"The question of price dominates trade between the States. Sales of an article which affect the country-wide price of the article directly affect the country-wide commerce in it."[437] Thus a practice which demonstrably affects prices would also affect interstate trade "directly," and so, even though local in itself, would fall within the regulatory power of Congress. In the following pa.s.sage, indeed, Chief Justice Taft whittles down, in both cases, the "direct-indirect" formula to the vanishing point: "Whatever amounts to more or less constant practice, and threatens to obstruct or unduly to burden the freedom of interstate commerce is within the regulatory power of Congress under the commerce clause, and it is primarily for Congress to consider and decide the fact of the danger and meet it. This court will certainly not subst.i.tute its judgment for that of Congress in such a matter unless the relation of the subject to interstate commerce and its effect upon it are clearly nonexistent."[438] And it was in reliance on the doctrine of these cases that Congress first set to work to combat the Depression in 1933 and the years immediately following. But in fact, much of its legislation at this time marked a wide advance upon the measures just pa.s.sed in review. They did not stop with regulating traffic among the States and the instrumentalities thereof; they also essayed to govern production and industrial relations in the field of production.
Confronted with this revolutionary claim to power on Congress" part, the Court again deemed itself called upon to define a limit to the commerce power that would save to the States their historical sphere, and especially their customary monopoly of legislative power in relation to industry and labor management.
THE SECURITIES AND EXCHANGE COMMISSION
Not all antidepression legislation, however, was of this revolutionary type. The Securities Exchange Act of 1934[439] and the Public Utility Company Act ("Wheeler-Rayburn Act") of 1935[440] were not. The former creates the Securities and Exchange Commission, and authorizes it to lay down regulations designed to keep dealing in securities honest and above-board and closes the channels of interstate commerce and the mails to dealers refusing to register under the act. The latter requires, by sections 4 (a) and 5, the companies which are governed by it to register with the Securities and Exchange Commission and to inform it concerning their business, organization and financial structure, all on pain of being prohibited use of the facilities of interstate commerce and the mails; while by section 11, the so-called "death sentence" clause, the same act closes after a certain date the channels of interstate communication to certain types of public utility companies whose operations, Congress found, were calculated chiefly to exploit the investing and consuming public. All these provisions have been sustained,[441] Gibbons _v._ Ogden, furnishing the Court its princ.i.p.al reliance.[442]
Congressional Regulation of Production and Industrial Relations
ANTIDEPRESSION LEGISLATION
In the following words of Chief Justice Hughes, spoken in a case which was decided a few days after President Franklin D. Roosevelt"s first inauguration, the problem which confronted the new Administration was clearly set forth: "When industry is grievously hurt, when producing concerns fail, when unemployment mounts and communities dependent upon profitable production are prostrated, the wells of commerce go dry."[443]
THE NATIONAL INDUSTRIAL RECOVERY ACT
The initial effort of Congress to deal with this situation was embodied in the National Industrial Recovery Act of June 16, 1933.[444] The opening section of the act a.s.serted the existence of "a national emergency productive of widespread unemployment and disorganization of industry which" burdened "interstate and foreign commerce," affected "the public welfare," and undermined "the standards of living of the American people." To effect the removal of these conditions the President was authorized, upon the application of industrial or trade groups, to approve "codes of fair compet.i.tion," or to prescribe the same in cases where such applications were not duly forthcoming. Among other things such codes, of which eventually more than 700 were promulgated, were required to lay down rules of fair dealing with customers and to furnish labor certain guarantees respecting hours, wages and collective bargaining. For the time being business and industry were to be cartelized on a national scale.
THE SCHECHTER CASE
In the case of Schechter Corp. _v._ United States,[445] one of these codes, the Live Poultry Code, was p.r.o.nounced unconst.i.tutional. Although it was conceded that practically all poultry handled by the Schechters came from outside the State, and hence via interstate commerce, the Court held, nevertheless, that once the chickens came to rest in the Schechters" wholesale market interstate commerce in them ceased. The act, however, also purported to govern business activities which "affected" interstate commerce. This, Chief Justice Hughes held, must be taken to mean "directly" affect such commerce: "the distinction between direct and indirect effects of intrastate transactions upon interstate commerce must be recognized as a fundamental one, essential to the maintenance of our const.i.tutional system. Otherwise, * * *, there would be virtually no limit to the federal power and for all practical purposes we should have a completely centralized government."[446] In short, the case was governed by the ideology of the Sugar Trust Case, which was not mentioned in the Court"s opinion.[447]
THE AGRICULTURAL ADJUSTMENT ACT
Congress" second attempt to combat the Depression comprised the Agricultural Adjustment Act of 1933.[448] As is pointed out elsewhere the measure was set aside as an attempt to regulate production, a subject which was held to be "prohibited" to the United States by Amendment X.[449] _See_ pp. 917-918.
THE BITUMINOUS COAL CONSERVATION ACT
The third measure to be disallowed was the Guffey-Snyder Bituminous Coal Conservation Act of 1935.[450] The statute created machinery for the regulation of the price of soft coal, both that sold in interstate commerce and that sold "locally," and other machinery for the regulation of hours of labor and wages in the mines. The clauses of the act dealing with these two different matters were declared by the act itself to be separable so that the invalidity of the one set would not affect the validity of the other; but this strategy was ineffectual. A majority of the Court, speaking by Justice Sutherland held that the act const.i.tuted one connected scheme of regulation which, inasmuch as it invaded the reserved powers of the States over conditions of employment in productive industry, was violative of the Const.i.tution and void.[451]
Justice Sutherland"s opinion set out from Chief Justice Hughes"s a.s.sertion in the Schechter Case of the "fundamental" character of the distinction between "direct" and "indirect" effects; that is to say, from the doctrine of the Sugar Trust Case. It then proceeded: "Much stress is put upon the evils which come from the struggle between employers and employees over the matter of wages, working conditions, the right of collective bargaining, etc., and the resulting strikes, curtailment and irregularity of production and effect on prices; and it is insisted that interstate commerce is greatly affected thereby. But, ..., the conclusive answer is that the evils are all local evils over which the Federal Government has no legislative control. The relation of employer and employee is a local relation. At common law, it is one of the domestic relations. The wages are paid for the doing of local work.
Working conditions are obviously local conditions. The employees are not engaged in or about commerce, but exclusively in producing a commodity.
And the controversies and evils, which it is the object of the act to regulate and minimize, are local controversies and evils affecting local work undertaken to accomplish that local result. Such effect as they may have upon commerce, however extensive it may be, is secondary and indirect. An increase in the greatness of the effect adds to its importance. It does not alter its character."[452] We again see the influence of the ideology of the Sugar Trust Case.[453]
THE NATIONAL LABOR RELATIONS ACT
The case in which the Court reduced the distinction between "direct" and "indirect" effects to the vanishing point, and thereby put Congress in the way of governing productive industry and labor relations in such industry was National Labor Relations Board _v._ Jones and Laughlin Steel Corp.,[454] decided April 12, 1937. Here the statute involved was the National Labor Relations Act of July 5, 1935,[455] which forbids "any unfair labor practice affecting interstate commerce" and lists among these "the denial by employers of the right of employees to organize and the refusal by employers to accept the procedure of collective bargaining." Ignoring recent holdings, government counsel appealed to the "current of commerce" concept of the Swift Case. The scope of respondent"s activities, they pointed out, was immense. Besides its great steel-producing plants, it owned and operated mines, steamships, and terminal railways scattered through several States, and altogether it gave employment to many thousands of workers. A vast industrial commonwealth such as this, whose operations constantly traversed State lines, comprised, they contended, a species of territorial enclave which was subject in all its parts to the only governmental power capable of dealing with it as an ent.i.ty, that is, the National Government. Yet even if this were not so, still the protective power of Congress over interstate commerce must be deemed to extend to disruptive strikes by employees of such an immense concern, and hence to include power to remove the causes of such strikes. The Court, speaking through Chief Justice Hughes, held the corporation to be subject to the act on the latter ground. "The close and intimate effect," said he, "which brings the subject within the reach of federal power may be due to activities in relation to productive industry although the industry when separately viewed is local." Nor will it do to say that such effect is "indirect." Considering defendant"s "far-flung activities," the effect of strife between it and its employees "* * * would be immediate and [it] might be catastrophic. We are asked to shut our eyes to the plainest facts of our national life and to deal with the question of direct and indirect effects in an intellectual vacuum. * * * When industries organize themselves on a national scale, making their relation to interstate commerce the dominant factor in their activities, how can it be maintained that their industrial labor relations const.i.tute a forbidden field into which Congress may not enter when it is necessary to protect interstate commerce from the paralyzing consequences of industrial war? We have often said that interstate commerce itself is a practical conception. It is equally true that interferences with that commerce must be appraised by a judgment that does not ignore actual experience."[456]
While the act was thus held to be within the const.i.tutional powers of Congress in relation to a productive concern, the interruption of whose business by strike "might be catastrophic," the decision was forthwith held to apply also to two minor concerns;[457] and in a later case the Court stated specifically that "the smallness of the volume of commerce affected in any particular case" is not a material consideration.[458]
Moreover, the doctrine of the Jones-Laughlin Case applies equally to "natural" products, to coal mined, to stone quarried, to fruit and vegetables grown.[459]
THE FAIR LABOR STANDARDS ACT; THE DARBY CASE
In 1938 Congress enacted the Fair Labor Standards Act.[460] The measure prohibits not only the shipment in interstate commerce of goods manufactured by employees whose wages are less than the prescribed minimum or whose weekly hours of labor are greater than the prescribed maximum, but also the employment of workmen in the production of goods for such commerce at other than the prescribed wages and hours.
Interstate commerce is defined by the act to mean "trade, commerce, transportation, transmission, or communication among the several States or from any State to any place outside thereof." It was further provided that "for the purposes of this act an employee shall be deemed to have been engaged in the production of goods [that is, for interstate commerce] if such employee was employed * * *, or in any process or occupation necessary to the production thereof, in any State."
Sustaining an indictment under the act, a unanimous Court, speaking by Chief Justice Stone, said: "The motive and purpose of the present regulation are plainly to make effective the congressional conception of public policy that interstate commerce should not be made the instrument of compet.i.tion in the distribution of goods produced under substandard labor conditions, which compet.i.tion is injurious to the commerce and to the States from and to which commerce flows."[461] In support of the decision the Court invokes Chief Justice Marshall"s reading of the necessary and proper clause in McCulloch _v._ Maryland and his reading of the commerce clause in Gibbons _v._ Ogden.[462] Objections purporting to be based on the Tenth Amendment are met from the same point of view: "Our conclusion is unaffected by the Tenth Amendment which provides: "The powers not delegated to the United States by the Const.i.tution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." The amendment states but a truism that all is retained which has not been surrendered. There is nothing in the history of its adoption to suggest that it was more than declaratory of the relationship between the national and State governments as it had been established by the Const.i.tution before the amendment or that its purpose was other than to allay fears that the new National Government might seek to exercise powers not granted, and that the States might not be able to exercise fully their reserved powers. _See_ e.g., II Elliot"s Debates, 123, 131; III id. 450, 464, 600; IV id. 140, 149; I Annals of Congress, 432, 761, 767-768; Story, Commentaries on the Const.i.tution, ---- 1907-1908."[463] Commenting recently on this decision, former Justice Roberts said: "Of course, the effect of sustaining the Fair Labor Standards Act was to place the whole matter of wages and hours of persons employed throughout the United States, with slight exceptions, under a single federal regulatory scheme and in this way completely to supersede state exercise of the police power in this field."[464] In a series of later cases construing terms of the act, it had been given wide application.[465]
THE AGRICULTURAL MARKETING AGREEMENT ACT
Meantime Congress had returned to the task of bolstering agriculture by pa.s.sing the Agricultural Marketing Agreement Act of June 3, 1937,[466]
authorizing the Secretary of Agriculture to fix the minimum prices of certain agricultural products, when the handling of such products occurs "in the current of interstate or foreign commerce or * * * directly burdens, obstructs or affects interstate or foreign commerce in such commodity or product thereof." In United States _v._ Wrightwood Dairy Company[467] the Court sustained an order of the Secretary of Agriculture fixing the minimum prices to be paid to producers of milk in the Chicago "marketing area." The dairy company demurred to the regulation on the ground of its applying to milk produced and sold intrastate. Sustaining the order the Court said: "Congress plainly has power to regulate the price of milk distributed through the medium of interstate commerce, * * *, and it possesses every power needed to make that regulation effective. The commerce power is not confined in its exercise to the regulation of commerce among the States. It extends to those activities intrastate which so affect interstate commerce, or the exertion of the power of Congress over it, as to make regulation of them appropriate means to the attainment of a legitimate end, the effective execution of the granted power to regulate interstate commerce. _See_ McCulloch _v._ Maryland, 4 Wheat. 316, 421; * * * The power of Congress over interstate commerce is plenary and complete in itself, may be exercised to its utmost extent, and acknowledges no limitations other than are prescribed in the Const.i.tution. Gibbons _v._ Ogden, 9 Wheat. 1, 196. It follows that no form of State activity can const.i.tutionally thwart the regulatory power granted by the commerce clause to Congress.
Hence the reach of that power extends to those intrastate activities which in a substantial way interfere with or obstruct the exercise of the granted power."[468]
In Wickard _v._ Filburn[469] a still deeper penetration by Congress into the field of production was sustained. As amended by the act of 1941, the Agricultural Adjustment Act of 1938,[470] regulates production even when not intended for commerce but wholly for consumption on the producer"s farm. Sustaining this extension of the act, the Court pointed out that the effect of the statute was to support the market. It said: "It can hardly be denied that a factor of such volume and variability as home-consumed wheat would have a substantial influence on price and market conditions. This may arise because being in marketable condition such wheat overhangs the market and, if induced by rising prices, tends to flow into the market and check price increases. But if we a.s.sume that it is never marketed, it supplies a need of the man who grew it which would otherwise be reflected by purchases in the open market. Home-grown wheat in this sense competes with wheat in commerce. The stimulation of commerce is a use of the regulatory function quite as definitely as prohibitions or restrictions thereon. This record leaves us in no doubt that Congress may properly have considered that wheat consumed on the farm where grown, if wholly outside the scheme of regulation, would have a substantial effect in defeating and obstructing its purpose to stimulate trade therein at increased prices."[471] And it elsewhere stated: "Questions of the power of Congress are not to be decided by reference to any formula which would give controlling force to nomenclature such as "production" and "indirect" and foreclose consideration of the actual effects of the activity in question upon interstate commerce. * * * The Court"s recognition of the relevance of the economic effects in the application of the Commerce Clause, * * *, has made the mechanical application of legal formulas no longer feasible."[472]
Acts of Congress Prohibiting Commerce
FOREIGN COMMERCE; JEFFERSON"S EMBARGO
"Jefferson"s Embargo" of 1807-1808, which cut all trade with Europe, was attacked on the ground that the power to regulate commerce was the power to preserve it, not the power to destroy it. This argument was rejected by Judge Davis of the United States District Court for Ma.s.sachusetts in the following words: "A national sovereignty is created [by the Const.i.tution]. Not an unlimited sovereignty, but a sovereignty, as to the objects surrendered and specified, limited only by the qualifications and restrictions, expressed in the Const.i.tution. Commerce is one of those objects. The care, protection, management and control, of this great national concern, is, in my opinion, vested by the Const.i.tution, in the Congress of the United States; and their power is sovereign, relative to commercial intercourse, qualified by the limitations and restrictions, expressed in that instrument, and by the treaty making power of the President and Senate. * * * Power to regulate, it is said, cannot be understood to give a power to annihilate. To this it may be replied, that the acts under consideration, though of very ample extent, do not operate as a prohibition of all foreign commerce. It will be admitted that partial prohibitions are authorized by the expression; and how shall the degree, or extent, of the prohibition be adjusted, but by the discretion of the National Government, to whom the subject appears to be committed? * * *
The term does not necessarily include shipping or navigation; much less does it include the fisheries. Yet it never has been contended, that they are not the proper objects of national regulation; and several acts of Congress have been made respecting them. * * * [Furthermore] if it be admitted that national regulations relative to commerce, may apply it as an instrument, and are not necessarily confined to its direct aid and advancement, the sphere of legislative discretion is, of course, more widely extended; and, in time of war, or of great impending peril, it must take a still more expanded range. Congress has power to declare war. It, of course, has power to prepare for war; and the time, the manner, and the measure, in the application of const.i.tutional means, seem to be left to its wisdom and discretion. * * * Under the Confederation, * * * we find an express reservation to the State legislatures of the power to pa.s.s prohibitory commercial laws, and, as respects exportations, without any limitations. Some of them exercised this power. * * * Unless Congress, by the Const.i.tution, possess the power in question, it still exists in the State legislatures--but this has never been claimed or pretended, since the adoption of the federal Const.i.tution; and the exercise of such a power by the States, would be manifestly inconsistent with the power, vested by the people in Congress, "to regulate commerce." Hence I infer, that the power, reserved to the States by the articles of Confederation, is surrendered to Congress, by the Const.i.tution; unless we suppose, that, by some strange process, it has been merged or extinguished, and now exists no where."[473]
FOREIGN COMMERCE; PROTECTIVE TARIFFS
Tariff laws have customarily contained prohibitory provisions, and such provisions have been sustained by the Court under Congress"s revenue powers (_see above_) and under its power to regulate foreign commerce.
Speaking for the Court in University of Illinois _v._ United States,[474] in 1933, Chief Justice Hughes said: "The Congress may determine what articles may be imported into this country and the terms upon which importation is permitted. No one can be said to have a vested right to carry on foreign commerce with the United States. * * * It is true that the taxing power is a distinct power; that it is distinct from the power to regulate commerce. * * * It is also true that the taxing power embraces the power to lay duties. Art. I, -- 8, cl. 1. But because the taxing power is a distinct power and embraces the power to lay duties, it does not follow that duties may not be imposed in the exercise of the power to regulate commerce. The contrary is well established. Gibbons _v._ Ogden, 9 Wheat. 1, 202. "Under the power to regulate foreign commerce Congress impose duties on importations, give drawbacks, pa.s.s embargo and nonintercourse laws, and make all other regulations necessary to navigation, to the safety of pa.s.sengers, and the protection of property." Groves _v._ Slaughter, 15 Pet. 449, 505.
The laying of duties is "a common means of executing the power." 2 Story on the Const.i.tution, -- 1088."[475]
FOREIGN COMMERCE; BANNED ARTICLES
The forerunners of more recent acts excluding objectionable commodities from interstate commerce are the laws forbidding the importation of like commodities from abroad. This power Congress has exercised since 1842.
In that year it forbade the importation of obscene literature or pictures from abroad.[476] Six years later it pa.s.sed an act "to prevent the importation of spurious and adulterated drugs" and to provide a system of inspection to make the prohibition effective.[477] Such legislation guarding against the importation of noxiously adulterated foods, drugs, or liquor has been on the statute books ever since. In 1887 the importation by Chinese nationals of smoking opium was prohibited,[478] and subsequent statutes pa.s.sed in 1909 and 1914 made it unlawful for anyone to import it.[479] In 1897 Congress forbade the importation of any tea "inferior in purity, quality, and fitness for consumption" as compared with a legal standard.[480] The act was sustained in 1904, in the leading case of b.u.t.tfield _v._ Stranahan.[481]
In "The Abby Dodge" case an act excluding sponges taken by means of diving or diving apparatus from the waters of the Gulf of Mexico or Straits of Florida was sustained, but construed as not applying to sponges taken from the territorial waters of a State.[482] In Weber _v._ Freed[483] an act prohibiting the importation and interstate transportation of prize-fight films or of pictorial representation of prize fights was upheld. Speaking for the unanimous Court, Chief Justice White said: "In view of the complete power of Congress over foreign commerce and its authority to prohibit the introduction of foreign articles recognized and enforced by many previous decisions of this court, the contentions are so devoid of merit as to cause them to be frivolous."[484] In Brolan _v._ United States[485] the Court again stressed the absolute nature of Congress"s power over foreign commerce, saying: "In the argument reference is made to decisions of this court dealing with the subject of the power of Congress to regulate interstate commerce, but the very postulate upon which the authority of Congress to absolutely prohibit foreign importations as expounded by the decisions of this court rests is the broad distinction which exists between the two powers and therefore the cases cited and many more which might be cited announcing the principles which they uphold have obviously no relation to the question in hand."[486]
INTERSTATE COMMERCE; CONFLICT OF DOCTRINE AND OPINION
The question whether Congress"s power to regulate commerce "among the several States" embraced the power to prohibit it furnished the topic of one of the most protracted debates in the entire history of the Const.i.tution"s interpretation, a debate the final resolution of which in favor of Congressional power is an event of first importance for the future of American Federalism. The issue was as early as 1841 brought forward by Henry Clay, in an argument before the Court in which he raised the specter of an act of Congress forbidding the interstate slave trade.[487] The debate was concluded ninety-nine years later by the decision in United States _v._ Darby, in which the Fair Labor Standards Act was sustained. The resume of it which is given below is based on judicial opinions, arguments of counsel, and the writings of jurists and political scientists. Much of this material was evoked by efforts of Congress, from about 1905 onward, to stop the shipment interstate of the products of child labor.
ACTS OF CONGRESS PROHIBITIVE OF INTERSTATE COMMERCE
The earliest such acts were in the nature of quarantine regulations and usually dealt solely with interstate transportation. In 1884 the exportation or shipment in interstate commerce of livestock having any infectious disease was forbidden.[488] In 1903 power was conferred upon the Secretary of Agriculture to establish regulations to prevent the spread of such diseases through foreign or interstate commerce.[489] In 1905 the same official was authorized to lay an absolute embargo or quarantine upon all shipments of cattle from one State to another when the public necessity might demand it.[490] A statute pa.s.sed in 1905 forbade the transportation in foreign and interstate commerce and the mails of certain varieties of moths, plant lice, and other insect pests injurious to plant crops, trees, and other vegetation.[491] In 1912 a similar exclusion of diseased nursery stock was decreed,[492] while by the same act, and again by an act of 1917,[493] the Secretary of Agriculture was invested with powers of quarantine on interstate commerce for the protection of plant life from disease similar to those above described for the prevention of the spread of animal disease.
While the Supreme Court originally held federal quarantine regulations of this sort to be const.i.tutionally inapplicable to intrastate shipments of livestock, on the ground that federal authority extends only to foreign and interstate commerce,[494] this view has today been abandoned. _See_ pp. 248-249.
THE LOTTERY CASE