Does Congress violate the Constitution by delegating unfettered legislative power to the President to approve industry-drafted codes of fair competition under the National Industrial Recovery Act, and may it use the Commerce Clause to regulate the wages, hours, and local sales of a slaughterhouse whose business is wholly intrastate and only indirectly affects interstate commerce?

A.L.A. Schechter Poultry Corporation and Schechter Live Poultry Market, along with the individual defendants who operated them, ran wholesale poultry slaughterhouse markets in Brooklyn, New York. Ninety-six percent of the live poultry marketed in New York City came from other states. The defendants bought live poultry from commission men at New York markets or railroad terminals, and occasionally from commission men in Philadelphia. They trucked the birds to their Brooklyn slaughterhouses, slaughtered them, and sold them, usually within twenty-four hours, to local retail dealers and butchers who sold directly to consumers. The defendants did not sell poultry in interstate commerce.

The Live Poultry Code was approved by the President on April 13, 1934, under Section 3 of the National Industrial Recovery Act, which authorized the President to approve industry-proposed "codes of fair competition." The Code regulated the live poultry industry in the New York metropolitan area, setting maximum hours, minimum wages, labor provisions, and trade practice rules, including a "straight killing" rule barring customers from selecting individual birds from a coop. The defendants were charged with violating the wage and hour provisions, the straight-killing rule, sales of an unfit chicken, inspection and licensing rules, and reporting requirements, and with conspiracy to commit those violations.

The defendants were indicted in the United States District Court for the Eastern District of New York on sixty counts. The trial court dismissed twenty-seven counts, and the defendants were acquitted on fourteen. They were convicted on eighteen counts of violating the Live Poultry Code and on one count of conspiracy. Before and during trial, they demurred to the indictment and moved to challenge the Code on three grounds: unconstitutional delegation of legislative power, regulation of intrastate transactions beyond Congress's authority, and violation of the Fifth Amendment's due process clause.

The Circuit Court of Appeals for the Second Circuit sustained the conspiracy conviction and sixteen counts of Code violations but reversed the two counts charging violations of the minimum wage and maximum hour provisions, finding them beyond Congress's power. The Supreme Court granted certiorari on the defendants' petition (No. 854) and the Government's petition (No. 864) on April 15, 1935.

(Hughes, J.)

Yes. Section 3 of the National Industrial Recovery Act is an unconstitutional delegation of legislative power, and the wage, hour, and local sales provisions of the Live Poultry Code exceed Congress's commerce power as applied to the defendants' intrastate business.

On delegation, Congress cannot abdicate or transfer essential legislative functions. Congress may leave subordinate rules and fact-finding to others only after laying down policies and standards. Section 3 supplies no standards for any trade or industry. "Fair competition" is undefined, and it is broader than common-law unfair competition and the Federal Trade Commission Act's "unfair methods of competition," which operate through a quasi-judicial body with notice, hearing, findings, and judicial review. The Act dispenses with that procedure. The only restraints are findings that the proponents are representative and the code does not promote monopolies, plus an opinion that it will tend to effectuate the broad aims of Section 1. Within that field the President may add or remove provisions at will. Delegation to industry groups to enact the laws they deem wise is unknown to our law. Extraordinary economic conditions do not enlarge constitutional power. Panama Refining Co. v. Ryan, 293 U.S. 388 (1935), supports this analysis, and Interstate Commerce Act, Radio Act, and Hampton & Co. v. United States, 276 U.S. 394 (1928), delegations are distinguishable because each supplied standards and procedures.

On the commerce power, the poultry's interstate journey ended when the birds came to rest in Brooklyn for local slaughter and sale, so the transactions were not "in" interstate commerce and not within a "current" or "flow" of commerce. Local Code violations affect interstate commerce at most indirectly. The distinction between direct and indirect effects is fundamental to the federal system. Local wages and hours relate to costs and prices only remotely, and the Government's theory would give Congress control over every cost element of local business and leave state authority by sufferance. Local 167 v. United States, 291 U.S. 293 (1934), is distinguishable because it involved a conspiracy to restrain interstate commerce. The convictions were reversed.

Concurrence (Cardozo, J., joined by Stone, J.) The delegation is unconfined and vagrant, a roving commission to inquire into evils and correct them, which is delegation running riot. Delegation to eliminate unfair methods of competition ascertained upon inquiry, as with the Federal Trade Commission, would be lawful. But the Code reaches whatever is desirable for the welfare of an industry or the nation, without standards known in advance, and it condemns established practices such as selective buying that are neither unethical nor oppressive. Even if Congress itself had enacted the Code, it would be void because the Commerce Clause does not authorize regulating wages and hours in the defendants' intrastate transactions. Although society transmits all tremors throughout its territory, the law is concerned with degree, and local activities do not become national because of distant repercussions. Finding directness here would find it almost everywhere and end the federal system. Wages and hours are the bone and sinew of the statutory scheme, so the infected parts cannot be severed and the Code collapses entirely.