A. L. A. Schechter Poultry Corp. v. United States

Article I vests legislative power in Congress. Congress may establish a policy and governing standards, leaving an executive or administrative body to make subordinate rules, determine facts, and apply the statutory standard to particular circumstances. But Congress may not abdicate its essential lawmaking role by transferring unbounded discretion to another branch or to private groups.

The NIRA's codes were not merely voluntary industry agreements. Once approved or prescribed, they operated as positive law binding even on those who did not consent, and violations could result in criminal punishment. Their validity therefore depended on a constitutionally sufficient legislative authorization.

The phrase “fair competition” did not confine the Code to traditional unfair-competition rules, such as passing off, fraud, coercion, or other conduct already condemned by law. The statute and its administration instead authorized comprehensive new rules governing industries in pursuit of broad goals including industrial rehabilitation, increased employment, higher purchasing power, and improved labor standards.

The statutory conditions—that code sponsors be representative, that codes not promote monopolies or oppress small enterprises, and that codes tend to effectuate Title I's policy—did not meaningfully define the permissible content of a code. The declaration of policy was an expansive catalogue of desirable economic ends, not a standard capable of channeling legislative choices.

Section 3 also authorized the President to add conditions, exemptions, and exceptions in his discretion, and to prescribe a code himself where no approved industry code existed. Thus, the President could effectively determine what rules would govern a vast range of trades and industries, with virtually unfettered discretion.

The Court distinguished statutes that validly delegated implementation of specific congressional policies, such as rate regulation, radio licensing, and flexible tariffs. In those laws, Congress had established substantive standards tied to a defined subject matter and required administrative decisions to rest on particular findings. Section 3 instead authorized the creation of the governing rules themselves without comparable limits.

The relevant Code provisions did not regulate the out-of-state shipment of poultry to New York, the consignee transactions, or the initial sales by commission merchants to Schechter. After Schechter purchased the birds, it transported them to Brooklyn to be slaughtered and sold solely in the local market.

At that point, the poultry had come to rest within New York and had become part of the mass of property in the State. It was neither held for further interstate transportation nor destined for an onward interstate movement. A continuous inflow of goods from other States does not itself make every later local transaction part of interstate commerce.

The Court distinguished stream-of-commerce cases, in which goods pause temporarily in one location but remain committed to a practical continuity of interstate movement. Schechter's poultry was not in such a stream when it was slaughtered and sold to local retailers and butchers.

Congress may regulate intrastate conduct when doing so is necessary to protect interstate commerce from a direct and substantial injury. For example, Congress may control intrastate railroad operations closely connected to interstate transportation, or reach local acts undertaken as part of a conspiracy to restrain interstate commerce.

Schechter's case involved no charge that the defendants had restrained interstate commerce or interfered with the movement of poultry while it was still interstate commerce. The prosecution rested only on violations of wage, hour, reporting, inspection, and sales rules governing a local slaughterhouse business.

The Government argued that wages and hours affect operating costs, costs affect prices, and prices influence the broader poultry market and interstate commerce. The Court concluded that this chain of effects was indirect. The same theory would permit federal regulation of virtually every cost of any local business—employees, rents, advertising, and business methods—thereby erasing the constitutional distinction between interstate commerce and a State's internal affairs.

The straight-selling rule, the prohibition on selling an unfit chicken, local inspection-related requirements, and reporting obligations likewise governed local sales and local business management. Any effect on interstate commerce was indirect rather than direct.

Economic emergency and the importance of national recovery did not enlarge Congress's constitutional authority. Because the Code was invalid both as an excessive delegation and as applied to these local transactions, the Court reversed the defendants' convictions in No. 854 and affirmed the judgment in No. 864, which had rejected the Government's effort to reinstate the wage-and-hour counts.