Bill Long 11/17/05
Understanding the Concept of a Code of Fair Competition
I have mentioned elsewhere that one of the major problems sought to be addressed in Depresssion-era economic legislation was the "chiseler"--the one who would sell below "market" because of the inferior quality of his goods and who would, as a result, force the market down to his price, thereby hurting legitimate traders. The NIRA of 1933, by requiring Codes of Fair Competition in hundreds of industries, attempted to deal with this problem. The "chiseler" would be subject to criminal charges; no longer would he be able to "bring down" the market by his acts. That this is the issue behind the Schechter case is evident from the narration of facts in the appellate court opinion. This opinion, which upheld the constitutionality of the Codes, was reversed by an unanimous Supreme Court. Interesting, also, is that the following factual predicate for the enactment of the Codes, so important for the appellate court, was ignored by the Supremes. But let's begin our essay by giving a lengthy quotation from the appellate decision (76 F2d 617 (2nd Cir, 1935)).*
[*Note the appellate court handed down its decision on April 1, 1935 and the Supreme Court decided the case fewer than two months later. This would be inconceivable today. In today's world a petition for review would have to be have been filed probably by July 1, and a grant of certiorari would take place, at the earliest, in the Fall. Oral argument would be in the Spring with a decision by the end of June.]
The Problem as Seen by the Appellate Court
Here is the "problem" which provoked Congress to pass the NIRA in 1933, requiring industry-wide Codes of Fair Competition. After noting that revenues in the poultry business had fallen approximately 53% ($30,000,000) in the four years from 1929-33, the court says:
"The practices of selling below cost, selective killing, bringing in uninspected poultry from outside the state, selling poultry unfit for human consumption, making possible a ready market for diseased and inferior poultry, were assigned as evils resulting in loss in the volume of business. New York presented a market for diseased poultry, and the evidence shows that diseased poultry was shipped almost exclusively to New York. Live poultry is a perishable commodity, and the presence of a few diseased chickens in a car frequently infects the whole carload. Such poultry, when sold, is necessarily disposed of through misrepresentations as to its condition, and causes distrust and a reluctance to purchase on the part of consumers. The presence of diseased poultry in the market caused a demand bacause of its cheap price. It narrowed the price range because good poultry, which could otherwise sell at a high price, had to meet the competition of the diseased poultry and drop in price. The avoidance of poultry inspection was a relatively simple matter in New York, and this was a material circumstance in conditioning the shipment of unfit poultry to that market. Poultry certain to be condemned in other markets because of its diseased condition, was shipped to New York. Lack of inspection requirements also induced fraudulent practices in the course of interstate shipment--such as overfeeding the poultry to increase its weight" (76 F2d at 619).
This, in a nutshell, was the problem of the "chiseler" in the poultry industry. The Code of Fair Competition, regulating not simply the maximum hours of work or minimum wages allowed, but also the quality of the chicken and the slaughter practices in the industry, would deal with this issue. The hope was (and isn't all wide-ranging legislation driven by hope, hope that cannot strictly be "proven"?) that by shoring up quality in various industries through marginalizing and criminalizing the "chiseler," economic recovery would happen. People would have confidence in the quality of the product they were buying and would buy more of the product--thus leading to economic renaissance.
Returning to the Supreme Court
But the Supreme Court chose to frame the issue differently from the appellate court. As anyone who has worked a while in law knows, framing the issue in your client's interest is often the most important thing a lawyer can do. Instead of looking at the problem of the "chiseler" or the extraordinary economic times which led to the passage of NIRA, the Court quickly said one thing and then moved to two issues. The one thing the Court quickly said, an ominous sign to the Administration, was that national emergencies do not enlarge the constitutional scope of Congressional or Presidential powers. The Constitution contains fixed grants of power; no exigent circumstances could change these grants of power.
For those who read between the lines of Supreme Court opinions this statement, though facially unproblematic, is disingenous. It is like a preacher saying, "I only teach the Bible." Of course that simple statement opens up the huge hermeneutic question--'HOW, indeed, do you interpret the Bible which you teach?' The Court was basically saying the same thing. 'We are just reading the Constitution.' When anyone says they are just doing something "obvious" or "elementary" or just simply reading the words off a page, head for the hills. Something else is up.
The next essay describes this "something else," the "two issues" just mentioned.
Copyright © 2004-2008 William R.Long