U.S. Supreme Court A.L.A. SCHECHTER POULTRY CORPORATION v. UNITED STATES, 295 U.S. 495 (1935)

295 U.S. 495

A.L.A. SCHECHTER POULTRY CORPORATION et al. v. UNITED STATES.

UNITED STATES v. A.L.A. SCHECHTER POULTRY CORPORATION et al.

Nos. 854, 864. Argued May 2, 3, 1935. Decided May 27, 1935.

Phrase 'unfair methods of competition' within Federal Trade Commission Act has broader meaning than common-law term 'unfair competition,' but its scope cannot be precisely defined, and what constitutes 'unfair methods of competition' must be determined in particular instances, upon evidence, in light of particular competitive conditions and of what is found to be a specific and substantial public interest (Federal Trade Commission Act 5 (15 USCA 45)).[ A.L.A. Schechter Poultry Corporation v. United States 295 U.S. 495 (1935) ]

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Mr. Chief Justice HUGHES delivered the opinion of the Court.

Petitioners in No. 854 were convicted in the District Court of the United States for the Eastern District of New York on eighteen counts of an indictment charging violations of what is known as the 'Live Poultry Code,'1 and on an additional count for conspiracy to commit such violations. [Footnote 2] By demurrer to the indictment and appropriate motions on the trial, the defendants contended (1) that the code had been adopted pursuant to an unconstitutional delegation by Congress of legislative power; (2) that it attempted to regulate intrastate transactions which lay outside the authority of Congress; and (3) that in certain provisions it was repugnant to the due process clause of the Fifth Amendment.

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poultry for slaughter and resale. After the poultry is trucked to their slaughterhouse markets in Brooklyn, it is there sold, usually within twenty-four hours, to retail poultry dealers and butchers who sell directly to consumers. The poultry purchased from defendants is immediately slaughtered, prior to delivery, by shochtim in defendants' employ. Defendants do not sell poultry in interstate commerce.

The 'Live Poultry Code' was promulgated under section 3 of the National Industrial Recovery Act. [Footnote 3] That section, the pertinent provisions of which are set forth in the margin,4 authorizes the President to approve 'codes of

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tute 'unfair methods of competition.' The final article provides for verified reports, such as the Secretary or Administrator may require, '(1) for the protection of consumers, competitors, employees, and others, and in furtherance of the public interest, and (2) for the determination by the Secretary or Administrator of the extent to which the declared policy of the act is being effectuated by this code.' The members of the industry are also required to keep books and records which 'will clearly reflect all financial transactions of their respective businesses and the financial condition thereof,' and to submit weekly reports showing the range of daily prices and volume of sales' for each kind of produce.

The President approved the code by an executive order (No. 6675-A) in which he found that the application for his approval had been duly made in accordance with the provisions of title 1 of the National Industrial Recover Act; that there had been due notice and hearings; that the code constituted 'a code of fair competition' as contemplated by the act and complied with its pertinent provisions, including clauses (1) and (2) of subsection (a) of section 3 of title 1 (15 USCA 703(a)(1, 2); and that the code would tend 'to effectuate the policy of Congress as declared in section 1 of Title I.' [Footnote 5]

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able,' and also that the code would tend to effectuate the policy declared in title 1 of the act, as set forth in section 1 (15 USCA 701). The report of the Administrator for Industrial Recovery dealt with wages, hours of labor, and other labor provisions. [Footnote 6]

Of the eighteen counts of the indictment upon which the defendants were convicted, aside from the count for conspiracy, two counts charged violation of the minimum wage and maximum hour provisions of the code, and ten counts were for violation of the requirement (found in the 'trade practice provisions') of 'straight killing.' This requirement was really one of 'straight' selling. The term 'straight killing' was defined in the code as 'the practice of requiring persons purchasing poultry for resale to accept the run of any half coop, coop, or coops, as purchased by slaughterhouse operators, except for culls.' [Footnote 7] The charges in the ten counts, respectively, were

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that the defendants in selling to retail dealers and butchers had permitted 'selections of individual chickens taken from particular coops and half coops.'

Of the other six counts, one charged the sale to a butcher of an unfit chicken; two counts charged the making of sales without having the poultry inspected or approved in accordance with regulations or ordinances of the city of New York; two counts charged the making of false reports or the failure to make reports relating to the range of daily prices and volume of sales for certain periods; and the remaining count was for sales to slaughterers or dealers who were without licenses required by the ordinances and regulations of the city of New York.

First. Two preliminary points are stressed by the government with respect to the appropriate approach to the important questions presented. We are told that the provision of the statute authorizing the adoption of codes must be viewed in the light of the grave national crisis with which Congress was confronted. Undoubtedly, the conditions to which power is addressed are always to be considered when the exercise of power is challenged. Extraordinary conditions may call for extraordinary remedies. But the argument necessarily stops short of an attempt to justify action which lies outside the sphere of constitutional authority. Extraordinary conditions do not create or enlarge constitutional power. [Footnote 8] The Constitution established a national government with powers deemed to be adequate, as they have proved to be both in war and peace, but these powers of the national government are limited by the constitutional grants. Those who act under these grants are not at liberty to transcend the

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604, 9 S.Ct. 166; Howe Scale Co. v. Wyckoff, Seamans & Benedict, 198 U.S. 118, 140, 25 S.Ct. 609; Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 413, 36 S.Ct. 357. In recent years, its scope has been extended. It has been held to apply to misappropriation as well as misrepresenation, to the selling of another's goods as one's own-to misappropriation of what equitably belongs to a competitor. International News Service v. Associated Press, 248 U.S. 215, 241, 242 S., 39 S.Ct. 68, 2 A.L.R. 293. Unfairness in competition has been predicated of acts which lie outside the ordinary course of business and are tainted by fraud or coercion or conduct otherwise prohibited by law. [Footnote 10] Id., 248 U.S. 315, page 258, 39 S.Ct. 68, 2 A.L.R. 293. But it is evident that in its widest range, 'unfair competition,' as it has been understood in the law, does not reach the objectives of the codes which are authorized by the National Industrial Recovery Act. The codes may, indeed, cover conduct which existing law condemns, but they are not limited to conduct of that sort. The government does not contend that the act contemplates such a limitation. It would be opposed both to the declared purposes of the act and to its administrative construction.

The Federal Trade Commission Act [section 5 (15 USCA 45 11 introduced the expression 'unfair methods of competition,' which were declared to be unlawful. That was an expression new in the law. Debate apparently convinced the sponsors of the legislation that the words 'unfair competition,' in the light of their meaning at common law, were too narrow. We have said that the substituted phrase has a broader meaning, that it does not admit of precise definition; its scope being left to judicial determination as controversies arise. Federal Trade Commission v. Raladam Co., 283 U.S. 643, 648, 649 S., 51 S.Ct. 587, 79 A.L.R. 1191; Federal Trade Commission v. R. F. Keppel, , 310-312, 54 S.Ct. 423. What are

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'UNFAIR METHODS OF COMPETITION' ARE THUS to be determined in particular instances, upon evidence, in the light of particular competitive conditions and of what is found to be a specific and substantial public interest. Federal Trade Commission v. Beech-Nut Packing Co., 257 U.S. 441, 453, 42 S.Ct. 150, 19 A.L.R. 882; Federal Trade Commission v. Klesner, 280 U.S. 19, 27, 28 S., 50 S.Ct. 1, 68 A.L.R. 838; Federal Trade Commission v. Raladam Co., supra; Federal Trade Commission v. R. F. Keppel, supra; Federal Trade Commission v. Algoma Lumber Co., 291 U.S. 67, 73, 54 S.Ct. 315. To make this possible, Congress set up a special procedure. A commission, a quasi judicial body, was created. Provision was made for formal complaint, for notice and hearing, for appropriate findings of fact supported by adequate evidence, and for judicial review to give assurance that the action of the commission is taken within its statutory authority. Federal Trade Commission v. Raladam Co., supra; Federal Trade Commission v. Klesner, supra. [Footnote 12]

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thereof; and to provide for the general welfare by promoting the organization of industry for the purpose of cooperative action among trade groups, to induce and maintain united action of labor and management under adequate governmental sanctions and supervision, to eliminate unfair competitive practices, to promote the fullest possible utilization of the present productive capacity of industries, to avoid undue restriction of production (except as may be temporarily required), to increase the consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment, to improve standards of labor, and otherwise to rehabilitate industry and to conserve natural resources.' [Footnote 13]

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The government urges that the codes will 'consist of rules of competition deemed fair for each industry by representative members of that industry-by the persons most vitally concerned and most familiar with its problems.' Instances are cited in which Congress has availed itself of such assistance; as, e.g., in the exercise of its authority over the public domain, with respect to the recognition of local customs or rules of miners as to mining claims, 14 or, in matters of a more or less technical nature, as in designating the standard height of drawbars. [Footnote 15] But would it be seriously contended that Congress could delegate its legislative authority to trade or industrial associations or groups so as to empower them to enact the laws they deem to be wise and beneficent for the rehabilitation and expansion of their trade or industries? Could trade or industrial associations or groups be constituted legislative bodies for that purpose because such associations or groups are familiar with the problems of their enterprises? And could an effort of that sort be made valid by such a preface of generalities as to permissible aims as we find in section 1 of title 1? The answer is obvious. Such a delegation of legislative power is unknown to our law, and is utterly inconsistent with the constitutional prerogatives and duties of Congress.

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from regulation by the Congress in respect of matters such as these, there can be no 'code' for it at all. This is clear from the provisions of section 7(a) of the act (15 USCA 707(a), with its explicit disclosure of the statutory scheme. Wages and the hours of labor are essential features of the plan, its very bone and sinew. There is no opportunity in such circumstances for the severance of the infected parts in the hope of saving the remainder. A code collapses utterly with bone and sinew gone.

I am authorized to state that Mr. Justice STONE joins in this opinion. Footnotes

Footnote 1 The full title of the Code is 'Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and about the City of New York.'

Footnote 2 The indictment contained 60 counts, of which 27 counts were dismissed by the trial court, and on 14 counts the defendants were acquitted.

Footnote 3 Act of June 16, 1933, c. 90, 48 Stat. 195, 196; 15 U.S.C. 703 (15 USCA 703).

Footnote 4 'Codes of fair competition.'Sec. 3. (a) Upon the application to the President by one or more trade or industrial associations or groups, the President may approve a code or codes of fair competition for the trade or industry or subdivision thereof, represented by the applicant or applicants, if the President finds (1) that such associations or groups impose no inequitable restrictions on admission to membership therein and are truly representative of such trades or industries or subdivisions thereof, and ( 2) that such code or codes are not designed to promote monopolies or to eliminate or oppress small enterprises and will not operate to discriminate against them, and will tend to effectuate the policy of this title: Provided, That such code or codes shall not permit monopolies or monopolistic practices: Provided further, That where such code or codes affect the services and welfare of persons engaged in other steps of the economic process, nothing in this section shall deprive such persons of the right to be heard prior to approval by the President of such code or codes. The President may, as a condition of his approval of any such code, impose such conditions (including requirements for the making of reports and the keeping of accounts) for the protection of consumers, competitors, employees, and others, and in furtherance of the public interest, and may provide such exceptions to and exemptions from the provisions of such code. as the President in his discretion deems necessary to effectuate the policy herein declared.'(b) After the President shall have approved any such code, the provisions of such code shall be the standards of fair competition for such trade or industry or subdivision thereof. Any violation of such standards in any transaction in or affecting interstate or foreign commerce shall be deemed an unfair method of competition in commerce within the meaning of the Federal Trade Commission Act, as amended ( chapter 2 of this title); but nothing in this title (chapter) shall be construed to impair the powers of the Federal Trade Commission under such Act, as amended (chapter 2).

Footnote 5 The executive order is as follows:'Executive Order.'Approval of Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and about the City of New York.'Whereas, the Secretary of Agriculture and the Administrator of the National Industrial Recovery Act having rendered their separate reports and recommendations and findings on the provisions of said code, coming within their respective jurisdictions, as set forth in the Executive Order No. 6182 of June 26, 1933, as supplemented by Executive Order No. 6207 of July 21, 1933, and Executive Order N. 6345 of October 20, 1933, as amended by Executive Order No. 6551 of January 8, 1934;'Now, therefore, I, Franklin D. Roosevelt, President of the United States, pursuant to the authority vested in me by title I of the National Industrial Recovery Act, approved June 16, 1933, and otherwise, do hereby find that:'1. An application has been duly made, pursuant to and in full compliance with the provisions of title I of the National Industrial Recovery Act, approved June 16, 1933, for my approval of a code of fair competition for the live poultry industry in the metropolitan area in and about the City of New York; and'2. Due notice and opportunity for hearings to interested parties have been given pursuant to the provisions of the act and regulations thereunder; and,'3. Hearings have been held upon said code, pursuant to such notice and pursuant to the pertinent provisions of the act and regulations thereunder; and '4. Said code of fair competition constitutes a code of fair competition, as contemplated by the act and complies in all respects with the pertinent provisions of the act, including clauses (1) and (2) of subsection (a) of section 3 of title I of the act; and'5. It appears, after due consideration, that said code of fair competition will tend to effectuate the policy of Congress as declared in section 1 of title I of the act.'Now, therefore, I, Franklin D. Roosevelt, President of the United States, pursuant to the authority vested in me by title I of the National Industrial Recovery Act, approved June 16, 1933, and otherwise, do hereby approve said Code of Fair Competition for the Live Poultry Industry in the Metropolitan Area in and about the City of New York.'Franklin D. Roosevelt, 'President of the United States. 'The White House, 'April 13, 1934.'

Footnote 6 The Administrator for Industrial Recovery stated in his report that the Code had been sponsored by trade associations representing about 350 wholesale firms, 150 retail shops, and 21 commission agencies; that these associations represented about 90 per cent. of the live poultry industry by numbers and volume of business; and that the industry as defined in the code supplies the consuming public with practically all the live poultry coming into the metropolitan area from forty-one states and transacted an aggreagate annual business of approximately $90,000,000. He further said that about 1,610 employees were engaged in the industry; that it had suffered severely on account of the prevailing economic conditions and because of unfair methods of competition and the abuses that had developed as a result of the 'uncontrolled methods of doing business'; and that these conditions had reduced the number of employees by approximately 40 per cent. He added that the report of the Research and Planning Division indicated that the code would bring about an increase in wages of about 20 per cent. in this industry and an increase in employment of 19.2 per cent.

Footnote 7 The prohibition in the code (article VII, 14) was as follows: 'Straight Killing.-The use, in the wholesale slaughtering of poultry, of any method of slaughtering other than 'straight killing' or killing on the basis of official grade. Purchasers may, however, make selection of a half coop, coop, or coops, but shall not have the right to make any selection of particular birds.'

Footnote 8 See Ex parte Milligan, 4 Wall. 2, 120, 121; Home Building & Loan Association v. Blaisdell, 290 U.S. 398, 426, 54 S.Ct. 231, 88 A.L.R. 1481.

Footnote 9 That section (15 USCA 701), under the heading 'Declaration of Policy,' is as follows: 'Section 1. A national emergency productive of widespread unemployment and disoreganization of industry, which burdens interstate and foreign commerce, affects the public welfare, and undermines the standards of living of the American people, is hereby declared to exist. It is hereby declared to be the policy of Congress to remove obstructions to the free flow of interstate and foreign commerce which tend to diminish the amount thereof; and to provide for the general welfare by promoting the organization of industry for the purpose of co- operative action among trade groups, to induce and maintain united action of labor and management under adequate governmental sanctions and supervision, to eliminate unfair competitive practices, to promote the fullest possible utilization of the present productive capacity of industries, to avoid undue restriction of production (except as may be temporarily required), to increase the consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment, to improve standards of labor, and otherwise to rehabilitate industry and to conserve natural resources.'

Footnote 10 See cases collected in Nims on Unfair Competition and Trade-Marks, c. I, 4, p. 19, and chapter XIX.

Footnote 11 Act of September 26, 1914, c. 311, 38 Stat. 717, 719, 720 (section 5 (15 USCA 45)).

Footnote 12 The Tariff Act of 1930 (section 337, 46 Stat. 703 (19 USCA 1337 )), like the Tariff Act of 1922 (section 316, 42 Stat. 943 (19 USCA 174 et seq.)), employs the expressions 'unfair methods of competition' and 'unfair acts' in the importation of articles into the United States, and in their sale, 'the effect or tendency of which is to destroy or substantially injure an industry, efficiently and economically operated, in the United States, or to prevent the establishment of such an industry, or to restrain or monopolize trade and commerce in the United States.' Provision is made for investigation and findings by the Tariff Commission, for appeals upon questions of law to the United States Court of Customs and Patent Appeals, and for ultimate action by the President when the existence of any 'such unfair method or act' is established to his satisfaction.

Footnote 13 See note 9.

Footnote 14 Act of July 26, 1866, c. 262, 14 Stat. 251; Jackson v. Roby, 109 U.S. 440, 441, 3 S.Ct. 301; Erhardt v. Boaro, 113 U.S. 527, 535, 5 S.Ct. 560; Butte City Water Co. v. Baker, 196 U.S. 119, 126, 25 S.Ct. 211.

Footnote 15 Act of March 2, 1893, c. 196, 27 Stat. 531 (45 USCA 1 et seq.); St. Louis, Iron Mountain & S. Railway Co. v. Taylor, 210 U.S. 281, 286, 28 S.Ct. 616.

Footnote 16 Act of February 23, 1927, c. 169, 44 Stat. 1162, as amended by the Act of March 28, 1928, c. 263, 45 Stat. 373.

Footnote 17 Act of September 21, 1922, c. 356, title 3, 315, 42 Stat. 858, 941 (19 USCA 154 et seq.).