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

During the "first 100 days" of the administration of Franklin D. Roosevelt, a number of bills were passed by Congress to deal with the Great Depression. Although separate bills dealt with different aspects of unemployment, banking, agriculture, and other problems, the central piece of legislation dealing with the economy as a whole was the National Industrial Recovery Act. Under that act, the government created the National Recovery Administration, whose function was to regulate the economy to ensure that prices were not cut and that businesses operated at prices that would keep them going. In order to do this, businesses would select, through their business associations, delegates to code authorities for each type of business. Labor unions and the consuming public would also be represented on these code authorities. The authorities would write specific regulations governing each business, setting prices, wages, and specific conditions for each type of business. The concept was that business could determine a fair code of competition, and at these prices, individual companies would not undercut the rest.

At first, the only sanction against companies not obeying the codes was that they would be denied the right to display a "Blue Eagle," a symbol of the National Recovery Administration. However, the codes would have the force of law and the federal government could extend other punishments to firms not following the codes.

The principles involved seemed to violate several long-standing views of the American economic system. In particular, the legislation allowed private business associations, in agreement with their unions, to create standards that would restrain trade, an apparent violation of the Sherman Anti-Trust Act. Furthermore, the codes would have the force of law, even though they had been prepared by the non-legislative groups collected in the code authorities.

Arguing for the federal government, attorneys working under Donald R. Richberg suggested that extraordinary times required extraordinary measures. In effect, Richberg and his associates were taking the doctrine of implied powers that had been established in McCulloch v. Maryland in 1819 and extending it greatly to cover the economic crisis of the 1930s.

The Schechter case arose when a particular chicken packing firm on Long Island, New York, violated the code for its industry in several regards. Among the many violations cited were some related to health conditions. However, the firm claimed that it did not need to obey the codes established by the code authority because the codes did not have the force of law.

The Court agreed with the attorneys for the Schechter firm, spelling out a number of objections to the law and finding it unconstitutional. While extraordinary crises called for extraordinary remedies, that did not justify the creation or the enlargement of constitutional powers. Congress could not abdicate or transfer to others its power to legislate. Congress could delegate rule-making, but it must lay down policies and standards and not turn over the creation of policies and standards to others. The "Codes of Competition" were meant, in fact, to be codes of law, and they were designed not merely to ensure competition, but to bring about the rehabilitation of the economy. No court rulings had ever justified the delegation of legislative power to the president (who appointed the boards), nor had the courts ever justified turning legislative power over to associations of companies or individuals. The code making authority was therefore unconstitutional. For good measure, the Court also ruled that the Schechter Company was not truly an interstate business, as it marketed its product entirely within New York.

With the striking down of the National Recovery Administration, the Roosevelt administration and Congress turned to more specific pieces of legislation designed to stimulate the economy, to increase employment, and to provide relief and security for employees. In effect, the Court had prevented the federal government from establishing a system of business regulation designed by businesses themselves, and preserving some aspects of a free market.