore, no code could be adopted unless it was applied for by trade or industrial associations, or representatives of the industry to which the code was to apply.
MR. JUSTICE SUTHERLAND: Is the term “fair competition” used in the Act?
MR. REED: Yes, sir.
MR. JUSTICE SUTHERLAND: Where is that?
MR. REED: It is in the appendix to our brief.
It is Section 3(a), on page 3 of the appendix.
MR. JUSTICE SUTHERLAND: Page what?
MR. REED: Page 3.
Furthermore, that there were to be no inequitable limitations on membership in these various associations.
MR. JUSTICE SUTHERLAND: May I ask you, if it will not interrupt your argument, just what you understand by “fair competition”?
Do you mean by that anything which is not unfair competition?
MR. REED: I had thought of it as being that type of competition which was accepted by the great majority of those who were in a particular business as being what was fair and proper.
MR. JUSTICE SUTHERLAND: Is that what the President was asked to approve?
MR. REED: He was asked that the code should apply that test; and that the code should be the result of an agreement of a representative group of employers who would state that those were fair terms of competition.
MR. JUSTICE MCREYNOLDS: Then “fair competition” would be whatever they agreed to?
MR. REED: And, as it was approved by the President.
MR. JUSTICE MCREYNOLDS: Yes.
And if they should ask for a sort of blackhand arrangement for that industry, then that would be what he would have to approve?
I am just putting that as an extreme case.
MR. REED: If there were a majority of the dealers in the industry that thought it was a kind of blackhand affair, I assume that that would be unfair competition.
MR. JUSTICE SUTHERLAND: That term, “unfair competition,” has a definite meaning in law.
But this term, “fair competition,” as I understand, is not used in that sense.
MR. REED: It is difficult to say that “fair competition” is the antithesis of “unfair competition.”
MR. JUSTICE SUTHERLAND: Yes.
MR. REED: There may be a zone between those two that would be covered by either one.
MR. JUSTICE SUTHERLAND: Well, “unfair competition” has a definite meaning in law, and has had for many years.
Now I do not understand that “fair competition,” as used in this Act, is used in the opposite sense of what “unfair competition” was.
You do not understand it to be that way, do you?
MR. REED: I do not.
I understand it to be an affirmative thing.
MR. JUSTICE STONE: So that a code might allow any kind of competition which was agreed to by the majority in that trade or industry, and it would then conform to this statute?
MR. JUSTICE STONE: Yes.
MR. REED: -I think there might be a distinction as to whether or not certain provisions of the code were fair or unfair.
MR. JUSTICE STONE: Then the question of “fairness” or “unfairness” is not a thing that they can agree to?
MR. REED: I think it is.
MR. JUSTICE STONE: Then they might agree to something that the Court had previously said would be unfair?
MR. REED: Of course it would seem theoretically possible, the question that you have asked, however the President has the right of approval or disapproval, but he has the right to call on the Federal Trade Commission for information.
MR. JUSTICE STONE: Well if he approves it, it is legal, is it not?
MR. REED: Not if there are clauses in there which he cannot approve.
MR. JUSTICE STONE: Well if “fair competition” is what the majority in the industry agree to, then he can approve it under this statute.
Is that not so?
MR. REED: This statute says he may approve codes of fair competition presented by the industry, when they are agreed to by the majority in the industry.
MR. JUSTICE STONE: But they must be terms of “fair competition”?
MR. REED: They must be terms of “fair competition.
MR. JUSTICE STONE: And they are so, if the majority agree to them?
MR. REED: I do not think so.
MR. JUSTICE STONE: Then what is the test of that?
MR. REED: It is the test of the judgment of the industry, approved by the President.
MR. JUSTICE STONE: And what is the standard which the President has to follow?
MR. REED: He has to follow what he has been asked to approve by the majority in the industry, plus his own discretion which he has the right to exercise to the extent of telling whether these codes are fair.
MR. JUSTICE SUTHERLAND: He may reject what the majority has agreed to, can he?
MR. REED: He has a further test, in that they must be such codes as would tend to effectuate the policies that are laid down in the first section of this Act.
MR. JUSTICE SUTHERLAND: Then, as I understand you, the President, in the last analysis, does determine what is “fair competition.”
MR. REED: I think I would say that.
MR. JUSTICE SUTHERLAND: And what is the standard that he uses in order to determine what is fair competition?
MR. REED: Whether or not they will conform to the policies stated in the first section of the Act.
MR. JUSTICE SUTHERLAND: And he either has to pay attention to what the majority in the industry say about it, or what the law says about it?
MR. REED: No.
It must be submitted by a representative group who desire to see a code of fair competition adopted by the industry.
MR. JUSTICE STONE: Well, then, that result is the standard which has to be accepted as a guide under Section 9(c)?
MR. REED: Do you mean the first section?
MR. JUSTICE STONE: Yes.
MR. REED: That is used as pointing out the policy declared by Congress and sets out the purposes of the Act.
MR. JUSTICE STONE: But that is not a sufficient guide, as in Section 9(c).
MR. REED: But here you have not only the provisions of Section I, but you have the further standards required in Section 3(a).
MR. JUSTICE VAN DEVANTER: Well, Section 3(a) provides, among other things - 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.
Do you not think that leaves him some latitude?
MR. REED: I do.
MR. CHIEF JUSTICE HUGHES: Well, you may tell us about that in the morning.
MR. CHIEF JUSTICE HUGHES: We will proceed with the causes under argument.
MR. RICHBERG: I wish to return very shortly to the question under discussion at the adjournment of Court yesterday-and that was, the delegation of power-but, before doing so, I beg the indulgence of the Court for just a few moments, to lay a brief foundation for all the arguments on the constitutional issues in this case.
The issues that are here involved are of such extraordinary importance that they become clearly visible only when we view the immediate controversy as simply a small incident in a far-reaching solution of a national problem, which can be simply stated, but which presents a vast complexity of details for adjustment.
This case, in a word, involves the attempt to cure a dangerous and deep-seated disease of business.
We cannot concentrate our attention on a pimple on the skin-if I may use that as an analogy-when we are dealing intelligently with a case of scarlet fever.
We cannot determine the validity of this law without considering the whole problem and the entire solution presented.
On this basis only can the reasonableness of the detail of the case be stated.
Now counsel, in his argument yesterday, described the emergency which caused the enactment of the National Emergency Act.
That emergency did not create the power to regulate commerce; but the emergency did make necessary the reasonable exertion of that power, through a law to protect all the people of the United States, which Congress alone could enact and which could only be made effective as enacted by Congress.
The answer to every major question which is presented here depends upon a previous understanding of and answer to these preliminary questions - First: What was the problem presented to the Congress?
Second: What was the solution adopted?
Third: What was the authority exercised?
Fourth: Was this authority reasonably exerted and the requirements of the law reasonably adapted to accomplish the intended solution?
I am not going to weary the Court by attempting to make any extended statement of the problem with which, in the broad, the Court is entirely familiar.
But I do want to call attention to the fact that the problem presented to Congress was not an isolated need for the regulation of the live-poultry industry.
The problem was to check the progressive destruction of an economic system upon which depended the welfare of the people and the maintenance of the Government itself.
Reduced to simple terms, the Government faced a condition of steadily declining production and of increasing unemployment, with a mounting burden of providing relief for destitution, which had exhausted the resources of state and local governments, and which the Federal Government was forced to meet.
Unless this downward spiral could be checked, the problem would grow more difficult every day.
Unless business could be revived, the burden on the Government would steadily rise, while its revenues were declining and its credit was gradually being impaired.
Unless the functioning of the economic system could be improved, grave domestic disorders and political upheavals were inevitable.
There was no power capable of organizing and directing a nationwide cooperation for the expansion of industry, except the power of the Federal Government.
Private industry had tried for years to do it.
Congress alone had the power and the obligation to regulate interstate commerce, upon which the livelihood and subsistence of all the people depended.
I do not need to go into the details of the transformation of our economic system, which has been referred to by the Court in previous cases.
I only need to point out that the basic needs for food, clothing, and shelter are satisfied through commerce among the states.
The vast bulk of employment is dependent upon the maintenance of that commerce.
The great volume of interstate business is absolutely dependent upon interstate commerce.
Not a single state can maintain a tolerable existence except through interstate commerce.
When this nationwide system of production, exchange, and employment was breaking down, only the National Government could bring about an orderly improvement through concerted action.
And, furthermore, the National Government had erected obstacles to private cooperation by the antitrust laws, that hampered any private efforts to organize concerted action.
I might add that it was not so much the laws themselves that had this effect as the uncertainty in regard to their construction.
In any time of chaotic self-assert ion, the obvious need is to organize for collective action.
When a physical disaster strikes a community, such as a tornado, or a flood, or a fire, individual self-protect ion must give way to an orderly common effort.
Some persons believed, and still believe, that we should wait for the spontaneous organization of such a movement at the end of a cycle of deflation; that we should wait for what they call a “natural business revival.
Others, who were a vast majority, had no faith in waiting.
They did not believe that we could safely wait; and millions of destitute people were intolerant of waiting any longer and suffering more deeply.
They demanded organized action under governmental leadership-and that was the solution adopted by Congress.
The power to regulate is not merely the power to prohibit wrongdoing; it must clearly also encompass a power to encourage and to organize cooperation in doing good.
No one would seriously quest ion the power of the Federal Government to promote and foster commerce.
Indeed, that has been explicitly sustained in such measures as railroad regulation.
If the Federal Government had merely inaugurated a vast program of cooperation between private enterprise and with the Government, who would have questioned that exercise of power?
The first point I desire to make to the Court is that that is just what the Government did.
The President asked, in his message to Congress of May 17, 1933, for the machinery “for a great cooperative movement.
And the means to be employed were stated primarily in Section I, in these cooperative terms - 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.
Those were not wishful statements of good intentions.
They were straightforward declarations of a legislative policy which could only be made effective by detailed administrative action.
When these declarations of policy are read in the light of the problem to be solved, the purpose of the legislation is made clear and the analysis of the problem is exhibited in the statement of the remedy.
Commerce was being obstructed because of the lack of cooperative organization among producers and distributors, and by a chaos of individual operations not adequately coordinated for the common benefit.
Strife between labor and management added to the discord and inefficiency.
Unfair competition was destroying the ability of businessmen to pay fair wages, to sell at reasonable prices, and, in general, to serve each other in their interdependence, and so to advance the general welfare.
The National Recovery Act recognized explicitly the need of organizing a nationwide cooperation.
It recognized the utter impossibility and impracticability of seeking to write a single code of fair practices for all business, or of seeking to enforce a single set of rigid standards of business conduct.
It proceeded upon the sound theory that thousands of businessmen themselves should know better than any small group of lawmakers what improved practices would stimulate a business revival, what the prohibition of unfair practices would do in promoting fair business, and what would substitute an orderly advance for a disorderly retreat.
So the law provided that codes of fair competition should be drawn up by those truly representative of trades and industries and, after passing through an administrative test as to whether they effectuated the public policy laid down by Congress, then these codes would provide the standards of fair competition under which trade and industry might be stimulated and improved.
I wish to call attention now to the opinion of this Court in the case of Panama Refining Company v; Ryan, 298 U.
Of course, the opinion of the Court in that case, in which the Court explicitly declined to pass upon the validity of the petroleum code, did not, by implication, pass upon the validity of a code or the Federal standards of policy which were basic to the formulation of a code.
Now, up to this point, it should be clear that Congress provided simply for a great cooperative movement for the advancement of trade and industry by promoting interstate commerce and removing obstructions to its free flow.
So far as I have gone, there is no invocation of any prohibitory power; and it is important to note that, although the object of the Governmental action was the improvement of interstate commerce, there were no limitations of codes to trades and industries engaged in or even substantially affecting interstate commerce.
And that has led to a great deal of confusion as to the application and scope of this law.
The object of the Recovery Act was to aid in the revival of all business, regardless of its local or interstate character.
And, since it was inevitable that all business would contribute something to interstate commerce, there seemed to be no reason for not thus encouraging an improvement in business conditions without an effort to draw a sharp line between intrastate and interstate commerce.
Also, the uncertainty of the antitrust laws made this desirable to revive cooperative efforts in business itself.
But when the problem of compulsion by the Federal Government was met, Congress limited the exercise of any such compulsory power to such conduct as lay within the reach of Federal authority.
A violation of code standards of fair competition was brought within the provisions of the Federal Trade Commission Act only when such a violation occurred-and I am quoting the language of the Act- “in any transaction in or affecting interstate or foreign commerce.
And I might say immediately that the words “affecting interstate or foreign commerce” are obviously to be read in the sense of “substantially affecting”; and only such a violation was made punishable.
The licensing provision of the Act-Section 4(b)-which has since lapsed and is no longer of importance, only applied to those engaged in a business in or affecting interstate or foreign commerce.
It may have been politically unwise not to limit the operation of the entire Act to those industries which were engaged in or substantially affected in interstate commerce, but in view of the desirability of extending these cooperative benefits to all business, the permissive area of codification was not definitely limited in the Act.
Another factor was the uncertainty, which will always persist, because it is a developing question, as to the extent to which business does affect interstate commerce and come within the Federal Trade Commission Act.
But the Recovery Act has not been administered upon the theory of compelling an intrastate business which did not affect interstate commerce to come within any compulsory requirements of the law.
Now I bring this out because there is no merit whatsoever in the labored effort of counsel for the defendants to list codes apparently covering local trades as proof of an illegal extension of authority.
It is, of course, impossible to determine merely from the name of a business whether it comes within the regulatory power of the Federal Government or not.
Congress and the courts cannot know where to draw the line until they can survey a comprehensive record of the actual operations of each trade and the character of business transacted in different parts of the country.
May I say just a word as to the extension of this power over the field of manufacturing, where it substantially affects interstate commerce?
Local activities at the beginning or end of transportation may control interstate commerce.
That was held by this Court in the case of Local 167 v. United States, 291 U. S. 293.
It is commonly said that “manufacturing” is not “commerce.”
Manufacturing, as a separate process, may not be commerce, but those engaged in it are engaged in commerce; and their activities are so enmeshed with interstate activities that the regulation of conduct affecting interstate commerce cannot be isolated in one compartment of their business.
This has been made clear by this Court repeatedly when the antitrust laws were in question.
It is the conduct of those engaged in manufacturing which affects commerce, not the mechanical process of manufacturing.
This law is directed to the standards of conduct; and, in the same way, the conduct of those engaged in unfair competitive practices in manufacturing or mining, or any form of production, affects, in the aggregate, the flow of interstate commerce.
It is not the single act in any instance.
It is the combination of many acts in a course of conduct which are just as destructive to commerce, whether they are separate actions or deliberately involved in a conspiracy to restrain commerce.
In connection with manufacturing, it may be of interest to note that one of the principal authors of the Constitution, President Madison, in his message of February 18, 18IS, to Congress, said - but there is no subject that can enter with greater force and merit into the deliberations of Congress than a consideration of the need to preserve and to promote the manufactures which have sprung into existence and attained an unparalleled maturity throughout the United States during the period of the European war.
This source of national independence and wealth I anxiously recommend, therefore, to the prompt and constant guardianship of Congress.
It certainly cannot be held that we are drifting away from the wisdom of the Fathers when we follow this advice-120 years later.
I may also refer to the Virginia Plan, described in our brief at page 95, which is the essential origin of the commerce clause of the Constitution.
If we will accept the fact that the Recovery Act does not attempt to extend the power of the Federal Government outside the sphere of its authority under the commerce clause of the Constitution, the question next arises as to whether competitive practices in trades and industries which are engaged in or substantially affect interstate commerce have been reason ably regulated.
This involves, first, the validity of the method of determining whether the practice was unfair; and, second, the reasonableness of the requirements imposed.
First - Could the legislature authorize the approval of standards of fair competition by administrative officials-which brings me to the quest ion of the delegation of power.
The short answer to this question is that Congress could not possibly have legislatively defined either fair or unfair practices for all trades and industries within any reasonable time.
It was necessary and wise, as a practical matter, to follow the long-established legislative method of setting the standards and leaving the details of their application to administration.
In fact, Congress granted far less administrative discretion in this Act than when fixing the standard of “just and reasonable rates” for public utilities, or the standard of “unfair competition” for business under the Federal Trade Commission Act, or of “the public interest” for acquisitions of stock by railroads, which was recently sustained by the Court.
The standards are clearly fixed in this Act.
But may I point out, first, that we are not here concerned with any provisions for a so-called “imposed” code under Section 3(d) or Section 7(c) of the Recovery Act, those sections never having been used by the N. R. A.
These existing codes all have been of the type called “voluntary” codes, brought forth voluntarily by representatives of the trade or industry affected.
We are concerned only with the adoption of codes such as the live-poultry code and with the standards laid down for such a code.
The standards of fair competition are made explicit.
They are those which are formulated and approved by truly representative associations.
They cannot include monopolistic practices or discriminate against or oppress small enterprises.
They can only be approved if, in the judgment of the President, they will effectuate the legislative policy, as declared by the Congress.
A question was asked by the Court yesterday as to the construction of the fair-competition provision of the Recovery Act.
That is found in Section I of the Act, which declares the policy laid down by Congress is “to eliminate unfair competitive practices.
The question of fair competition involves the anti thesis of unfair competition.
It involves primarily the prohibition of those practices which are recognized as “unfair competition,” or “unfair methods of competition,” used all through the Federal Trade Commission Act.
So closely is that Act tied with this, that in the Recovery Act it is provided that, after the President has approved the code, the standards there having been set, any violation of such standards shall be deemed an unfair method of competition, within the meaning of the Federal Trade Commission Act.
So that the complete tie-up of a code of fair competition with the well-recognized and long-established standards of unfair competition seemed plain in the Act and seemed plain in the purpose of Congress.
But, in addition to the normal standards which the Federal Trade Commission, for example, is permitted to apply, are the several detailed standards in the Act itself: First, in carrying out the policy of Section 1; second, in providing that such codes are not designed to promote monopolies or to eliminate or oppress small enterprises, and will tend to effectuate the policy of the Congress.
Then there is the further provision that - the President may, as a condition of his approval of any such code, impose conditions for the protection of consumers, competitors, employees, and others, and, in furtherance of the public interest.
As to that provision, may I point out also that it does not in any way modify the character of the code.
That does not confer on the President unlimited discretion, when the code is handed to him, to regard it as a blank check and to write into it anything that he sees fit.
No such administrative construction has ever been given, and we would not contend for a moment that such an administrative construction would be a proper exercise of the authority.
It is perfectly clear that the fundamental basis of the code is the agreement of a truly representative group of a trade or industry as to what constitutes fair competition.
If that could be set aside by the unfettered discretion of the President, or anybody else, necessarily the standard laid down would fall.
But, as a matter of fact, the actual practice, and the practice very clearly intended under the law, has always been that when a code is submitted, if modifications are provided by Executive Order to protect other interests, those modifications must be accepted by a truly representative group in the trade or industry who themselves have sponsored the code; otherwise, there would have to be notice given and public hearing before a modification could be made effective by an imposed code.
So that the standards which are here provided for the codes are far more accurate, understandable, and explicit than the standards which have been sustained by this Court in case after case, in the application of administrative authority by the Interstate Commerce Commission, the Federal Trade Commission, and other administrative bodies.
May I come now to the immediate Code which is in question in these cases?
The Poultry Code was approved, admittedly, by more than 90 percent-in both volume and numbers of members- of those engaged in this industry.
Now surely it would be hard to find a more explicit standard for determining fair competition and prohibiting unfair competition than the agreement of 90 percent of those engaged in the industry.
MR. JUSTICE STONE: Such an agreement was regarded as a violation of fair competition before this legislation, was it not?
MR. RICHBERG: It is my understanding that such an agreement would not have been a violation, unless it involved an unreasonable restraint upon trade; but such an agreement, if it was adopted to develop trade, would not be an unreasonable restraint upon trade.
MR. JUSTICE STONE: If it involved fixing prices, would it have been such restraint?
MR. RICHBERG: Possibly so, but there is no price determination in this Code.
MR. JUSTICE STONE: (interposing) I was not thinking specifically of this Code, but of the standards as set up.
Or, if you have a standard which was adopted by the members of the trade or business that includes price-fixing, and that is a standard which was never recognized before, of course that particular one is specifically forbidden by the requirement in Section 3(a) that: Such code shall not permit monopolies or monopolistic practices.
A code deliberately agreed upon for price fixing could clearly be used for price fixing.
MR. RICHBERG: I know of no such codes.
MR. JUSTICE SUTHERLAND: Does not the automobile code provide for that?
MR. RICHBERG: The automobile code does not provide for “price fixing” in that sense.
It provides for the allowance which may be made in trading in used cars.
That does not determine the price of a used car, because the market for used cars is left entirely open.
MR. JUSTICE SUTHERLAND: It fixes a price beyond which dealers are forbidden to go, whether the automobile is worth more or not.
MR. RICHBERG: In making allowances?
MR. JUSTICE SUTHERLAND: Yes; I say, in making allowances.
MR. RICHBERG: Well the reason for that is to reach a fair practice in the sale of cars-because making an excessive allowance and the pressure for getting an excessive allowance were found, as a matter of fact, to be destructive of fair competition.
It had become an “unfair practice.
Now if that seriously affected the prices of automobiles, it might amount to unfair competition in their sale.
I am not saying that the prices of automobiles are not dependent on that practice, or trying to raise a legal implication as to whether it has any effect, but the fact is that the market for used cars is left entirely open because no one is compelled to sell at that price; that simply limits his opportunity of disposing of that used car.
MR. JUSTICE SUTHERLAND: I did not mean to ask you to go into that, but as a matter of fact it does prohibit the dealer who wants to buy the car to be turned in and the owner of the car from agreeing upon the price.
MR. RICHBERG: I should say it did not, except to this extent: That in these allowances in taking out a new car it does; and it is put in for the purpose of promoting the sales of new cars, because the sales of new cars were being destroyed by the excessive allowances for used cars.
MR. JUSTICE SUTHERLAND: Well this limits, to that extent, the liberty of contract of these people.
MR. RICHBERG: I have no doubt it does limit the liberty of contract of those people.
MR. JUSTICE SUTHERLAND: Well does it contemplate the fixing of wages?
Does it do anything of that kind in the poultry business?
MR. RICHBERG: I want to take that entire subject up a little later.
MR. JUSTICE SUTHERLAND: Very well.
MR. RICHBERG: I will say this: It contemplates the question of minimum wages.
MR. JUSTICE STONE: I want to ask you this further question: Whatever is involved in the code must conform to fair standards of competition that had been understood before this legislation was adopted?
MR. JUSTICE STONE: Well, so far as the trade is concerned, but people who suffered, who are not within the trade, could attack it?
MR. RICHBERG: Oh, yes.
I did not mean to the limited extent of the managers.
MR. JUSTICE STONE: Well, for instance, take the construction of the Sherman Antitrust Act.
The Sherman Act, apart from the fact that they can agree on something, applies to the codes adopted under this Section?
MR. RICHBERG: Yes.
MR. JUSTICE STONE: It must conform to the standard of the Sherman Act?
MR. RICHBERG: That is correct.
As I have always understood the Sherman Act, I have understood that it was in aid of fair competition and not to destroy it.
MR. JUSTICE STONE: It must conform to the standards of the Sherman Act, whether or not it was formed by agencies within the code?
MR. RICHBERG: Yes.
MR. JUSTICE STONE: And the object of it was to promote fair dealing?
MR. RICHBERG: Precisely.
I want to say one word more as to these standards.
It seems to me that if they conform closely to the standards long existing and adopted by the courts, then in the absence of statutes they are hardly subject to the repeated criticisms that they are arbitrary and capricious delegations of legislative power.
The whole history of the development of the law merchant has been nothing but the application of established customs, originally adopted by the merchants and proved in court, and eventually accepted by the courts without proof, but the courts taking judicial notice of their common practice.
Now, in this case, all that was attempted was a more rapid development or crystallization of the accepted methods of fair trade practice in industry, recognized by those engaged therein, and with the protection of the public interests by the employment of certain standards.
I want to discuss now, Mr. Justice Sutherland, the question of wages and hours which you have raised- passing the other questions of fair trade practice.
And I do so for two reasons: In the first place, I think they carry their own argument with them; and, in the second place, the Circuit Court of Appeals unanimously sustained the validity of the law and its application, and its determination of fair standards, and only divided on the question of wages and hours.
I want the point immediately fixed that these requirements are not provided for the individual betterment of the employee.
They were not provided primarily for protecting the health or advancing the welfare of the individual worker-which were the objects of practically every other law of that character which has ever come before this Court.
They were established for entirely different reasons, to meet conditions which have never before been presented to this Court to promote the health of trade and industry as a whole.
It was not the live-poultry business or its workers who were the particular objects or beneficiaries of this legislation.
Congress was meeting the problem of a disorganized economic system which had been on the verge of a complete break-down; and this was actually a disorganized economic system, and no theoretical idea.
A major cause of this economic disorder lay in the unfair competition and vicious trade practices which, through a variety of effects, maintained a constant downward spiral of price-cutting and wage-cutting and declining purchasing power, and constantly accentuated the resulting competitive evils by decreasing employment and purchasing power, through the overworking and underpayment of wage earners.
To revive industry, it was clear that more men must be put to work, but not at the cost of further reductions of wages and buying power.
And here again, Congress was not without experience.
A great “share-the-work” movement had been voluntarily undertaken a year or so before, but it had failed absolutely to help, because cut-throat competition steadily brought lower wage payments and longer hours, and the whole voluntary effort, which was a nationwide effort through trade and industry to carry out a share-the-work program had failed-and Congress benefited by that experience.
The helpless condition of wage earners in a situation where there were armies of unemployed who were seeking any kind of work at any kind of wages and under any conditions could not be relieved except by establishing, in this national emergency, standards of fair competition in the employment of labor: The employer who took advantage of necessity and increased working hours, while reducing wages, dragged all fair competitors down to his level.
Now, observe the application of all this to this industry: 90 percent of those engaged in this industry-and I may call attention to the fact that, in the testimony taken in the preparation of this code, there participated not only the employers but representatives of all labor organizations and employees; and, at the end, 90 percent of those representative of the trade and industry, by volume and numbers, agreed that certain minimum wages and maximum hours were fair competitive practices; that it was a fair basis on which to employ labor and put forth a product.
Yet the claim here is that 10 percent can destroy that health giving, life-giving effort to improve economic conditions, by themselves being permitted to go below these standards, and thereby force down the 90 percent to a continuation of sweatshop operation and the worst evils in trade and industry.
If Congress is impotent, if the Government of the United States is impotent to prevent such results, then it is impotent indeed to preserve a respectable or tolerable economic system.
It is not necessary for me to argue here as to the economic soundness of this policy.
Theoretically, people may come in and talk about “putting the cart before the horse” or “raising one's self by the bootstraps,” expressing other economic theories.
The fact is that trade is a circle; and whether the stimulus comes from a new flow of capital into new enterprises, or a new flow of capital into raising wages, the fact is that more employing and more money in circulation spell reviving business.
The most decisive fact is that business has revived.
But the final answer in any judicial review of legislation is that the legislative power is the power authorized by the Constitution to adopt economic policies; and, that said policies are not subject to judicial review.
The economic policy which Congress in its wisdom decided to adopt is within the power of the Congress of the United States.
The policy was legally adopted.
Then, again, the maintenance of fair competition as to labor conditions is a corollary of an antitrust policy which is, supposedly, to prevent the exploitation of consumers-which can take place either through high prices or low wages.
To provide for the maintenance of fair competition in every form of business activity except in the employment of labor is merely a futile policy.
Especially is it a futile policy when 10 million men walk the streets and produce a pressure on the labor standards downward.
And yet It seems strange that, in this case, we meet the argument that, although the Federal Government can prevent a monopolistic concert of action by employers and workers in this very industry so as to prevent restraints upon commerce, the Federal Government has no authority to sanction a cooperative concert of action by employers in this and other industries, to benefit and advance interstate commerce.
I am totally unable to follow that argument, to find the slightest shred of reason or argument in that contention.
But we need not decide when interstate commerce ends and that which is intrastate begins.
The control of the handling and the sales and the prices at the place of origin before the interstate journey begins, or in the state of destination, where the interstate movement ends, may operate directly to restrain and monopolize interstate commerce.
And in the final paragraph of the opinion in that case, this Court also said: And, maintaining that interstate commerce ended with the sales by receivers to market men, appellants insist that the injunction should only prevent acts that restrain commerce up to that point.
But intrastate acts will be enjoined whenever necessary or appropriate for the protection of interstate commerce against any restraint denounced by the Act.
I ask how the argument is left open in this Court, that that which can be prohibited as a “restraint upon industry and commerce” under the Sherman Act, is beyond the reach of the power of Congress to improve, and beyond the power to regulate in any beneficial way?
I say the thread of logic is utterly impossible for me to follow that would tie that argument to that decision.
I need not go into the effect of labor disturbances upon interstate commerce.
I need not recall to the Court the Coronado Coal Co. v. United Mine Workers case, 286 U. S. 295; or the Bedford Cut Stone Co. v. Stonecutters Association case, 274 U. S. 37, in which it was held that if the labor disturbance, after interstate commerce had ended-in the Bedford Cut Stone case-or before interstate commerce had begun-in the Coronado Coal Co. case-if the labor disturbance operated substantially to restrain commerce, it was subject to the Federal power.
I only wish to point out that there can be no distinction made between the power of Congress where there is a conspiracy to do wrong and cases where the wrongdoing is done without involving any conspiracy.
If 1,000 automobiles jam the highways and get tangled at intersections, it is not necessary to prove a conspiracy to obstruct traffic in order to bring about an orderly condition.
The power which can regulate can require the automobiles to drive in lanes, and can require them to stop and go by lights, and can direct the traffic as necessary.
And that regimentation which we hear so much about is the only thing which produces a little order.
If it was not for that regimentation of traffic and bringing order out of chaos, commerce would be impracticable, if not impossible, under modern conditions.
And there is no distinction between automobiles crowding the highways in a ruthless assertion of their supposed “individual rights,” and the conduct of members of a trade or industry in recklessly asserting supposed individual rights which will result in the destruction of the industry.
I wish to point out again that the object of the codes is “economic health,” not “individual health”; that the regulation of wages and hours does not proceed upon the basis of determining the wages to be paid.
They proceed merely upon the basis of fixing the minimum wages, below which minimum wages shall be unfair competition-not a minimum determined by the demands of a labor organization, let us say, but determined by the agreement of an industry; that it is unfair to ask men to work for less than a certain wage per hour, and that it is unfair to compete against another man by paying such a wage.
Of course the relation in this industry is obvious.
This is an industry in which most of those employed earn a very large wage; the 50 cents an hour only applies to a small group.
The minimum wages paid do not represent the bulk of payments.
They represent not a wage-fixing, but they represent the fixing of an unfair competitive practice.
Now we reach another sphere when we deal with the question of maximum hours.
And we are, there, also dealing with another policy adopted by Congress in a great emergency.
I am not suggesting the extent to which such a power could be extended in normal times.
I am discussing an emergency which Congress was compelled to deal with for the very maintenance of the Government itself.
With millions of unemployed depending upon public relief, what could be more fair than to permit industry itself, by voluntary action, to so limit the hours of labor that some of those unemployed millions could be reabsorbed into industry?
What could be more fair, and what could be a more natural exercise of the power of regulation than the adoption or establishment of those standards to meet the needs of the industry, and take off the relief rolls a few million of the unemployed and give them work?
I am not going to strain the analogies, but the question was raised in the early discussions of workmen's compensation laws, which were sustained considerably upon the basis that it was fair and appropriate for industry to maintain its own burden, to carry its own load of cost, and not to have one trade be parasitic upon another.
Industries have attached to them those who are dependent upon them by their natural skill and training.
The textile towns in the South have no other employment for those who are there.
If they can spread employment and put those men at work, it is a fair method of improving the condition of trade and industry, by taking that many men out of unemployment, and putting them back into employment and making them self-supporting, and taking them off the public relief rolls.
But that could not be done if the employers in the very next town were working employees longer hours.
And so we need a standard of fair competition for trade and industry, under the conditions existing at this time.
And what could be a fairer standard than that adopted by those who impose it upon themselves?
May I ask, Mr. Chief Justice, how much time I have used?
MR. CHIEF JUSTICE HUGHES: You have spoken 45 minutes.
I do not know how much of the time you wish to use.
Your side has 28 minutes left.
MR. RICHBERG: Our side has 28 minutes left, altogether?
MR. CHIEF JUSTICE HUGHES: Yes.
MR. RICHBERG: At the same time, billions of dollars were being made available by credits to protect private enterprises, to save homes from foreclosure, and to permit the marketing of crops.
The whole physical and mental resources of the nation were being mobilized in a great cooperative effort to raise our standard of living-or to prevent its destruction.
The same effort which was undertaken to raise farm prices to a level at which farmers could earn a living was paralleled by the effort to raise wages and spread employment in industry, so that industrial workers might not be driven, through the excesses of competition, into an intolerably low standard of living.
Now, to claim that under these circumstances the full power of the Federal Government to regulate interstate commerce could not be exercised without violating those protections of individual liberty of action which are appropriate and beneficial in the normal working of a free competitive system is to deny to the Federal Government the power to protect and promote that interstate commerce which the National Government alone could protect against the evils of this unparalleled depression.
To apply to these conditions the reasonable tests applicable in normal times would simply mean to allow actual liberty of contract to be destroyed, and to allow actual economic freedom to be destroyed, in order to preserve a theoretical liberty-which, without wishing to be brut al, I may say has been very properly described as a “liberty to starve.
The liberties of millions of unemployed depended, and still depend at this time, upon their ability to find employment.
No men can claim that they are free when they have no opportunity to make a living.
The ability of the people to sell their services for even subsistence payments depended upon relieving or counteracting the pressure of millions of unemployed against the freedom of the employee to make a contract for decent wages.
In order to preserve the realities of liberty, what was necessary by the Federal Government was “action,” not “inaction.
Under these circumstances, the establishment, substantially by common consent, of maximum hours of labor and minimum rates of pay, simply constituted a nationwide effort to protect the liberty and the livelihood of millions of workers and of their employers.
It protected the freedom of men to obtain employment on decent terms.
It protected the freedom of the managers, and the freedom of the industrialists and traders to sell their product at a fair price.
Without these protections, commerce between the states was being obstructed and destroyed; and, as a matter of fact, this nationwide cooperation which was instituted under the National Industrial Recovery Act actually broke down obstruct ions and released a free flow of commerce.
Any incidental interference with individual liberty of action was trilling, in comparison with the freedom gained by the great masses of the people.
I may point out that this Court has heretofore held that there is nothing sacrosanct in non-interference with complete freedom in price fixing, or even in wage fixing.
I will refer, merely in passing, to the case entitled Tagg Brothers & Morehead v. United States, 280 U. S. 20, in which the fixing of charges for services was under consideration, and in which this Court, in language not inapplicable here, said: There is here no attempt to fix anyone's wages or to limit anyone's net income.
Differences in skill, industry, and experience will continue to be factors in the earning power of the several plaintiffs.
For the order fixes only the charges to be made in individual transactions.
In that connection, I may point out that the requirements of compensation here applied to minimum wages paid by the hour, and also to minimum wages for piecework.
Quite obviously, therefore, under the piecework system larger wages could be paid to the persons who have more skill, and they are free to obtain higher wages.
I might say only a few words, in passing, about a complaint which is rather vaguely made in this case as to the multiplicity of administrative orders and the resulting ignorance of law by those to be affected through this administrative process.
I suppose that is a makeweight argument that is not to be taken seriously.
It has here no basis in fact, so far as I know.
It is not true as to the particular trade or industry.
In this case, the requirements of the code were simple and made public.
The defendants knew where the code app lied, very thoroughly, and they knew exactly what it provided.
I might also point out that this process of codification substituted much more security as to their fair practice in business and fair cooperation and fair competition in business than was prevalent under the previous situation, with the factor of the uncertainty as to the provisions of the Sherman Antitrust Act, which might or might not be applied to inhibit any particular line of conduct.
In conclusion, I would like to state that there are four cases decided by this Court which cover substantially each one of the constitutional points raised in this case-each one is a recent decision of this Court, and each one applies definitely and clearly to the exact questions involved in this case.
As to the delegation of power, I ask only for a reading of the opinion of the Court in Panama Refining Co. v. Ryan, 293 U. S. 388, with the statement as to the standards set forth in this very law, read in the light of the necessity to meet for which the law was adopted.
As to interstate commerce, the exact transactions here involved are the very transactions covered by the holding of this Court, in the case of Local No. 167 v. United States, 291 U. S. 293, that they are subject to regulation under the power to regulate interstate commerce.
As 'to due process of law, the reasonableness of this effort on the part of the National Government is covered in the decision in the case of Home Building & Loan Association v. Blaisdell, 290 U. S. 398, where “reasonable” means to safeguard the economic structure and “the very bases of individual opportunity” have been sustained by this Court to meet the needs of a situation such as this.
There is no further invasion of any claimed constitutional liberty or any further invasion of any constitutional guarantee by these codes that, by the farthest stretch of the imagination, could be claimed, than was claimed under the questions arising in the Minnesota Mortgage case.
In the case of Nebbia v. New York, the power of the Federal Government is upheld to promote the general welfare in pursuit of its specifically delegated power to regulate inter state commerce which is involved in this case.
And in that case you pointed out there is nothing peculiarly sacrosanct involved in regulations which affect pr ices and wages, any more than in regulations which otherwise affect one's ability to earn a livelihood and to exercise individual freedom.
It seems clear to us that, if the Court adheres to the doctrines laid down in these cases, it will sustain the constitutionality of the law and the validity of its administration as involved in this case.
MR. HELLER: Furthermore, as to whether there was an invasion of the defendants ' constitutional rights by the adoption of the code under the National Industrial Recovery Act.
I will not discuss interstate commerce.
I assume that Mr. Wood will discuss that in connection with the wage problems.
First, I would like to correct some of these statements of fact that were made yesterday.
It was stated that the defendants were engaged in “receiving poultry.
That was an inaccurate statement.
The poultry, as it is brought into the City of New York, is brought in steel cars; but the poultry is removed, not by these defendants who are wholesale market people located in the Borough of Brooklyn, City and State of New York, but the poultry is removed by the commission merchants.
They pay for the necessary expenses.
They take the poultry out and they crate them in the wooden boxes-40 or 50 in a box.
Then these defendants come upon the scene.
They buy the poultry from the persons to whom it had been shipped, after its arrival in New York and its delivery to those persons.
After such purchase from those persons by the defendant, the poultry is transported within the city by the defendants to their place of business, and is slaughtered at their place of business; and, after being slaughtered, the poultry is resold by the defendants, either the same day or on the following day, and the prices for which the poultry is sold are not made before the poultry is slaughtered.
The poultry is sold after it is slaughtered solely in the local New York market to retail dealers there.
None of it is sold to move outside of New York State.
At this point I want to call attention to one of the provisions of the Code with regard to what is known as “straight-killing.
The straight-killing provision of the Code prevents the purchaser from these defendants from selecting their poultry, either in the particular coop or from all the poultry.
You will find that in a box there are 25 or 30 birds.
And let us say that John Jones, for example, comes in and says, “I want to buy three chickens weighing 5 pounds apiece.
Under this straight-killing provision of the Code, we could not sell them to him in that way.
He would be prohibited from making that selection.
We would have to pick out the first 3 chickens that came to our hands.
And 10 counts of the 17 counts in the indictment, that were sustained, were counts relating to the alleged violations of the straight-killing provision of the Code.
Customers come in, and they do not want to take 3-pound chickens when they wanted 5-pound chickens.
But, under this provision of the Code regarding straight-killing, they are prohibited from making a selection of the poultry that they want; and, therefore, it means that the customer has no choice, as he should have, under the Code.
As I say, 10 of the counts of the indictment which were sustained by the Court of Appeals related to this straight-killing provision.
It was further stated that these defendants, at times, purchased poultry in New Jersey.
That is not correct.
The record does not support that statement.
On the contrary, it shows that only one purchase during the entire year, when there was a shortage in New York, was made in the City of Philadelphia.
All other purchases were made in the Borough of Manhattan, City of New York.
Then the statement was made that diseased poultry was sold by defendants in the City of New York.
Now New York City is the only city where they have an inspection system for poultry, and that is a local system and not a Federal inspection system.
You do not find any inspection system in Philadelphia, Chicago, or other large cities-and not even one in New Jersey.
They have attempted to tell this Court that my clients were guilty of selling diseased poultry.
It is true that there were 17 counts in the indictment which were sustained by the Circuit Court of Appeals.
Two of the counts related to selling diseased poultry.
On one of them relating to the alleged sale of two unfit chickens, they were acquitted.
On one count, charging the sale of one diseased chicken, they were convicted and the conviction was sustained.
And the evidence is that they sold one diseased chicken and that that was done unintentionally.
And that is the only justification there is for the charge that we were “knowingly trafficking in diseased poultry.
The evidence was that we paid for the inspection.
In order to ascertain whether that one chicken was unfit for human consumption, it was necessary to have an autopsy on that chicken performed by the board-of-health inspectors.
The chicken had been passed as fit by the Federal inspector.
Thereafter, an agent of the Code Authority went to the defendants' place of business and marked these three chickens and followed them into the hands of the purchaser.
And, as I say, it was necessary for him to have an autopsy performed on them.
And, as a result of that, it was found that this one chicken, covered by the count on which defendants were convicted, was egg-bound.
And on this count of the indictment relating to that one chicken, on which my client was convicted for selling a “diseased chicken,” this one count was submitted to the Circuit Court of Appeals and was sustained by that court.
And that is all the evidence there is in the record as to that.
Not only that, but I asked one of the Government's witnesses, “Can you say that there is any diseased poultry being sold in the City of New York?
He said, “No, and no one else can, because in order to say whether anyone sold diseased poultry there it would be necessary to have inspection in other cities.
It is limited to the metropolitan area of New York, two adjoining counties in New Jersey, and one county in the State of Connecticut.
The other centers of population have no code whatsoever as to poultry.
As a matter of fact, there is testimony in this record by Government witnesses that other codes were made in the same industry, but they have never been approved, for some reason or other.
That is the Section under which these defendants were convicted.
That is left entirely to the Code of Fair Competition, which mayor may not be approved, to declare what those acts are which are to be declared criminal.
This National Industrial Recovery Act became effective June 16, 1933.
The Code, for this industry, was not approved until April 13, 1934, and did not become in force until May 1, 1934, or 10 months after the adoption of the National Recovery Act.
Now we say that this Code is clearly unconstitutional.
Let us read some of the provisions contained in this particular Code, with reference to what shall be deemed to be unfair methods of competition.
It says: The following practices shall be deemed to be and shall constitute unfair methods of competition on the part of members of the industry and are hereby prohibited: 'false advertising'; knowingly purchasing or selling produce unfit for human consumption; discrimination between customers by rebates, etcetera; commercial bribery; interference with contractual relations; defamation of creditors or customers; 'destructive' price cutting, all selling below market price being deemed, prima facia, such; price discrimination between purchasers; giving of prizes and premiums; misrepresentation respecting produce; excessive feeding to increase sale weight; false weighing; delay of unloading to cause shrinkage of weight; 'selective' killing-[I have just described that]; sales to unlicensed persons; misrepresentations as to expected shipments to create false market; misrepresentation of facts affecting price; combinations to monopolize or restrain trade; unreasonable service charges; misrepresentation as to function or business; racketeering.
Now we submit that this is a case where Congress has delegated to the President the power to make laws, in prescribing a code of fair competition.
This is shown by what has been done in this Live-Poultry Code.
We know what a code is.
It is usually defined as a “code of law.
It has been defined as a “system of laws; any systematic body of law, especially one giving statutory force; a compilation of laws of public authority.
That is the definition in Webster's New International Dictionary.
Judge Mitchell, in the case of Johnson v, Harrison, 47 Minn.
575, says that the word “code” as now generally used is a “system of law.
Such codes are well-known on the continent of Europe, in Latin America, and elsewhere-such as the Code of Napoleon.
With respect to a “rule,” on the other hand, that has been defined as a “principle or regulation set up by authority, prescribing or directing action or forbearance,” as, for instance, a regulation made by a court of justice or public office with reference to the conduct of business therein.
The word “code,” in this enactment, must have been advisedly used with knowledge of its usual sense.
There was evidently no intention by Congress to use it as meaning “rule” or “regulation,” witness Section 10(a) of the Industrial Recovery Act, which says that the President may prescribe “rules” and “regulations” to carry out the purposes of Title I.
Congress, therefore, did not intend to make a body of rules, but a “code” as we have defined it.
Now Mr. Justice Rosenberry, in the case of Gibson Auto Co., Inc. v. Finnegan, Attorney General, et al., 259 N.W. 420, a case which arose in the Supreme Court of Wisconsin, lends some dignity at least to our argument.
He says: If the regulation of any trade or industry so minutely as is provided for by the code of fair competition of the motor vehicle retailing trade is in the public interest, the Act nowhere so declares nor can it be said to be implied.
What is in the public interest is to be found by the preponderant majority of the trade.
The code, as adopted and approved, deals with matters of the highest public concern; cooperation between employees and employers, the elimination of unfair competitive practices; the reduction and relief of unemployment; the improvement of standards of labor, removal of obstacles to business recovery; the rehabilitation and conservation of the natural resources of the state.
These mailers of the very highest importance to the general welfare are, by Chapter 110, to be dealt with not by the legislature in whom the power to make laws is vested by the Constitution, but by an indefinite, unascertained, self-perpetuating group which may be in existence or may thereafter come into existence.
It is our contention that, if there must be a delegation to a particular group such as in this case, if Congress does not care to assume the burden that has been cast upon it by the Constitution, at least let them delegate it to a body of citizens.
In this case, there is nothing in these codes that even requires that the person who shall make these laws shall be citizens of the United States.
It is, we think, therefore plain that the Code of Fair Competition and the formulation of the Code of Fair Competition for the Live-Poultry Industry involve a complete abdication of the legislative power of Congress.
In reading Section 3, I say, again, that the Act is patently unconstitutional.
Section 3 provides for the enactment of so-called “codes of fair competition.
It was pursuant to this Section that the President approved the Code of Fair Competition for the Live-Poultry Industry of the Metropolitan Area in and about the City of New York.
Trade or industrial associations of groups “representative” of trades or industries, or branches thereof, may formulate codes of fair competition and present them to the President for approval.
By Section 3(a), when approved by the President, the provisions of each code of fair competition are to be the standards of fair competition for the entire trade or industry or branch thereof, and compulsory upon all-the non-assenters as well as the proponents.
The President may, as a condition of his approval of any such code, impose, at his absolute discretion, any conditions he deems to be “in furtherance of the public interest,” for the protection of consumers, competitors, employees, and others.
MR. JUSTICE MCREYNOLDS: Was anything like that contained in this case?
MR. HELLER: There were some changes made.
There is testimony by one of the defendants' witnesses, who said that there were changes made in the code that the industry submitted.
Of course my client has never assented to this Code, and he was put out of business by this Code.
This Section of the Act also provides that the President may provide such exceptions and exemptions from the provisions of the code as, in his absolute discretion, he deems necessary to effectuate the policies “herein declared”; that is, Section 3(a).
There is no authority of law that compels anybody to submit a code, except as that particular code may effect the policy established by Congress; nor is there anything in the Act which directs the President that he may not approve a particular code that may be submitted, if he does not deem that the provisions in the particular code are intended to carry out the policy of Congress.
Not only that, but it leaves it solely to his discretion to take out some of the provisions of that code and to put in others.
The Government's contention is that the word “may” must be defined as meaning “must.
But a reading of the Act itself will indicate that it was used and employed in different ways in different places.
The President may as a condition of his approval of any such code impose such conditions for the protection of consumers, competitors, employees, and others, and In furtherance of the public interest, and may also 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.
That is Section 3(a).
In Section 3(b) it says: 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.
And then it says, further on: Any violation of such standards in any transaction in or affecting interstate or foreign commerce shall be deemed an unfair method of competition.
They use these words discriminately.
Now of course, as a practical matter, the record shows that other methods for the same industry were proposed, but they were never passed upon, or they were never approved.
Therefore, “may” is what was intended by the wording of this section.
Since the word is “may,” of course there is no direction to the President that he “must” do it.
Now we have an interesting case on this question.
It was before the advent of the National Recovery Act, and it arose in the Court of Appeals of the State of New York.
Judge Cardozo concurred in the opinion in that case.
The case was that of People v. Klinck Patching Company, 214 N. Y. 121.
Under its terms, he has the power, without check or guidance so far as we can perceive, to veto the entire clause and decide that its benefits shall never be extended to any case, although it comes within the precise terms of the statute, or to permit the exemption in one case and deny it in another precisely similar one.
Of course it is not to be assumed that the Commissioner of Labor would intentionally be arbitrary and unreasonable in the exercise of this power, but nevertheless the legislature has attempted to confer upon him the opportunity which would permit of these shortcomings and we are to judge of a statute by what is possible under it.
In the absence of any guide, it might very well happen that an administrative officer, with the best of purposes, would nevertheless be very fallible in the execution of them.
Now, irrespective of these patent defects, let us examine to see whether those provisions in that Section of the Act comply with what are said in the Panama Refining Company case to be the essentials of a proper delegation of power.
It is our contention that such a delegation of power as is found in the National Recovery Act is purely and simply a delegation of legislative power to the President of the United States; on account of the fact that Congress has set up no intelligible policy, or any policy at all, for the governing of the industry; because it has provided no standard to guide and restrict the President in his action, and no procedure for making determinations in conformity with due process of law.
This Court was very careful, in the Panama Refining Co.
case, to say that three things must be present: a policy, a standard, and a method of procedure.
Now “policy” and “standard,” I take it, do not mean the same thing.
Both must be present.
We would define “policy” as a “settled or definite course or method adopted or followed by a government, institution, body, or individual”; and “standard” has been defined as “a criterion, or model, or example, or established usage.
Now of course there are many cases in the courts in which a delegation was permitted, but all of those cases may be classified in these ways: They would come under some doctrine like that of Field v. Clark, 143 U. S. 649, of the power to suspend the free list for imports if the President finds discrimination against American products; some doctrine like that of United States v. Grimaud, 220 U. S. 506, of adopting rules and regulations for forest reserves; or some doctrine like that of Union Bridge Company v. United States, 204 U. S. 324, as to the classification of bridges as to whether they obstruct navigation.
But in all of those cases we find “a policy,” “a standard,” and “a method of procedure.”
For instance, in the case of Buttfield v. Strenahan, 192 U. S. 470, the Congressional policy there was to exclude the importation of inferior teas.
That was the policy adopted by Congress itself and declared by the Act.
And, as a standard of administrative action, it provided for the establishment of uniform standards of purity, quality, and fitness for consumption for all kinds of imported tea, on expert recommendations, and only after chemical analysis.
In the case of Hampton v. United States, 276 U. S. 394, this Court dealt with the Flexible-Tariff Act.
There, the declared policy of Congress was to foster American industry by placing it upon an equal competitive basis with foreign industry.
And the standard was the adjustment of tariffs so as to cover the difference between cost of production here and cost of production abroad.
And the President was definitely limited with respect to the changes he could make in the tariff-to 50 percent.
In the case of Union Bridge Company v. United States, 204 U. S.
364, the policy declared by the Congress was the removal of obstructions to navigation by reason of the height or width of span of bridges; and the standard was thus definitely set.
It is further to be noted that, in all these cases we have considered, the statute refers to a particular subject-matter, fully described and defined and limited in such descriptions.
So that, for instance, in Buttfield v. Strenahan, the subject-matter was imported tea; in Hampton v. United States, it was tariffs; in the Bridge case, it was bridges over navigable waters; and in the Shreveport case, 287 U. S. 77, it was food and drugs.
So that, in every instance, we have a definite subject-matter.
The question arises, therefore, in analyzing the Act: Does Section I declare the policy?
It was said yesterday in the argument that it did not, in the Panama Refining Company case.
Today it is claimed that it does set forth a policy.
It is claimed that, while it may not do so under Section 9(c), it states a policy under Section 3(a)-although Section 9(c) dealt with a specific subject-matter, the transportation of oil, while Section 3(a) deals with everything under the sun.
There is no system defined in Section 3.
In the Panama Refining Company case, the Court held that there had been an illegal delegation by Congress of legislative power, since Congress did not declare that oil should be forbidden from moving in interstate commerce, but had merely authorized the President to determine whether or not it should be permitted so to move-without specifying the circumstances and conditions which should govern the President in his determination.
Now, with respect to this purely intrastate business of slaughtering, the delegation of legislative power by Congress to the President is more flagrant-for nowhere in the Act itself has Congress declared any policy whatsoever.
The so-called “Live-Poultry Code” is enforceable, if at all, only by virtue of Section 3 of the National Industrial Recovery Act; and that particular Section does not declare that slaughterhouses for live poultry shall be regulated by codes of fair competition.
It merely provides that trade and industrial associations or groups may, if they choose, formulate codes of fair competition and submit them to the President for approval.
If approved by the President, those provisions become law, or the “standards,” as they claim, of fair competition in or affecting interstate commerce.
Now in analyzing Section 3 itself, what does it provide by way of a model, or by way of an example, that these codes of fair competition should resemble?
Now all that Section 3 provides is, first, that the association that submits the code must be truly representative.
And naturally that is a condition precedent.
It does not say what the code shall contain.
And then it provides that the code or codes should not be designed to promote monopolies.
Well that is what it “shall not do” and not what it “shall” contain.
That is all that is to be found in the Act, except one thing: That trade associations may make a code, and that code shall be the code of fair competition.
Now there is no longer any contention that there is a policy; and they say it is a sufficient standard, and it is as broad as the one in the Federal Trade Commission Act.
Well, what does the Federal Trade Commission Act provide?
I recall to Your Honors that in the case of Federal Trade Commission v, Gratz, 253 U. S. 421, you held that the Federal Trade Commission Act did not give that Commission power to set up policies and standards, but it was a fact-finding body to determine what conduct is an unfair method of competition.
Congress there stated that it was unlawful to engage in unfair methods of competition.
It set up a proper machinery consonant with due process of law.
It provided for the appointment of five commissioners, who were to be appointed with the consent of the Senate.
It gave them no power whatsoever to declare anything to be illegal or immoral.
It provided for a procedure, such as a formal complaint, claiming that this person had used unfair methods of competition.
And that person had to be given notice, and was given the right to answer, and to cross-examine witnesses, and the testimony had to be reduced to writing; and all the Commission, could do was to find whether or not the man was engaged in unfair methods of competition.
And, if the Commission so found, that did not give them the right to send the man to jail; because, to enforce its order, the Commission must apply to the Circuit Court of Appeals, and that court has the power to make a decree affirming or setting aside the Commission's order.
And if that court decided against him, the party had the right to make application to this Court for a writ of certiorari.
And it was only when the final order of the Circuit Court of Appeals was entered that there was any compulsion upon the accused to change his practices; or that he could be penalized if he violated the court's decree.
Whereas, in this case, as soon as a trade association such as the one here in question promulgates this minute course of conduct for all engaged in that business, and as soon as that has received the President's approval, any violation of it thereafter is made subject to criminal punishment.
We offered evidence at the trial that straight-killing was always a liability; that it was an unreasonable provision of law; that the Trade Commission had no right to interfere or prescribe such a method.
We were not permitted to raise the question whether the Federal Trade Commission Act was held not to apply because, in that case-in that Act-a procedure was set up for the determination of the question of whether or not there was an unfair method of competition; whereas, in this case, as soon as these various provisions of the Code were promulgated, they became law.
And we could not question-
MR. JUSTICE MCREYNOLDS: was that question raised in the trial court?
MR. HELLER: Yes, sir.
MR. JUSTICE MCREYNOLDS: Did you insist that you had the basis?
MR. HELLER: We insisted that we had that right, but the court submitted everything to the jury: the question of whether or not it affected interstate commerce, and the question of reasonable regulation, he passed to the jury.
MR. JUSTICE MCREYNOLDS: What was that question?
MR. HELLER: The question as to whether it was a reasonable or an unreasonable regulation.
He said we could not raise that.
He said it had become law, and therefore we were in no position to question it.
Now it is very obvious that the purpose of the National Recovery Act is to do away with the hearing; because the contention was made a few moments ago that we were to ascertain what was an unfair method of competition according to the standard of unfair competition in the Federal Trade Commission Act.
Now, if that was the intention of the provisions-to determine “unfair competition”-we already had a body in existence for determining that: the Federal Trade Commission.
But what they have refused to do here is to give us the procedure provided by the Federal Trade Commission Act.
Because all of these Acts, if they are unfair as set forth in this particular code, could have been determined under the Federal Trade Commission Act, provided we were engaged in interstate commerce.
And that is why they probably enacted the National Industrial Recovery Act-to reach all other industries, whether they were just engaged in intrastate commerce, or whether they were affecting interstate commerce.
This Court held, for instance, in the case of Wichita Railroad & Light Co. v. Public Utilities Commission, 260 U. S. 48, that in creating such an administrative agency the legislature, to prevent its being a pure delegation of legislative power, must enjoin upon it a certain course of procedure and certain rules of decision in the performance of its function.
It is a wholesome and necessary principle that such an agency must pursue the procedure and rules enjoined and show a substantial compliance therewith to give validity to its action.
When, therefore, such an administrative agency is required as a condition precedent to an order, to make a finding of facts, the validity of the order must rest upon the needed finding.
If it is lacking, the order is ineffective.
Now in that case they pressed upon the Court the lack “of an express finding” and they said it: may be supplied by implication and by reference to the averments of the petition invoking the action of the Commission.
But the Court refused to proceed upon that interpretation.
In the case of Southern Railway Co. v. Virginia, 290 U. S. 190-a recent case-this Court, reviewing a Virginia statute purporting to authorize the State Highway Commissioner, without notice or hearing, to require railroads to eliminate grade crossings whenever, in his opinion, that was necessary for public safety and convenience, held that there had been no due process of law, because of the fact that the action taken by the State Highway Commissioner was without hearing, without evidence, and without opportunity on the part of the railroad to know the basis therefore.
The attempt to empower the State Highway Commissioner so to take property if and when he deemed it necessary for public safety and convenience, this Court said, in that case, amounted to “the delegation of purely arbitrary and unconstitutional power.
At page 197 The railroad, under such circumstances, could have had no fair opportunity to demonstrate that the action of the State Highway Commissioner was arbitrary.
The Court further said, at page 199 - The infirmities of the enactment are not relieved by an indefinite right of review in respect of some action spoken of as arbitrary, the fact that the Virginia Supreme Court of Appeals had held that a remedy by injunction was available to the railroad company was regarded by this Court as insufficient to alter its conclusions.
Now it has been said, for instance a few moments ago, that this Court held that it was a sufficient criterion in some of the cases wherein the words such as “public interest” were used.
Take, for instance, the Chesapeake & Ohio Railroad case, where they said just those words were used.
They are mistaken in picking out just two or three words out of the whole decision, because more than that occurred in that particular case.
In the case of Chesapeake & Ohio Railway v, United States, the Interstate Commerce Act, as amended by the Transportation Act of 1920, was involved.
It declared that no railroad should extend its line or construct a new line without obtaining from the Interstate Commerce Commission a certificate of public convenience and necessity.
And, on page 42 of the opinion of the Court, it referred to Section 5(4) of the Interstate Commerce Act, which authorized the Commission to adopt a plan for the consolidation of railway properties into a limited number of systems.
And the section, as this Court said, clearly disclosed the policy on the part of Congress to preserve competition among carriers.
It provided that: in the division of such railways into such systems under such plan, competition shall be preserved as fully as possible and wherever practicable the existing routes and channels of trade and commerce shall be maintained.
Of course the policy there was the adequate transportation.
And the standard involved in that particular case was the consolidation, consistent with competition and consistent with the maintenance of the present lines.
It was “efficiency,” and “adequate service.
The same reasoning applies to many of the other cases cited by the Government-merely picking out sentences from the decision.
It would therefore appear from the foregoing that the approval by the President of the United States of the Live-Poultry Code was an unconstitutional exercise of delegated legislative power: First, because Congress omitted to lay down any intelligible policy, or indeed any policy at all, for the governing of the industry; Second, because Congress provided no standard to guide the President's action in determining whether a code of fair competition should be approved for any industry, much less for the intrastate operations of the live-poultry business; Third, because the President is not required to make, and has made, no findings of fact as to the necessity or propriety of the code of fair competition for the intrastate operations of the live-poultry business to bring his act of approval within any standard for action that the Recovery Act may contain; Fourth, because Congress has set no limits as to what the fair-competition provisions of such code may be; but, on the contrary, has left them to the unrestrained discretion of the President, without any judicial review, to write the law of fair competition for the intrastate operations of the live-poultry business, without any procedure complying to any extent with the due process of law required of him.
As to the findings, all we find is the President's conclusion that this particular Code complies with the requirements of the National Industrial Recovery Act.
MR. JUSTICE MCREYNOLDS: Does this Act require the President to establish a code?
MR. HELLER: Does this Act “require” that?
MR. JUSTICE MCREYNOLDS: Does it require that?
MR. HELLER: It does not.
It is permissive.
MR. JUSTICE MCREYNOLDS: The President is not required to adopt a code, under any circumstances?
MR. HELLER: No.
This says he “may.
MR. JUSTICE MCREYNOLDS: He is not required to do so?
MR. HELLER: He is not required to do so.
MR. JUSTICE MCREYNOLDS: When it comes to the provisions of the Code, is there anything in that Act to define what they must do?
MR. HELLER: There is nothing, except the words in the Act, “fair competition”; that is all there is.
And the question arises whether “fair competition” does not mean merely the opposite of “unfair competition”; because I may undersell my neighbor, because I may be operating my plant more efficiently than he is his.
MR. JUSTICE MCREYNOLDS: Can the President adopt a code without being requested to do so?
MR. HELLER: He can.
MR. JUSTICE MCREYNOLDS: Without being requested?
MR. HELLER: Yes.
The last part of Section 3(d) provides: 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 therefore has 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.
MR. JUSTICE MCREYNOLDS: But he is not required to do so under any circumstances?
MR. HELLER: He is not.
It is optional with him.
MR. JUSTICE MCREYNOLDS: Yes.
MR. HELLER: I merely want to say, with respect to the findings, that there is no evidence- it has not been offered in this case-there is no legal evidence, rather, to be found anywhere in the record, as to whether a particular practice should be found to be an unfair method of competition.
What compelled this particular association to make that an unfair practice?
We contend, therefore, that the findings of the President are mere conclusions, not based upon any evidence whatsoever.
Now we further contend that since some provisions of the code are clearly unconstitutional, or are unauthorized by the statute, or both, the whole code must fall, because of the lack of separability of the provisions.
We have discussed the provisions with reference to this straight-killing provision of the Live-Poultry Code, and the evidence shows this to be an arbitrary and capricious regulation having no reasonable relation to interstate commerce.
MR. JUSTICE MCREYNOLDS: What do you understand that provision amounts to?
MR. HELLER: Which provision is that?
MR. JUSTICE MCREYNOLDS: The one that you are just speaking of, the “straight-killing” provision.
MR. HELLER: The straight-killing provision is in this Code.
MR. JUSTICE MCREYNOLDS: Yes.
But the practice, what is it?
MR. HELLER: That is, of the “straight-killing”?
MR. JUSTICE MCREYNOLDS: Yes.
MR. HELLER: Do you want me to explain “straight-killing”?
MR. JUSTICE MCREYNOLDS: Well, never mind.
MR. JUSTICE VAN DEVANTER: Explain what that clause requires.
MR. JUSTICE MCREYNOLDS: I want to see whether I understand it correctly.
MR. HELLER: It is set out in the Code.
MR. JUSTICE MCREYNOLDS: If I understand this correctly, these chickens are brought into New York by the carload, and then they are taken out and put in coops?
MR. HELLER: Yes, sir.
They are put in coops by the commission merchant.
MR. JUSTICE MCREYNOLDS: How many are there in a coop?
MR. HELLER: From 30 to 40, according to their size.
MR. JUSTICE MCREYNOLDS: Then, when the commission man delivers them to the slaughterhouse, they are in coops?
MR. HELLER: They are in coops.
MR. JUSTICE MCREYNOLDS: And, if he undertakes to sell them, he must have straight-killing?
MR. HELLER: He must have straight-killing.
In other words, his customer is not permitted to select the ones he wants.
He must put his hand in the coop when he buys from the slaughterhouse and take the first chicken that comes to hand.
He has to take that.
MR. JUSTICE MCREYNOLDS: Irrespective of the quality of the chicken?
MR. HELLER: Irrespective of the quality or the price of the chicken.
MR. JUSTICE MCREYNOLDS: Suppose it is a sick chicken?
MR. HELLER: Well, he could reject a sick chicken.
MR. JUSTICE MCREYNOLDS: Now can he break up those coops and sell them, half a dozen chickens to one man, and half a dozen to another man?
MR. HELLER: He cannot.
He can sell a whole coop, or one-half of a coop.
MR. JUSTICE MCREYNOLDS: And that is all?
MR. HELLER: That is all.
And when he sells five, or six, or two, or three, he cannot permit the purchaser any selection of the chickens in the coop.
MR. JUSTICE STONE: Do you mean that there can be a selection if he buys one-half of the coop?
MR. HELLER: No.
You just break the box into two halves.
MR. HELLER: There is no selection in the case.
MR. JUSTICE SUTHERLAND: Well suppose, however, that all the chickens have gone over to one end of the coop?
MR. HELLER: That is right.
They may have done that.
Now we say that, if any provision of this particular Code is unreasonable, the whole Code must fall.
Because an agreement, obviously, by those who submitted the Code to the President, to have him approve the Code “as is,” and it is reasonable to infer that they would not have assented to it if some of its provisions were not sustained.
MR. JUSTICE MCREYNOLDS: Were you convicted for straight killing?
MR. HELLER: Yes, on ten counts.
MR. JUSTICE MCREYNOLDS: You were convicted on ten counts?
MR. HELLER: Yes, sir, and fined $7,000, and sentenced to three months in jail.
MR. JUSTICE MCREYNOLDS: Was that under the conspiracy statute?
MR. HELLER: The conspiracy was part of it.
MR. JUSTICE MCREYNOLDS: I mean, was it an offense under the conspiracy statute?
MR. HELLER: It was also a conspiracy offense under one of the counts of the indictment.
MR. JUSTICE MCREYNOLDS: What I am not clear about is whether you were convicted on ten counts.
MR. HELLER: Well, they were convicted on ten counts.
MR. JUSTICE MCREYNOLDS: What were some of the other counts?
MR. HELLER: One was selling a diseased chicken- one chicken- that I spoke about.
Another was failure to file a report, and the making of alleged false reports.
MR. JUSTICE MCREYNOLDS: As a mailer of fact, what did your man do, your client?
MR. HELLER: Here is what he did-and that is in the record.
We said to the commission men, “Here is the provision that we must observe, because we want to observe the law and we do not want to go to jail.
MR. JUSTICE MCREYNOLDS: Certainly.
MR. HELLER: So an agent of the Code Authority came to the defendants' place of business of procure evidence on which to base a criminal charge.
And so he picked out ten chickens, and three of those had an autopsy performed on them.
And two of them were found to be all right, and one chicken, it was disclosed in the autopsy, was egg-bound.
That is exactly what took place.
MR. JUSTICE MCREYNOLDS: And now you are fined $500 for that?
MR. HELLER: Now we are fined $3,000 or $4,000 for that.
MR. WOOD: May it please the Court, my associate has very generously yielded the remainder of his time to me, and I should like to inquire how much altogether we have remaining on our side of the case?
MR. CHIEF JUSTICE HUGHES: You were allowed 2 hours; and 47 minutes has been taken.
You have an hour and 13 minutes left.
MR. WOOD: Thank you, sir.
If the Court please, defendants are slaughterers of live poultry for sale in the New York City market exclusively.
Among the counts on which they were convicted were the asserted violations of the Code provisions regulating the minimum wages and maximum hours of persons employed in their slaughterhouse.
It is unnecessary to go to the codes for the purpose of finding an assertion of Federal authority over minimum wages and maximum hours of the employee-not alone persons or corporations engaged in interstate commerce, but of persons and corporations engaged in productive enterprise in the wholesale and retail trade and the goods produced as a result of productive enterprise, and in other trades and occupations as well.
The Act itself required that all employers in an industry covered by a code shall observe the maximum hours of labor and the minimum rates of pay approved or prescribed by the President of the United States.
The command is contained in the last clause of paragraph (a) of Section 7, reproduced at the close of the last paragraph on page 8 of the appendix to our brief, which has the yellow cover.
While the Act did not require that all industry and all occupations should be the subject of codes to be adopted under the Act, it clearly contemplated the same.
And, moreover, in the section called to the Court's attention by my associate just before recess, the President is empowered in his discretion to prescribe and impose upon any industry not submitting any code for approval, a code of his own making which again “may,” if it must not, include the prescription of minimum wages and maximum hours.
Nor does the Act stop there, because its penal provision under which this case arises makes it a penal offense, subjecting the violator to fine, to violate any provision contained in any code adopted or approved under the Act.
So, reading these various provisions of the Act together, we find, first, that the President is empowered to insert maximum hour and minimum-wage provisions in any code adopted under the Act; that the Act itself, not merely the code, commands the observance of those maximum-hour and minimum-wage provisions by all members of the industry; and that the Act itself provides that such observance shall be enforced by criminal proceedings involving the imposition of criminal penalties upon the member of any industry who fails to observe the minimum-wage and maximum-hour provisions prescribed by the President and included in the code.
The Congress, therefore, affirmatively undertook, by this Act, to authorize the President to regulate the wages and hours of persons employed under the code established under the Act-and some 2,200 codes have been adopted under the Act.
Every one of such codes contains a regulation of hours and wages required to be observed by all the members of the industry to which it applies, to be enforced by criminal prosecution.
And I may say that the codes so approved range from the regulation of the children's garment industry, to the regulation of persons preparing human bodies for burial and the erection of monuments over those bodies after they have been buried-thus literally undertaking to regulate human activity from the cradle to the grave, and beyond.
And in everyone of these codes, whether it be that pertaining to a major industry or that regulating the undertaking business, or the operation of a barber shop, or a bowling alley, the President has under this Act undertaken to prescribe maximum hours and minimum wages to be paid by the employers in that industry.
Now Mr. Richberg says that these codes, and the minimum wage and maximum-hour provisions of the Code whose enforcement is sought here, were hours and wages agreed upon in each instance by a large majority of the industry.
But they acquired validity only when approved by the President.
Their required observance was dependent solely upon the exercise of Federal authority; and Federal authority has assumed, as in this case, to punish any person-although not assenting to the Code, as these defendants did not-if he fails to observe the regulation of hours and wages so prescribed and approved by the President and so inserted in the Code.
And so we have, in this case, presented squarely the question as to whether under the commerce power it is competent for the Federal Government to regulate the wages and hours of employees of persons and corporations not engaged in interstate transportation, but in the ordinary productive and trade activities of the great body of our people.
It is not contended that the employee who, it was charged and proved, was paid less and worked longer than the Code provision required was engaged in interstate commerce.
The power of the Federal Government to regulate his wages and hours, and the wages and hours of the employees of the defendants here, must therefore rest upon the proposition that it is within the commerce power, because the regulation of wages and hours of persons engaged in an industry and trade affected interstate commerce; and the Government so concedes.
Turning for a moment-because I may not have time to speak of that at any length-I might say also that it is not claimed, as I understand it, and if it is the claim is without foundation, that the other code provisions which were violated here relate to activities or conduct in interstate commerce; and that the conviction upon the grounds relating to the violation of code provisions governing trade practices must and can be sustained, if at all, upon the theory that the conduct sought to be regulated was conduct affecting interstate commerce.
Mr. Richberg, in his argument, has properly said that the importance of this case extends far beyond the limited issues arising under the particular counts upon which these defendants were convicted, and brings before the Court the fundamental questions of constitutional law involved in the Recovery Act and its administration, including that involved in the asserted power of the Federal Government to regulate wages and hours.
I agree with him.
And in my argument I shall undertake to say to the Court, as clearly as I can, what we conceive to be the fundamental questions of constitutional law involved in that issue.
Mr. Richberg has said that we, in our briefs, have rather skillfully-as he puts it-avoided mentioning the national crisis out of which the Recovery Act grew.
I did not think we had, but I shall, before I conclude, have something to say about that “national crisis,” and about its effect, if any, upon the breadth and scope of the commerce power.
But if we, in our presentation, have ignored the national crisis, I must say that-if I have correctly comprehended the argument of the Government and the fundamental basis of its contentions- the Government, on the contrary, has ignored the limited scope of the Federal power, confined as it is to the exercise of the enumerated powers contained in the Constitution, the historical origin of this limitation, and the purpose of its creation.
And, in any case, where the extent and scope of the power of Congress under the commerce clause, or any other clause, is so sharply drawn into question, those fundamental considerations of constitutional law and of their historical background may not be ignored.
Having experienced tyranny that comes from a central government of undefined power, the states and the people were fearful lest the Constitution should result merely in a change of master.
To that end, no general grant of legislative power was given to the general government, and every specific power of government was scrutinized with jealous eye.
The friends of the Constitution, when its adoption was hanging in the balance, found it necessary to urge, as Marshall points out in McCulloch v. Maryland, 4 Wheat. 316, that the United States was to be a government of limited and enumerated powers; and the history and contemporaneous documents of the time-some of which are referred to in our brief-so record.
It was on this understanding, and on this understanding alone as the history of the times and the decisions of this Court reveal, that the Constitution was adopted, resulting in the establishment of a dual form of government.
To this end, the provisions granting power to the Federal Government were written with a studied definiteness and care, in order that they might be easily understood, and that it might not be thereafter held that there lurked in those provisions a grant of power not intended to be granted.
To this end, the Tenth Amendment was adopted, reserving not to the states alone but to the people themselves, all powers not specifically delegated.
To this end, the Bill of Rights was adopted, guaranteeing the people in their liberties, so as to assure them that the new government should be, as declared by Marshall in Marbury v. Madison, 1 Cranch. 137, “A government of laws and not of men. ”
Nor is it without significance that the requirement of due process embodied in the Bill of Rights through the Fifth Amendment was not imposed as a limitation upon state authority until the adoption of the Fourteenth Amendment, following the Civil War.
It was the usurpation and abuse of power by a highly centralized Federal Government, not by the states, that was feared and jealously guarded against.
To ensure this, and to ensure the adoption of the Constitution, every enumerated power was expressed in simple language, capable of understanding by the most humble.
And as said by Marshall in Gibbons v. Ogden, 9 Wheat. 1, speaking of the very powers on which the Government relies in this case-and I quote it because it has such a permanent bearing upon what seem to me to be fundamental things that the Government has overlooked: As men whose intentions require no concealment generally employ the words which most directly and aptly express the ideas they intend to convey, the enlightened patriots who framed our Constitution, and the people who adopted it, must be understood to have employed words in their ordinary, natural sense, and to have intended what they said.
The enumerated power in question is the power to regulate commerce among the several states, with foreign nations, and with Indian tribes.
The enumerated power is not the power to regulate anything which affects interstate commerce, or affects it substantially, to be determined, as the Government says in this case, as the test of Federal power, in each case, as an economic fact.
Such a grant of power would have been a broader power; and, had the grant been conferred upon the Federal Government-of power to regulate anything and everything that affected interstate commerce, or that affected it substantially-the grant would have been so indefinite in scope and so general in terms that it admits of little doubt that the Constitution would never have been adopted by the Convention; or, if adopted by the Convention, would never have been ratified by the people.
As I see it, the Government would give to the commerce clause-the fundamental basis of its argument carried to its logical conclusion- an interpretation which would be destructive of our dual system of government and subversive of our political, social, and economic institutions under a Constitution whose purpose and origin was as I have described.
And it gives it so broad a scope as to lead to these consequences- which I think appears nowhere more clearly than in the asserted exercises of a right of the Federal Government to regulate wages and hours of employees of persons engaged in industry and commerce.
Succinctly stated, the argument is that the regulation of hours and wages is within the commerce clause for two reasons, one of which was given by Mr. Richberg in his argument this morning, and the other of which was not, but is included in the brief and was included in the brief below and has been included in every brief hitherto filed by the Government in cases like this: The first is that the Federal Government may regulate wages and hours, under the commerce clause, because wages and hours affect the prices at which goods and produce may be sold; and because they affect the competitive regulation of producers; and that, hence, wages and hours affect the distribution and flow of interstate commerce.
And the second half of the argument is that wages and hours may be regulated by the Federal Government under the commerce clause because they affect the purchasing power of a large section of the population dependent upon work and wages in order that they may spend, and thus affect the volume and flow of interstate commerce.
In one form or another, substantially every argument contained in the Government's brief falls under one or the other of these two main subdivisions.
Now let us test both: First, the asserted right to regulate the hours and wages of the employees of persons engaged in industry and commerce because such wages and hours affect prices and hence affect interstate commerce.
The regulation of wages and hours in a productive pursuit is the regulation of the conduct of persons engaged in the production of goods.
As- early as Kidd v, Pearson, 128 U. S. I, decided nearly 50 years ago, this Court said that a commerce clause which would draw within its reach the regulation of production would bring within it not only manufacture but also horticulture, agriculture, stock raising, mining-in short, as the Court said, “ every branch of human industry”; for, as said the Court, “ there is not one of them that does not contemplate more or less clearly an interstate or foreign market.”
That was said in a case attacking the validity of an Iowa statute prohibiting the manufacture of intoxicating liquor, which had been interpreted by the highest court of that State as prohibiting such manufacture not only for the purpose of local sale and consumption, but for the purpose of shipment in interstate commerce.
And in determining in that case that that Act, claimed to be invalid because in contravention of the commerce clause of the Constitution, was not in contravention of the commerce clause, the Court-as very definitely appears from its decision-approached the consideration of the limits of the State power by first considering and ascertaining the limits of the Federal power.
And it was because, as the Court said in that case, to include within the power to regulate commerce the control of every production would have the result which I have described, contrary to the ordinary meaning of the word “ commerce,” and contrary to the whole intent of the Constitution, that the Court said that the Iowa statute was a valid statute.
In so doing, it recognized clearly in its opinion the undeniable fact that production does affect commerce; so that 50 years ago the very argument that is now made was addressed to this Court and rejected.
And in other cases cited in our brief and with which the Court is familiar, the Court has again taken occasion, from time to time, to say that a conception of the commerce clause, which would permit Congress under the guise of that clause to regulate production, was a conception of power which would put it within the power of the Federal Government to nationalize industry.
Now wages and hours affecting prices and prices affecting interstate commerce, as they do, it follows that wages and hours affect interstate commerce only indirectly.
There are many other factors that affect interstate commerce, its volume, its flow, and its distribution, among the several individual units of an industry much more directly.
The first is that of the price itself, because of the indirect effect upon which it is said that wages affect interstate commerce.
And so it would seem that it is a logical consequence of the Government's argument that, if it may regulate the wages and hours of employees of persons engaged in productive activity- let us stop with that for the moment-it may more directly regulate interstate commerce by the regulation of the prices to be charged by the producers of the goods themselves.
And that this is not a fanciful suggestion on my part is demonstrated by the fact that in the Government’s brief in the Belcher case-withdrawn upon the eve of argument-one of the arguments that the Government made in that case was one of the arguments made in support of its power to regulate wages and hours-and I quote this language: Congress might have attempted the solution of the problem with which it was confronted through general price-fixing, following to say that such a course was rejected because it would involve great difficulties and possible danger of abuse.
So I am not alone in suggesting that the logical consequence of the argument that the Government may regulate wages and hours because wages and hours affect prices, and prices affect the volume and flow of and distribution of interstate commerce, is that if Congress had the power asserted here, it also has the power to fix the prices of all articles moving in interstate commerce.
Now there are two other factors affecting production that affect interstate commerce-this volume and flow-much more directly than do wages and hours: and those are, the volume of the total goods produced in any particular industry, and the allocation of that total volume among the several units in the industry itself.
And it is again significant that, in the arguments advanced by the Government in the Belcher case, before its withdrawal the Court pointed out that among the beneficent provisions of the lumber code were the provisions regulating and determining the total amount of lumber to be produced and allocating the total amount of that production to the several units in the industry.
And I say that if the Government may regulate wages and hours because wages and hours affect prices, and prices affect the volume, flow, and distribution of interstate commerce, then it necessarily follows that the Government may directly regulate that which it is seeking indirectly to regulate through the regulation of wages and hours, the volume, the amount of the goods to be produced, and the allocation of that production among the several units of the industry.
That is the logical consequence of the argument.
And the Government courageously recognizes in its brief in the Belcher case, although it does not renew that argument here.
And we are also told in the Government's brief in the Belcher case that the occasion for those provisions' determining the amount to be produced and allocating it among producers was in order to bring production and consumption into a reasonable balance.
Now, if Your Honors please, we have since the depression heard much from many 'quarters of “planned economy” and its desirability, and the setting up of some scheme under some central authority capable of being enforced by that central authority which would maintain at all times a proper balance between production and consumption and a proper distribution of goods produced, in order to avoid the disasters that come upon us periodically through depressions, panics, and other industrial upheavals.
If the argument, the fundamental argument, of the Government here is sound-that it may regulate wages and hours because wages and hours affect prices and prices affect the volume and flow of interstate commerce-the logical consequence of that argument is that there rests in the United States today that power of creating and imposing upon the people of the United States that system of “planned economy” which the prevalent majority in Congress at the time believed to be for the best interests of the people, and enforce it upon them by criminal process.
I hope that the Court does not think that I am attempting to give to the contentions of the Government an extravagant or an extreme significance, but to me those incidents of power which I have described as the logical consequences of the fundamental basis of the Government's argument are its logical consequences; and they so seemed to the Government when it wrote its brief in the Belcher case.
I do not need to pause to call the attention of this Court to the logical effect which the existence of such power, or even only a small part of it, results in as the logical consequence of the Government's argument, would have upon the continued maintenance of our present political and of our present social and economic institutions.
It may be that the Government should have such power, but it may not be exercised by Congress today, under the present Constitution, but would require a constitutional amendment to permit its exercise.
And so I think that if we consider the fundamental conceptions of the Constitution and of our form of Government, their historical origin, the fact that the Government is a government of enumerated powers each one of which was expressed with studied care in simple language in order that it might not be misunderstood and in order that this power of the central government might be definitely confined; that when we consider those fundamental conceptions which have been with us in this nation from its beginning, and then consider on the other hand the logical consequences of the fundamental basis of the argument made by the Government here, it needs no more and should need no more to establish the proposition that the wage and hour provisions of the Code were beyond the power of the Federal Government to impose or enforce under the commerce clause.
There are other considerations which lead to the same conclusion, but before I pass to them I will take up the second branch of the argument.
And that is: that if Congress may regulate wages and hours, because wages and hours affect purchasing power-I do not recall whether Mr. Richberg included that this morning in his argument as one of the grounds upon which he sought to sustain this exercise of power or not-but in the Government's brief, we find the following: “Revival of purchasing power was recognized as the major objective of any program,” speaking now of the conditions existing at the time of the adoption of the National Recovery Act: as the major objective of any program for the rehabilitation of interstate commerce.
Minimum-wage provisions, by raising the wages of the lowest earners, and maximum-hours provisions, by decreasing unemployment, were the chief means selected in the Recovery Act to increase purchasing power and thus rehabilitate commerce throughout the nation.
And so we have it from the Government itself that the primary purpose of the Recovery Act was to increase purchasing power by bringing within the control of the Federal Government the regulation of all wages and hours of all wage-earners, irrespective of the occupations in which they were employed.
And that the assertion of such power necessarily follows from the second branch of the argument is, of course, self-evident; because, if wages and hours of persons engaged in a productive enterprise having some relation to interstate commerce may be regulated by the Federal Government because the purchasing power of those wage-earners is affected; and, hence by the same argument, the Federal Government may regulate the wages and hours of persons engaged in any line of business however remotely connected with interstate commerce-and, in point of fact, in these 2,200 codes, it has done so.
While it may have no bearing upon the precise condition in this case or definitely upon the legal question involved in this case, I think it is significant as indicating the extent of the power of Congress over wages and hours, and over the regulation of industry, to call Your Honors' attention to the fact that the findings accompanying the adoption of practically every one of these 2,200 codes is in identical language.
And in the granting part: including removal of obstructions to the free flow of interstate and foreign commerce.
And winding up with a finding that it will accomplish these results, among others: by promoting the fullest possible utilization of the present productive capacity of industries, by increasing the consumption of industrial and agricultural products through increasing purchasing power.
MR. JUSTICE BUTLER: (Interposing): What finding is that?
MR. WOOD: That is a stock finding, and will be found upon page 80 of our brief, which is contained in every code including the Live-Poultry Code.
Now here we find, if Your Honors please
MR. JUSTICE BUTLER: Were there any special findings in the Poultry Code?
MR. WOOD: Not that I recall; certainly not in the portion relating to wages and hours, which is the subject with which I am most familiar.
Now I direct Your Honors' attention to that stock finding contained in every code-and, as I say, whether for a major industry or for the operation of bowling alleys-not to suggest that these defendants may escape punishment if regulation of wages and hours of the industry in which they are engaged was something that it was competent for Congress to undertake, but as indicative of the whole theory of the Recovery Act and of the control over wages and hours, which it is sought to bring under the Federal Government, for the purpose-as appears from the second half of the Government's argument in support of its power to regulate wages and hours-for the purpose of affecting and improving purchasing power.
But let that argument be rejected.
It still follows, as I pointed out before, that the logical consequences of the argument that the Government may regulate wages and hours because wages and hours affect prices, and prices affect interstate commerce, is that it is in the power of the Government to nationalize at least all productive industry, work out a “planned economy,” and bring all such enterprises within the complete control of the Federal Government.
Whether the commerce be state, or interstate, or whatever the power to interfere with the former because it may affect the latter, the subject-matter of the regulation must be commerce, and not something else.
But production-and these defendants here were producers, although in a very simple way, engaged in the slaughter of chickens for resale, transforming them from a raw product to a finished product, or a semi-finished product, for the commerce in that product which was to follow-I say that production is not commerce, either under the classic definition of that term given by Marshall in Gibbons v, Ogden, or in its modern definition as given in the Century Dictionary.
Under both definitions, “commerce” is “intercourse.
As such, it embraces transportation, buying and selling of goods, and navigation.
But in its natural import-and Marshall, in the same case, said that the words of the grant must be construed in the light of their natural import- “production,” whether by way of manufacture, farming, mining, or the slaughter of live animals, is not “commerce,” but it is something that precedes commerce if the goods produced are to be shipped in interstate commerce, or something as in this case which follows commerce if the manufacturing process consists in taking goods which have ceased to move in interstate commerce and have come to rest within the state, and transforming them into some new state either ready for further use or for domestic consumption.
That that “production” was not “commerce” was held as long ago, as I have said, as the case of Kidd v. Pearson.
And on numerous other occasions the Court has repeated it, from time to time.
And on every occasion upon which it became necessary, or the question came up before the Court, it has decided that production was not commerce; that commerce in the goods produced followed, or in the raw material out of which made, preceded, and that consequently there was no power in the Federal Government to regulate the conduct of production or to regulate the conduct of producers in their capacity as such; pointing out, not only in Kidd v. Pearson, but in other cases, that to give to the commerce clause of the Constitution such a conception would be to make out of it an instrument whereby the Federal Government would be empowered to nationalize and control all industry.
Now a number of these cases that I have referred to are case in which there was involved the extent of the police, or taxing powers, of the state.
And the Government would brush these quotations aside-in which this Court has said that production is not commerce, but something which follows or precedes commerce by saying that the permissible limits of state authority do not necessarily mark the permissible limits of Federal authority.
And that, of course, is so.
But the permissible limits of one may mark the permissible limits of the other.
And the single thing about the cases that the Government would brush aside, in which the rule is laid down that “production is not commerce,” is that, in determining whether the particular state act in question was in violation of the commerce clause, this Court approached that question in every instance not for the purpose of attempting to delimit the extent of the state power and whether the power sought to be exercised was within it but first ascertained the limits of the Federal power and whether the exercise of the state power infringed upon the Federal power as so limited.
So we say that, aside from the logical consequences and their far-reaching effect upon our institutions involved in the fundamental basis of the Government's argument, the regulation of wages and hours of persons engaged in productive enterprise is not a regulation of interstate commerce, because production is not commerce and the regulation of production is not within the grant.
Now the Government makes another argument, an argument which has been put forward by certain others.
And that is, that wages and hours may be regulated for the purpose of equalizing the competitive conditions of producers in various parts of the country; and that, hence, in order to put such producers not engaged at the time in production but engaged in the creation of goods afterwards to become the subject of interstate commerce Congress may reach into all of the states and regulate the wages and hours of each of those producers in order that one, through the manner in which he conducts his private enterprise, may not be at a disadvantage with another who conducts it in a different way.
And this argument rests solely, as I get it, upon the assumption that since the states, acting alone, cannot bring about uniformity in wages and hours, the Federal Government must of necessity have the right so to do.
Like the others previously discussed, this argument is untenable because it assumes in the Federal Government the power to regulate the conduct of production and the business of producers in their capacity as such.
But it is untenable on other and equally fundamental grounds: First, it would wipe out the whole conception of the Federal Government as a government of delegated and enumerated powers because no such power is delegated, and the existence of such power is not within the words of the grant, construed in their natural import.
It would nullify, altogether, the Tenth Amendment in which all the powers not delegated were reserved, not to the states, but to the people; and that it would have that effect appears, I think, from the very foundation on which the argument rests.
The argument is that no one state may reach across its borders and regulate wages and hours of productive industry in another state; that that power, therefore, does not reside in the states; it has not been directly conferred upon the Federal Government therefore there is no such power of regulation and, hence, although not delegated the Federal Government may step into the breach and exercise it.
But, powers not delegated were expressly reserved in the Constitution, not only to the states but to the people themselves.
And they were so reserved to make sure that the Federal Government might not, at some time in the future, exercise some power in conflict with them.
I do not concede that the power to regulate wages and hours of business and industry generally resides in the states.
To some extent, in respect of certain industries, it may; but, at least so far as the decisions of this Court under the Fifth Amendment and the Fourteenth Amendment are concerned, up to date there is nothing in them that suggests that the states may undertake generally the regulation of wages and hours of persons employed either in productive enterprise or in other lines of business.
And, of course if I am right about this, then the argument has still less foundation.
Because it assumes in the Federal Government, for the purpose of bringing about uniformity, the exercise of a power which, if undertaken to be brought about by the states acting separately in such a way as to create uniform conditions of wages and hours, would be the exercise of a power not possessed by the states themselves.
The theory apparently is that there is some sort of “twilight zone.
I think that is the expression used by Professor Corwin in the CORNELL L AW JOURNAL, from whom this argument appears largely to have been borrowed, although it may have originated with my distinguished friend on my right, instead of Professor Corwin.
But, however originated, the doctrine appears to be that there is a twilight zone somewhere between the powers of the Federal Government and the powers of the state governments, and that whenever such a twilight zone is discovered then the Federal Government may occupy that zone and make such rules and regulations in respect of the matters within it as it sees fit.
Of course there is no warrant in the Constitution for any such theory.
And if, in order to bring about uniformity in the conduct of production by the several states, the governors may exercise that power, then it was unnecessary either to fight the Civil War, or to adopt the Thirteenth Amendment for the purpose of abolishing slavery.
Because, if this argument is sound, a northern majority at all times had it within its power to prevent the use of slave labor in the southern states in order to create uniformity of productive conditions in the various states of the Union.
No such power was ever conferred and no such power exists.
I am not going to discuss due process.
I have discussed it in the brief.
I am only going to content myself with a quotation from the decision in Near v. Minnesota, 283 U. S. 697, in which, bearing upon this very question I am now discussing, the Court said “that the power of the state” -speaking there of the more unlimited power that a sovereign state had, as distinguished from the powers of the Federal Government, which is one of limited and enumerated powers- that the power of the state stops short of interference with what are deemed to be certain indispensable requirements of the liberty assured, notably with respect to the fixing of prices and wages.
We all concede, and the decisions of this Court show, that under extraordinary conditions and in respect of certain industries the power at least to regulate prices may be exercised.
But, as said by the Chief Justice in the quotation from which I have read, there is no general power so to do under the Fifth or Fourteenth Amendment, either in the Federal Government or in the state governments.
Now, if the Court please, I have covered the major points contained in our brief, in opposition to the contention that power to regulate wages and hours is a power conferred by the commerce clause.
There is one other argument made by Mr. Richberg today, and also in the brief.
And that is, that it may be exercised for the purpose of preventing strikes.
There is no warrant in the decisions of this Court that either in the Federal Government or in the state governments, for the purpose of providing industrial peace, they may regulate the wages and hours of all wage-earners in the United States.
And, if they may not do that, either the states or the Federal Government- if the power falls short of that-then, of course, it is not an effective instrument for the object suggested.
The argument that this power may be sustained for the purpose of preventing strikes is but another thinly disguised argument that the Federal Government, under the guise of the commerce clause may reach across state lines to everywhere throughout the United States, and everywhere throughout the United States regulate the conduct of production and regulate wages and hours of all persons engaged in productive or other enterprise.
No such power was conferred or was intended to be conferred.
In respect to the minor violations, I shall not have time to speak.
Mr. Heller has already described “straight-killing” and what it is.
And I think it is plain that the conviction of the defendants on the “straight-killing” counts cannot be sustained either as for the violation of a regulation affecting interstate commerce or of a reasonable and lawful regulation affecting productive activity on any ground.
Each of the others undertook to impose conditions upon the sale in local markets of articles which had ceased to be articles of interstate commerce, which had been transformed in character from live chickens to slaughtered chickens, and in effect to write into the Federal law the local rules and regulations of the State of New York relating to the sale and licensing and inspection requirements incident to this business.
New York was competent to protect its citizens by the adoption of appropriate measures for that purpose.
It did so.
Those regulations carried with them their own penalties under the New York law.
None of them had anything to do with interstate commerce.
They were all regulations concerning the conditions under which a person in New York engaged in this business might carry it on.
These defendants were not indicted for a violation of those New York regulations, but were sought to be fined and sent to jail under a Code provision which undertook, under the guise of regulating interstate commerce, to make these purely local regulations of the State of New York a part of the Code, borrowing the substance of the regulation, but imposing a different and a Federal penalty.
Now I do not want to overlook the national crisis and the national emergency.
Mr. Richberg said that we have skillfully avoided discussing it in our brief.
No one is more cognizant of the seriousness of the condition which confronted this country when President Roosevelt took office than I am.
The picture probably cannot be overdrawn.
But, as this Court has repeatedly said, while an emergency may constitute the occasion for the exercise of a delegated power, it can never be its source.
The Code provisions reviewed-and again I refer particularly to the wage and hour provisions-may not, therefore, be sustained as an exercise of emergency power.
But it does not follow, and our recent political and economic history shows it does not follow, that adherence to the Constitution and to the limitations upon the Federal power contained therein, and adherence to the enumerated powers, rendered the Congress or the Administration impotent to take effective measures of other descriptions to meet the emergency.
Acting under the power to levy and collect taxes to provide for the national defense and the general welfare, and under the control over the purse-strings which goes with it, the Congress has appropriated billions of dollars to provide for public works, to aid industry, to relieve the destitute, and in many ways to start the wheels of commerce in motion again.
It has provided conservation camps for a laudable purpose, and with a practical result.
Under the R. F. C. it has lent millions, if not billions, of dollars to corporations on the verge of bankruptcy in order to prevent the stoppage of orderly transportation and productive processes.
Under the bankruptcy laws it has made extraordinary and unusual provision for the relief of debtors.
It has brought about a reform in the banking system, and it has provided us with a new monetary system.
These were all acts done within the enumerated powers.
The efficacy of the program embodied in the Recovery Act is something about which opinions differ.
Its adherents say that it has promoted recovery.
The only impartial and independent investigation of the subject which has been made which I have so far seen-that recently made by the Brookings Institute-says that, on the contrary, it has retarded recovery.
This Court is not concerned with who is right.
But, since an emergency may not create power, it follows that if the Federal Government, under the commerce clause, may nationalize industry-which I say is the logical consequence of the fundamental basis of the argument made here-and may assume control in multitudinous ways over the activities of the people to be regulated and controlled by a central government in Washington, it may adopt such measures at any time that the prevalent majority in Congress believes to be wise and expedient.
The basis upon which the existence of such power is asserted is then destructive of our dual form of government, and subversive of our political, economic, and social institutions.
If, as many believe, the Federal Government should be converted into some form of National Socialism -whether Soviet, Fascist, or Nazi-it may be accomplished only by the submission of a constitutional amendment, upon which submission the people of the United States will have a right to determine whether or not they desire such change to be made.
It may not be made by an act of Congress.
MR. REED: I might say that we have not gone into that matter, because both the District Court and the Circuit Court of Appeals had the question of the sufficiency of the evidence to support the counts of the indictment before them, and you will find on page 156 of our brief a quick reference to those provisions.
I do want to say, however, that in regard to the sale of unfit poultry the charge of the indictment was not that there was a sale of a single unfit fowl, but a regular conspiracy and a constant succession of those acts.
The “straight killing” of provisions is concerned in the allegations in the indictment in regard to that, based upon a violation of a provision of the Code, not against the retail sale of fowl, but against the wholesale sale of fowl.
It will be found on page 54 of the appendix to the Government's brief, Section 14 of the Code.
The straight-killing provision was considered a reasonable limitation upon the freedom of trade, to be placed upon this industry by those who presented the Code to the President.
The letter from the Secretary of Agriculture, and the letter from the Administrator of the N. R. A. to the President, are contained in the appendix to our brief.
A transcript of the entire hearing was presented to the President and, it is assumed, was given consideration in the adoption of this Code.
MR. JUSTICE BUTLER: Is that available?
MR. REED: Yes, sir.
The transcript itself is available, but it is not printed yet.
MR. JUSTICE BUTLER: Where is it to be found?
MR. REED: In Volume II, Poultry Code, N. R. A.
MR. JUSTICE BUTLER: That is the hearing on this Code?
MR. REED: Yes, sir.
MR. JUSTICE BUTLER: Well, counsel spoke of several codes having been submitted prior to the adoption of this Code.
How about that?
MR. REED: There is in evidence here, and it has been introduced in this case, a Code which was submitted by the industry; and, by agreement, that was brought up without being printed.
That is Exhibit 21, which is not printed but which is here, and I believe we have the mimeographed copy of it.
MR. JUSTICE BUTLER: How does that differ from the other one?
MR. REED: That differs from the other one in minor particulars.
It had wages and hours, and there were various changes, but I could not just say what they were.
MR. JUSTICE BUTLER: What findings in respect of this have been made?
MR. REED: You will find the findings in our appendix, page 23, containing the President's order approving the Code.
MR. JUSTICE BUTLER: What are they?
MR. REED: They are largely the language of the Act.
Included in the findings, however, are references to the reports of the Administrator of the N. R. A.
and the Secretary of Agriculture, both of which go into some detail as to their examination of the practices.
MR. JUSTICE BUTLER: I know, but I want to find out the basis of facts found.
MR. REED: The findings are merely that they are found.
MR. JUSTICE BUTLER: Well, what facts were found?
MR. REED: The facts which were found were those which were required to be found by the Act.
MR. JUSTICE BUTLER: Are they all stated on pages 23 and 24 of the appendix to your brief?
MR. REED: They are.
MR. JUSTICE BUTLER: There are no other findings-
MR. REED: There are no other findings except those.
MR. JUSTICE BUTLER: -underlying this Code?
MR. REED: The findings of the N. R. A. and the A. A. A., which will be found on the pages following the President's order, contain the reports to the President, with the recommendations of approval of the Live-Poultry Code.
But there were no findings except those.
MR. JUSTICE BUTLER: Well are there any findings in the President's findings, except what is there stated?
MR. REED: There are none except what is there stated.
MR. JUSTICE BUTLER: The fact that he had some things before him and did not find them would not suggest that they are part of the findings, but would rather negative that idea, because if he had intended to find them he would have found them.
MR. REED: But he says that: 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.
Now, therefore, I *** do hereby find that***.
MR. JUSTICE BUTLER: Yes.
And the things that he found were, in Finding No.
1, that there was an application; No. 2, that there was due notice and opportunity for hearings; No. 3, that there were hearings; No. 4, that: 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; His finding No. 5 is: 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.
That is a declaration of policy?
MR. REED: Correct, sir.
MR. JUSTICE BUTLER: And he has found that that was in harmony with that policy.
Now I would like to have you give me the substance of “declaration 3,” or “Section 3,” which he refers to, with which he says they comply fully.
That gives us the chain of law-making under which these men were punished, does it not?
MR. REED: It does.
Those sections, especially Section 3(a)-that is the application that is to be made by the employers or industrial organizations which apply for the code-include the requirement that these groups are representative of the industry; that the codes are not designed to promote any type of monopoly; that in case they affect the welfare of other people, they may come in under them.
MR. JUSTICE BUTLER: Well take the provisions of Section 3(a), subdivisions (1) and (2).
Is not that the entire scope of his reference?
MR. REED: Yes, sir.
MR. JUSTICE BUTLER: Now what is Section 3(a) (1)?
MR. REED: It says, if the President finds (1) that such associations or groups impose no inequitable restrictions on admission to membership.
MR. JUSTICE BUTLER: That is, they cannot keep out other men on any inequitable basis from that association.
Is that it?
MR. REED: That is it.
MR. JUSTICE BUTLER: And what else?
That they are “truly representative”?
MR. REED: That they are truly representative of the industry.
MR. JUSTICE BUTLER: What does the clause numbered (2) in Section 3(a) say?
MR. REED: Clause (2) of that Section says: (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.
MR. JUSTICE BUTLER: Well now, if the findings that I have referred to are not sufficiently definite to warrant the making of law or regulation, violations of which are subject to punishment by fine and imprisonment, there is no such basis in this case.
Is that true?
MR. REED: All the findings are included in that letter and the President's Executive Order.
MR. JUSTICE BUTLER: That is the complete chain from Congress to the imprisonment?
MR. REED: That is correct.
I may add, there, that in the case of Hampton & Co. v. United States, 276 U. S. 394, the findings were in substantially the same language as this.
MR. JUSTICE BUTLER: And that relates to what subject?
MR. REED: That related to the flexible tariff.
MR. JUSTICE BUTLER: That is, the act of Congress?
MR. REED: That is the act of Congress regarding the flexible tariff.
MR. JUSTICE BUTLER: To what subject does this Section 3 relate?
MR. REED: Section 3 of the Industrial Recovery Act?
MR. JUSTICE BUTLER: Yes.
MR. JUSTICE BUTLER: What industries?
MR. REED: All industries that will not come before the President and ask for these codes.
MR. JUSTICE BUTLER: That is, all industries local or affecting interstate commerce, of every kind in this country?
Is that it?
MR. REED: Yes-would have a right to apply for the code.
MR. JUSTICE BUTLER: And that rests, you say, upon the authority of the Hampton case?
MR. REED: I cited that as authority for the adoption of the findings the President made.
MR. JUSTICE BUTLER: Well what does the provision of the Tariff Act referred to in the Hampton case provide as to the power granted?
MR. REED: That the tariffs may be raised or lowered 50 percent.
MR. JUSTICE BUTLER: That is, that the President had authority to do that; but his actions were conditioned upon what?
MR. REED: Upon a finding being made by the Tariff Commission.
MR. JUSTICE BUTLER: And a finding was made?
MR. REED: A finding was made by the Tariff Commission, upon which he based his finding.
MR. JUSTICE BUTLER: Then he made a finding?
MR. REED: Then he made a finding.
MR. JUSTICE BUTLER: So, in that case the policy was to erect a tariff wall representing the difference between the cost of production abroad and the cost here for the purpose of ascertaining whether the President might act in a specific item and condition.
There was created a Tariff Commission to ascertain the facts, after elaborate hearings, was there not?
MR. REED: After hearing and investigation.
MR. JUSTICE BUTLER: Yes, of the facts in respect to the difference between the costs here and abroad.
Is that correct?
MR. REED: That is correct.
MR. JUSTICE BUTLER: Then, having those costs, the Commission would report to the President; and he would find, in respect of those particular items, cost, would he not, before he could act to increase or reduce the tariff?
MR. REED: It was required that he should find the facts.
MR. JUSTICE BUTLER: Where are the corresponding conditions with respect to the adoption of these codes-taking the Live Poultry Code of the City of New York, or for that district, or the entire ground referred to or covered by Section 3 of the National Recovery Act?
MR. REED: Obviously there are not precisely the same standards or methods of determining the facts as were used in the Tariff Commission Act.
But there are standards which are laid down in this Act for the determination by the President.
MR. JUSTICE BUTLER: What are they?
MR. REED: The standards of the codes that are to be brought here by the employing groups, that are to state to him the code which they desire.
MR. JUSTICE BUTLER: That is a standard which governs his action-the standard specified in that Code?
MR. REED: No.
That is the application that is made to him for the approval of the code.
The standard is that it must be a method of obtaining fair competition in industry.
MR. JUSTICE BUTLER: Well is he bound by the code that is submitted to him in the application, or limited by it in any respect?
MR. REED: We think he is.
MR. JUSTICE BUTLER: You think that he cannot depart from it?
MR. REED: We think that the conditions that he may put there must be accepted by the industry before there can be a valid code.
MR. JUSTICE BUTLER: That is not what I am talking about, or asking you about.
I was trying to find out this: You say that the standard upon which his action is based is the application by the industry.
Is that it?
MR. REED: No.
MR. JUSTICE BUTLER: -no, but where in the Act are there any standards fixed for fixing the wages of this bookkeeper, for example, who would not work for less than 50 cents an hour, and for the violation of which these men were convicted?
MR. REED: There is no primary standard beyond what is a fair competitive condition.
MR. JUSTICE BUTLER: Well what words in this Act would you turn to as justifying or as specifying a standard of Executive action in that regard?
MR. REED: (reading): 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.
MR. JUSTICE BUTLER: And that authorizes him to fix wages, now?
MR. REED: Correct, sir.
MR. JUSTICE BUTLER: Then let us look at subdivision (d) of Section 3 of the Act: The President, “upon his own motion,” may do all of these things, may he not, to this industry or any other industry, local or interstate, in this country?
MR. REED: Only after public hearings.
MR. JUSTICE BUTLER: “after such*** hearing as he shall specify”?
MR. REED: As he may require.
MR. JUSTICE BUTLER: He is not required to make any finding?
MR. REED: No, because he has the hearings there in front of him at that time.
He is not required to-.
MR. JUSTICE BUTLER: I am not asking you whether findings will be “necessary,” but he is not “required” to make any?
MR. JUSTICE MCREYNOLDS: Is there any provision for a court review, where a man is charged under these codes with a violation thereof, any opportunity to be heard as to their reasonableness or otherwise?
MR. REED: There is no provision for court review.
But the Government is of the opinion, of course, that the codes are subject to attack in cases such as this.
As a matter of fact, in this case, when we offered to bring in the evidence that the Code was based upon, the defendants admitted that this Code had been properly adopted.
So the actual record of this Code is not in the case.
MR. JUSTICE MCREYNOLDS: Yes, but can the code provisions be tested in the courts, in any way?
Has a man any opportunity to go into the courts if he thinks those codes infringe his rights?
MR. REED: There is no machinery provided when it passes from the approval of the President by which a test of the code can be made in the court, as in the Federal Trade Commission Act.
MR. JUSTICE MCREYNOLDS: Well do they not have, in the case of the carriers under the Interstate Commerce Act, some opportunity to be heard in court before the order is effective?
MR. REED: Some opportunity to be heard?
I do not recall that language of the statute.
MR. JUSTICE MCREYNOLDS: In the case of both the Interstate Commerce Commission and the Federal Trade Commission?
MR. REED: Both of those are subject to court review.
MR. JUSTICE MCREYNOLDS: Yes, and is that not the general rule-that there must be some chance to test it in court?
MR. REED: I should say it had been done more often that way than otherwise.
MR. JUSTICE MCREYNOLDS: And is there any opportunity given here to do that?
MR. REED: Only when the violator of the code is attacked in court; only when he is charged with violating the code.
MR. JUSTICE MCREYNOLDS: Well what has he open to him there?
MR. REED: He could rest his defense on the fact that the code had not been adopted on proper hearing.
MR. JUSTICE MCREYNOLDS: And nothing else?
MR. REED: He could bring the evidence on which the code had been adopted into court and could show them, possibly, that there had been no basis for the conclusion reached that this particular Section was a proper provision for a code of fair competition.
MR. JUSTICE MCREYNOLDS: Well, under this Act, is the President required to do anything?
MR. REED: We think so.
MR. JUSTICE MCREYNOLDS: What do you think he is required to do?
MR. REED: That when an application is made, in conformity with this Act with the provisions that are laid down as provisions of all code, that he must approve that code.
MR. JUSTICE MCREYNOLDS: “Must approve it”?
MR. REED: Must approve it.
MR. JUSTICE MCREYNOLDS: In other words, he must accept as a fair trade practice whatever the majority of those who are in the trade agreed upon?
MR. REED: No.
He can make as a condition of his approval that they agreed to certain other requirements, under the last clause of Section 3.