|Nebbia v. New York
262 N.Y. 259; 186 N.E. 694, affirmed.
[ Roberts ]
[ Mcreynolds ]
Nebbia v. New York
APPEAL FROM THE COUNTY COURT OF MONROE COUNTY, NEW YORK
MR. JUSTICE ROBERTS delivered the opinion of the Court.
The Legislature of New York established, by Chapter 158 of the Laws of 1933, a Milk Control Board with power, among other things, to "fix minimum and maximum . . . retail prices to be charged by . . . stores to consumers for consumption off the premises where sold." The Board fixed nine cents as the price to be charged by a store for a quart of milk. Nebbia, the proprietor of a grocery store in Rochester, sold two quarts and a five cent loaf of bread for eighteen cents, and was convicted for violating the Board's order. At his trial, he asserted the statute and order contravene the equal protection clause and the due process clause of the Fourteenth Amendment, and renewed the contention in successive appeals to the county court and the Court of Appeals. Both overruled his claim and affirmed the conviction. [n1]
The question for decision is whether the Federal Constitution prohibits a state from so fixing the selling price of milk. We first inquire as to the occasion for the legislation, and its history.
During 1932, the prices received by farmers for milk were much below the cost of production. The decline in prices during 1931 and 1932 was much greater than that of prices generally. The situation of the families of dairy producers had become desperate, and called for state aid similar to that afforded the unemployed, if conditions should not improve. [p516]
On March 10, 1932, the senate and assembly resolved
That a joint Legislative committee is hereby created . . . to investigate the causes of the decline of the price of milk to producers and the resultant effect of the low prices upon the dairy industry and the future supply of milk to the cities of the State; to investigate the cost of distribution of milk and its relation to prices paid to milk producers, to the end that the consumer may be assured of an adequate supply of milk at a reasonable price, both to producer and consumer.
The committee organized May 6, 1932, and its activities lasted nearly a year. It held 13 public hearings at which 254 witnesses testified and 2,350 typewritten pages of testimony were taken. Numerous exhibits were submitted. Under its direction, an extensive research program was prosecuted by experts and official bodies and employees of the state and municipalities, which resulted in the assembling of much pertinent information. Detailed reports were received from over 100 distributors of milk, and these were collated, and the information obtained analyzed. As a result of the study of this material, a report covering 473 closely printed pages, embracing the conclusions and recommendations of the committee, was presented to the legislature April 10, 1933. This document included detailed findings, with copious references to the supporting evidence; appendices outlining the nature and results of prior investigations of the milk industry of the state, briefs upon the legal questions involved, and forms of bills recommended for passage. The conscientious effort and thoroughness exhibited by the report lend weight to the committee's conclusions.
In part, those conclusions are:
Milk is an essential item of diet. It cannot long be stored. It is an excellent medium for growth of bacteria. These facts necessitate safeguards in its production and handling for human consumption which greatly increase [p517] the cost of the business. Failure of producers to receive a reasonable return for their labor and investment over an extended period threaten a relaxation of vigilance against contamination.
The production and distribution of milk is a paramount industry of the state, and largely affects the health and prosperity of its people. Dairying yields fully one-half of the total income from all farm products. Dairy farm investment amounts to approximately $1,000,000,000. Curtailment or destruction of the dairy industry would cause a serious economic loss to the people of the state.
In addition to the general price decline, other causes for the low price of milk include: a periodic increase in the number of cows and in milk production; the prevalence of unfair and destructive trade practices in the distribution of milk, leading to a demoralization of prices in the metropolitan area and other markets, and the failure of transportation and distribution charges to be reduced in proportion to the reduction in retail prices for milk and cream.
The fluid milk industry is affected by factors of instability peculiar to itself which call for special methods of control. Under the best practicable adjustment of supply to demand, the industry must carry a surplus of about 20 percent, because milk, an essential food, must be available as demanded by consumers every day in the year, and demand and supply vary from day to day and according to the season; but milk is perishable, and cannot be stored. Close adjustment of supply to demand is hindered by several factors difficult to control. Thus, surplus milk presents a serious problem, as the prices which can be realized for it for other uses are much less than those obtainable for milk sold for consumption in fluid form or as cream. A satisfactory stabilization of prices for fluid milk requires that the burden of surplus milk be shared equally by all producers and all distributors in the milkshed. [p518] So long as the surplus burden is unequally distributed, the pressure to market surplus milk in fluid form will be a serious disturbing factor. The fact that the larger distributors find it necessary to carry large quantities of surplus milk, while the smaller distributors do not, leads to price-cutting and other forms of destructive competition. Smaller distributors, who take no responsibility for the surplus, by purchasing their milk at the blended prices (i.e., an average between the price paid the producer for milk for sale as fluid milk, and the lower surplus milk price paid by the larger organizations) can undersell the larger distributors. Indulgence in this price-cutting often compels the larger dealer to cut the price, to his own and the producer's detriment.
Various remedies were suggested, amongst them united action by producers, the fixing of minimum prices for milk and cream by state authority, and the imposition of certain graded taxes on milk dealers proportioned so as to equalize the cost of milk and cream to all dealers, and so remove the cause of price-cutting.
The legislature adopted Chapter 158 as a method of correcting the evils, which the report of the committee showed could not be expected to right themselves through the ordinary play of the forces of supply and demand, owing to the peculiar and uncontrollable factors affecting the industry. The provisions of the statute are summarized in the margin. [n2] [p519]
Section 312(e), on which the prosecution in the present case is founded, provides:
After the board shall have fixed prices to be charged or paid for milk in any form [p520] . . . , it shall be unlawful for a milk dealer to sell or buy or offer to sell or buy milk at any price less or more than such price . . . , and no method or device shall be lawful whereby milk is bought or sold . . . at a price less or more than such price . . . , whether by any discount, or rebate, or free service, or advertising allowance, or a combined price for such milk together with another commodity or commodities, or service or services, which is less or more than the aggregate of the prices for the milk and the price or prices for such other commodity or commodities, or service or services, when sold or offered for sale separately or otherwise. . . .
First. The appellant urges that the order of the Milk Control Board denies him the equal protection of the laws. It is shown that the order requires him, if he purchases his supply from a dealer, to pay eight cents per quart and [p521] five cents per pint, and to resell at not less than nine and six, whereas the same dealer may buy his supply from a farmer at lower prices and deliver milk to consumers at ten cents the quart and six cents the pint. We think the contention that the discrimination deprives the appellant of equal protection is not well founded. For aught that appears, the appellant purchased his supply of milk from a farmer as do distributors, or could have procured it from a farmer, if he so desired. There is therefore no showing that the order placed him at a disadvantage, or, in fact, affected him adversely, and this alone is fatal to the claim of denial of equal protection. But if it were shown that the appellant is compelled to buy from a distributor, the difference in the retail price he is required to charge his customers, from that prescribed for sales by distributors, is not, on its face, arbitrary or unreasonable, for there are obvious distinctions between the two sorts of merchants which may well justify a difference of treatment, if the legislature possesses the power to control the prices to be charged for fluid milk. Compare American Sugar Refining Co. v. Louisiana, 179 U.S. 89; Brown-Forman Co. v. Kentucky, 217 U.S. 563; State Board of Tax Commissioners v. Jackson, 283 U.S. 527.
Second. The more serious question is whether, in the light of the conditions disclosed, the enforcement of § 312(e) denied the appellant the due process secured to him by the Fourteenth Amendment.
Save the conduct of railroads, no business has been so thoroughly regimented and regulated by the State of New York as the milk industry. Legislation controlling it in the interest of the public health was adopted in 1862, [n3] and subsequent statutes [n4] have been carried into the general [p522] codification known as the Agriculture and Markets Law. [n5] A perusal of these statutes discloses that the milk industry has been progressively subjected to a larger measure of control. [n6] The producer or dairy farmer is in certain circumstances liable to have his herd quarantined against bovine tuberculosis; is limited in the importation of dairy cattle to those free from Bang's disease; is subject to rules governing the care and feeding of his cows and the care of the milk produced, the condition and surroundings of his barns and buildings used for production of milk, the utensils used, and the persons employed in milking (§§ 46, 47, 55, 72-88). Proprietors of milk gathering stations or processing plants are subject to regulation (§ 54), and persons in charge must operate under license and give bond to comply with the law and regulations; must keep records, pay promptly for milk purchased, abstain from false or misleading statements and from combinations to fix prices (§§ 57, 57a, 252). In addition, there is a large volume of legislation intended to promote cleanliness and fair trade practices, affecting all who are engaged in the industry. [n7] The challenged amendment [p523] of 1933 carried regulation much farther than the prior enactments. Appellant insists that it went beyond the limits fixed by the Constitution.
Under our form of government, the use of property and the making of contracts are normally matters of private, and not of public, concern. The general rule is that both shall be free of governmental interference. But neither property rights [n8] nor contract rights [n9] are absolute, for government cannot exist if the citizen may at will use his property to the detriment of his fellows, or exercise his freedom of contract to work them harm. Equally fundamental with the private right is that of the public to regulate it in the common interest. As Chief Justice Marshall said, speaking specifically of inspection laws, such laws form
a portion of that immense mass of legislation which embraces every thing within the territory of a State . . . , all which can be most advantageously exercised by the States themselves. Inspection laws, quarantine laws, health laws of every description, as well as laws for regulating the internal commerce of a State . . . are component parts of this mass. [n10]
Justice Barbour said for this court:
. . . it is not only the right, but the bounden and solemn duty, of a state to advance the safety, happiness and prosperity of its people, and to provide for its general welfare by any and every act of legislation which it may deem to be conducive to these ends where the power over the particular subject, or the manner of its exercise, is not surrendered or restrained, in the manner just stated. [p524] That all those powers which relate to merely municipal legislation, or what may, perhaps, more properly be called internal police, are not thus surrendered or restrained, and that, consequently, in relation to these, the authority of a state is complete, unqualified, and exclusive. [n11]
And Chief Justice Taney said upon the same subject:
But what are the police powers of a State? They are nothing more or less than the powers of government inherent in every sovereignty to the extent of its dominions. And whether a State passes a quarantine law, or a law to punish offences, or to establish courts of justice, or requiring certain instruments to be recorded, or to regulate commerce within its own limits, in every case, it exercises the same powers -- that is to say, the power of sovereignty, the power to govern men and things within the limits of its dominion. It is by virtue of this power that it legislates, and its authority to make regulations of commerce is as absolute as its power to pass health laws, except insofar as it has been restricted by the constitution of the United States. [n12]
Thus has this court, from the early days, affirmed that the power to promote the general welfare is inherent in government. Touching the matters committed to it by the Constitution, the United States possesses the power, [n13] as do the states in their sovereign capacity touching all subjects jurisdiction of which is not surrendered to the federal government, as shown by the quotations above given. These correlative rights, that of the citizen to exercise exclusive dominion over property and freely to contract about his affairs and that of the state to regulate the use of property and the conduct of business, are always in collision. No exercise of the private right can be [p525] imagined which will not in some respect, however slight, affect the public; no exercise of the legislative prerogative to regulate the conduct of the citizen which will not to some extent abridge his liberty or affect his property. But, subject only to constitutional restraint, the private right must yield to the public need.
The Fifth Amendment, in the field of federal activity, [n14] and the Fourteenth, as respects state action, [n15] do not prohibit governmental regulation for the public welfare. They merely condition the exertion of the admitted power by securing that the end shall be accomplished by methods consistent with due process. And the guaranty of due process, as has often been held, demands only that the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the object sought to be attained. It results that a regulation valid for one sort of business, or in given circumstances, may be invalid for another sort or for the same business under other circumstances, because the reasonableness of each regulation depends upon the relevant facts.
The reports of our decisions abound with cases in which the citizen, individual or corporate, has vainly invoked the Fourteenth Amendment in resistance to necessary and appropriate exertion of the police power.
The court has repeatedly sustained curtailment of enjoyment of private property in the public interest. The owner's rights may be subordinated to the needs of other private owners whose pursuits are vital to the paramount interests of the community. [n16] The state may control the [p526] use of property in various ways; may prohibit advertising billboards except of a prescribed size and location, [n17] or their use for certain kinds of advertising; [n18] may in certain circumstances authorize encroachments by party walls in cities; [n19] may fix the height of buildings, the character of materials, and methods of construction, the adjoining area which must be left open, and may exclude from residential sections offensive trades, industries and structures likely injuriously to affect the public health or safety; [n20] or may establish zones within which certain types of buildings or businesses are permitted and others excluded. [n21] And although the Fourteenth Amendment extends protection to aliens as well as citizens, [n22] a state may for adequate reasons of policy exclude aliens altogether from the use and occupancy of land. [n23]
Laws passed for the suppression of immorality, in the interest of health, to secure fair trade practices, and to safeguard the interests of depositors in banks, have been found consistent with due process. [n24] These measures not [p527] only affected the use of private property, but also interfered with the right of private contract. Other instances are numerous where valid regulation has restricted the right of contract, while less directly affecting property rights. [n25]
The Constitution does not guarantee the unrestricted privilege to engage in a business or to conduct it as one [p528] pleases. Certain kinds of business may be prohibited; [n26] and the right to conduct a business, or to pursue a calling, may be conditioned. [n27] Regulation of a business to prevent waste of the state's resources may be justified. [n28] And statutes prescribing the terms upon which those conducting certain businesses may contract, or imposing terms if they do enter into agreements, are within the state's competency. [n29] [p529]
Legislation concerning sales of goods, and incidentally affecting prices, has repeatedly been held valid. In this class fall laws forbidding unfair competition by the charging of lower prices in one locality than those exacted in another, [n30] by giving trade inducement to purchasers, [n31] and by other forms of price discrimination. [n32] The public policy with respect to free competition has engendered state and federal statutes prohibiting monopolies, [n33] which have been upheld. On the other hand, where the policy of the state dictate that a monopoly should be granted, statutes having that effect have been held inoffensive to the constitutional guarantees. [n34] Moreover, the state or a municipality may itself enter into business in competition with private proprietor, and thus effectively [p530] although indirectly control the prices charged by them. [n35]
The milk industry in New York has been the subject of longstanding and drastic regulation in the public interest. The legislative investigation of 1932 was persuasive of the fact that, for this and other reasons, unrestricted competition aggravated existing evils, and the normal law of supply and demand was insufficient to correct maladjustments detrimental to the community. The inquiry disclosed destructive and demoralizing competitive conditions and unfair trade practices which resulted in retail price-cutting and reduced the income of the farmer below the cost of production. We do not understand the appellant to deny that, in these circumstances, the legislature might reasonably consider further regulation and control desirable for protection of the industry and the consuming public. That body believed conditions could be improved by preventing destructive price-cutting by stores which, due to the flood of surplus milk, were able to buy at much lower prices than the larger distributors and to sell without incurring the delivery costs of the latter. In the order of which complaint is made, the Milk Control Board fixed a price of ten cents per quart for sales by a distributor to a consumer, and nine cents by a store to a consumer, thus recognizing the lower costs of the store and endeavoring to establish a differential which would be just to both. In the light of the facts, the order appears not to be unreasonable or arbitrary, or without relation to the purpose to prevent ruthless competition from destroying the wholesale price structure on which the farmer depends for his livelihood, and the community for an assured supply of milk. [p531]
But we are told that, because the law essays to control prices, it denies due process. Notwithstanding the admitted power to correct existing economic ills by appropriate regulation of business, even though an indirect result may be a restriction of the freedom of contract or a modification of charges for services or the price of commodities, the appellant urges that direct fixation of prices is a type of regulation absolutely forbidden. His position is that the Fourteenth Amendment requires us to hold the challenged statute void for this reason alone. The argument runs that the public control of rates or prices is per se unreasonable and unconstitutional, save as applied to businesses affected with a public interest; that a business so affected is one in which property is devoted to an enterprise of a sort which the public itself might appropriately undertake, or one whose owner relies on a public grant or franchise for the right to conduct the business, or in which he is bound to serve all who apply; in short, such as is commonly called a public utility; or a business in its nature a monopoly. The milk industry, it is said, possesses none of these characteristics, and, therefore, not being affected with a public interest, its charges may not be controlled by the state. Upon the soundness of this contention the appellant's case against the statute depends.
We may as well say at once that the dairy industry is not, in the accepted sense of the phrase, a public utility. We think the appellant is also right in asserting that there is in this case no suggestion of any monopoly or monopolistic practice. It goes without saying that those engaged in the business are in no way dependent upon public grants or franchises for the privilege of conducting their activities. But if, as must be conceded, the industry is subject to regulation in the public interest, what constitutional principle bars the state from correcting existing [p532] maladjustments by legislation touching prices? We think there is no such principle. The due process clause makes no mention of sales or of prices any more than it speaks of business or contracts or buildings or other incidents of property. The thought seems nevertheless to have persisted that there is something peculiarly sacrosanct about the price one may charge for what he makes or sells, and that, however able to regulate other elements of manufacture or trade, with incidental effect upon price, the state is incapable of directly controlling the price itself. This view was negatived many years ago. Munn v. Illinois, 94 U.S. 113. The appellant's claim is, however, that this court, in there sustaining a statutory prescription of charges for storage by the proprietors of a grain elevator, limited permissible legislation of that type to businesses affected with a public interest, and he says no business is so affected except it have one or more of the characteristics he enumerates. But this is a misconception. Munn and Scott held no franchise from the state. They owned the property upon which their elevator was situated, and conducted their business as private citizens. No doubt they felt at liberty to deal with whom they pleased, and on such terms as they might deem just to themselves. Their enterprise could not fairly be called a monopoly, although it was referred to in the decision as a "virtual monopoly." This meant only that their elevator was strategically situated, and that a large portion of the public found it highly inconvenient to deal with others. This court concluded the circumstances justified the legislation as an exercise of the governmental right to control the business in the public interest; that is, as an exercise of the police power. It is true that the court cited a statement from Lord Hale's De Portibus Maris, to the effect that, when private property is "affected with a public interest, it ceases to be juris privati only"; but the court proceeded at once to define what it understood by [p533] the expression, saying:
Property does become clothed with a public interest when used in a manner to make it of public consequence, and affect the community at large.
(P. 126.) Thus, understood, "affected with a public interest" is the equivalent of "subject to the exercise of the police power", and it is plain that nothing more was intended by the expression. The court had been at pains to define that power (pp. 124, 125) ending its discussion in these words:
From this, it is apparent that, down to the time of the adoption of the Fourteenth Amendment, it was not supposed that statutes regulating the use, or even the price of the use, of private property necessarily deprived an owner of his property without due process of law. Under some circumstances, they may, but not under all. The amendment does not change the law in this particular; it simply prevents the States from doing that which will operate as such a deprivation. [n36]
In the further discussion of the principle, it is said that, when one devotes his property to a use "in which the public has an interest," he, in effect, "grants to the public an interest in that use," and must submit to be controlled for the common good. The conclusion is that, if Munn and Scott wished to avoid having their business regulated, they should not have embarked their property in an industry which is subject to regulation in the public interest.
The true interpretation of the court's language is claimed to be that only property voluntarily devoted to a known public use is subject to regulation as to rates. But obviously Munn and Scott had not voluntarily dedicated their business to a public use. They intended only [p534] to conduct it as private citizens, and they insisted that they had done nothing which gave the public an interest in their transactions or conferred any right of regulation. The statement that one has dedicated his property to a public use is, therefore, merely another way of saying that, if one embarks in a business which public interest demands shall be regulated, he must know regulation will ensue.
In the same volume, the court sustained regulation of railroad rates. [n37] After referring to the fact that railroads are carriers for hire, are incorporated as such, and given extraordinary powers in order that they may better serve the public, it was said that they are engaged in employment " affecting the public interest," and therefore, under the doctrine of the Munn case, subject to legislative control as to rates. And in another of the group of railroad cases then heard, [n38] it was said that the property of railroads is "clothed with a public interest" which permits legislative limitation of the charges for its use. Plainly, the activities of railroads, their charges and practices, so nearly touch the vital economic interests of society that the police power may be invoked to regulate their charges, and no additional formula of affection or clothing with a public interest is needed to justify the regulation. And this is evidently true of all business units supplying transportation, light, heat, power and water to communities, irrespective of how they obtain their powers.
The touchstone of public interest in any business, its practices and charges, clearly is not the enjoyment of any franchise from the state, Munn v. Illinois, supra. Nor is it the enjoyment of a monopoly; for in Brass v. [p535] North Dakota, 153 U.S. 391, a similar control of prices of grain elevators was upheld in spite of overwhelming and uncontradicted proof that about six hundred grain elevators existed along the line of the Great Northern Railroad, in North Dakota; that, at the very station where the defendant's elevator was located, two others operated, and that the business was keenly competitive throughout the state.
In German Alliance Insurance Co. v. Lewis, 233 U.S. 389, a statute fixing the amount of premiums for fire insurance was held not to deny due process. Though the business of the insurers depended on no franchise or grant from the state, and there was no threat of monopoly, two factors rendered the regulation reasonable. These were the almost universal need of insurance protection and the fact that, while the insurers competed for the business, they all fixed their premiums for similar risks according to an agreed schedule of rates. The court was at pains to point out that it was impossible to lay down any sweeping and general classification of businesses as to which price-regulation could be adjudged arbitrary or the reverse.
Many other decisions show that the private character of a business does not necessarily remove it from the realm of regulation of charges or prices. The usury laws fix the price which may be exacted for the use of money, although no business more essentially private in character can be imagined than that of loaning one's personal funds. Griffith v. Connecticut, 218 U.S. 563. Insurance agents' compensation may be regulated, though their contracts are private, because the business of insurance is considered one properly subject to public control. O'Gorman & Young v. Hartford Fire Ins. Co., 282 U.S. 251. Statutes prescribing in the public interest the amounts to be charged by attorneys for prosecuting certain claims, a matter ordinarily one of personal and private nature, [p536] are not a deprivation of due process. Frisbie v. United States, 157 U.S. 160; Capital Trust Co. v. Calhoun, 250 U.S. 208; Calhoun v. Massie, 253 U.S. 170; Newman v. Moyers, 253 U.S. 182; Yeiser v. Dysart, 267 U.S. 540; Margolin v. United States, 269 U.S. 93. A stockyards corporation, "while not a common carrier, nor engaged in any distinctively public employment, is doing a work in which the public has an interest," and its charges may be controlled. Cotting v. Kansas City Stockyards Co., 183 U.S. 79, 85. Private contract carriers, who do not operate under a franchise, and have no monopoly of the carriage of goods or passengers, may, since they use the highways to compete with railroads, be compelled to charge rates not lower than those of public carriers for corresponding services, if the state, in pursuance of a public policy to protect the latter, so determines. Stephenson v. Binford, 287 U.S. 251, 274.
It is clear that there is no closed class or category of businesses affected with a public interest, and the function of courts in the application of the Fifth and Fourteenth Amendments is to determine in each case whether circumstances vindicate the challenged regulation as a reasonable exertion of governmental authority or condemn it as arbitrary or discriminatory. Wolff Packing Co. v. Industrial Court, 262 U.S. 522, 535. The phrase "affected with a public interest " can, in the nature of things, mean no more than that an industry, for adequate reason, is subject to control for the public good. In several of the decisions of this court wherein the expressions "affected with a public interest" and "clothed with a public use" have been brought forward as the criteria of the validity of price control, it has been admitted that they are not susceptible of definition and form an unsatisfactory test of the constitutionality of legislation directed at business practices or prices. These decisions must rest, finally, upon the basis that the requirements of due process were [p537] not met, because the laws were found arbitrary in their operation and effect. [n39] But there can be no doubt that, upon proper occasion and by appropriate measures, the state may regulate a business in any of its aspects, including the prices to be charged for the products or commodities it sells.
So far as the requirement of due process is concerned, and in the absence of other constitutional restriction, a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose. The courts are without authority either to declare such policy or, when it is declared by the legislature, to override it. If the laws passed are seen to have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the requirements of due process are satisfied, and judicial determination to that effect renders a court functus officio.
Whether the free operation of the normal laws of competition is a wise and wholesome rule for trade and commerce is an economic question which this court need not consider or determine.
Northern Securities Co. v. United States, 193 U.S. 197, 337-338. And it is equally clear that, if the legislative policy be to curb unrestrained and harmful competition by measures which are not arbitrary or discriminatory, it does not lie with the courts to determine that the rule is unwise. With the wisdom of the policy adopted, with the adequacy or practicability of the law enacted to forward it, the courts are both incompetent and unauthorized to deal. The course of decision in this court exhibits a firm adherence to these principles. Times without number, we have said that the legislature is primarily the judge of the necessity of such an enactment, [p538] that every possible presumption is in favor of its validity, and that, though the court may hold views inconsistent with the wisdom of the law, it may not be annulled unless palpably in excess of legislative power. [n40]
The lawmaking bodies have in the past endeavored to promote free competition by laws aimed at trusts and monopolies. The consequent interference with private property and freedom of contract has not availed with the courts to set these enactments aside as denying due process. [n41] Where the public interest was deemed to require the fixing of minimum prices, that expedient has been sustained. [n42] If the lawmaking body, within its sphere of government, concludes that the conditions or practices in an industry make unrestricted competition an inadequate safeguard of the consumer's interests, [n43] produce waste harmful to the public, threaten ultimately to cut off the supply of a commodity needed by the public, or portend the destruction of the industry itself, appropriate statutes passed in an honest effort to correct the threatened consequences may not be set aside because the regulation adopted fixes prices reasonably deemed by the legislature to be fair to those engaged in the industry and to the consuming public. And this is especially so where, as here, the economic maladjustment is one of price, which threatens harm to the producer at one end of the series and the consumer at the other. The Constitution does [p539] not secure to anyone liberty to conduct his business in such fashion as to inflict injury upon the pubic at large, or upon any substantial group of the people. Price control, like any other form of regulation, is unconstitutional only if arbitrary, discriminatory, or demonstrably irrelevant to the policy the legislature is free to adopt, and hence an unnecessary and unwarranted interference with individual liberty.
Tested by these considerations, we find no basis in the due process clause of the Fourteenth Amendment for condemning the provisions of the Agriculture and Markets Law here drawn into question.
The judgment is
1. People v. Nebbia, 262 N.Y. 259, 186 N.E. 694.
2. Chapter 158 of the Laws of 1933 added a new Article (numbered 25) to the Agriculture and Markets Law. The reasons for the enactment are set forth in the first section (§ 300). So far as material they are: that unhealthful, unfair, unjust, destructive, demoralizing and uneconomic trade practices exist in the production, sale and distribution of milk and milk products, whereby the dairy industry in the state and the constant supply of pure milk to inhabitants of the state are imperiled; these conditions are a menace to the public health, welfare and reasonable comfort; the production and distribution of milk is a paramount industry upon which the prosperity of the state in a great measure depends; existing economic conditions have largely destroyed the purchasing power of milk producers for industrial products, have broken down the orderly production and marketing of milk, and have seriously impaired the agricultural assets supporting the credit structure of the state and its local governmental subdivisions. The danger to public health and welfare consequent upon these conditions is declared to be immediate, and to require public supervision and control of the industry to enforce proper standards of production, sanitation and marketing.
The law then (§ 301) defines the terms used; declaring, inter alia, that "milk dealer" means any person who purchases or handles milk within the state, for sale in the state, or sells milk within the state except when consumed on the premises where sold, and includes within the definition of "store" a grocery store.
By § 302, a state Milk Control Board is established, and, by § 303, general power is conferred upon that body to supervise and regulate the entire milk industry of the state, subject to existing provisions of the public health law, the public service law, the state sanitary code, and local health ordinances and regulations; to act as arbitrator or mediator in controversies arising between producers and dealers, or groups within those classes, and to exercise certain special powers to which reference will be made.
The Board is authorized to promulgate orders and rules which are to have the force of law (§ 304); to make investigations (§ 305); to enter and inspect premises in which any branch of the industry is conducted, and examine the books, papers and records of any person concerned in the industry (§ 306); to license all milk dealers and suspend or revoke licenses for specified causes, its action in these respects being subject to review by certiorari (§ 308), and to require licensees to keep records (§ 309) and to make reports (§ 310).
A violation of any provision of Article 25 or of any lawful order of the Board is made a misdemeanor (§ 307).
By § 312, it is enacted (a):
The board shall ascertain by such investigations and proofs as the emergency permits, what prices for milk in the several localities and markets of the state, and under varying conditions, will best protect the milk industry in the state and insure a sufficient quantity of pure and wholesome milk . . . and be most in the public interest. The board shall take into consideration all conditions affecting the milk industry including the amount necessary to yield a reasonable return to the producer and to the milk dealer.
(b) After such investigation, the board shall, by official order, fix minimum and maximum wholesale and retail prices to be charged by milk dealers to consumers, by milk dealers to stores for consumption on the premises or for resale to consumers, and by stores to consumers for consumption off the premises where sold. It is declared
(c) that the intent of the law is that the benefit of any advance in price granted to dealers shall be passed on to the producer, and if the board, after due hearing, finds this has not been done, the dealer's license may be revoked, and the dealer may be subjected to the penalties mentioned in the Act. The board may (d) after investigation fix the prices to be paid by dealers to producers for the various grades and classes of milk.
Subsection (e), on which the prosecution in the present case is founded, is quoted in the text.
Alterations may be made in existing orders after hearing of the interested parties (f) and orders made are subject to review on certiorari. The board (§ 319) is to continue with all the powers and duties specified until March 31, 1934, at which date it is to be deemed abolished. The Act contains further provisions not material to the present controversy.
3. Laws of 1862, Chap. 467.
4. Laws of 1893, Chap. 338. Laws of 1909, Chap. 9; Consol.Laws, Chap. 1.
5. Laws of 1927, Chap. 207; Cahill's Consolidated Laws of New York, 1930, Chap. 1.
6. Many of these regulations have been unsuccessfully challenged on constitutional grounds. See People v. Cipperly, 101 N.Y. 634, 4 N.E. 107; People v. Hill, 44 Hun 472; People v. West, 106 N.Y. 293, 12 N.E. 610; People v. Kibler, 106 N.Y. 321, 12 N.E. 795; People v. Hills, 64 App.Div. 584, 72 N.Y.S. 340; People v. Bowen, 182 N.Y. 1; 74 N.E. 489; Lieberman v. Van de Carr, 199 U.S. 552; St. John v. New York, 201 U.S. 633; People v. Koster, 121 App.Div. 852, 106 N.Y.S. 793; People v. Abramson, 208 N.Y. 138, 101 N.E. 849; People v. Frudenberg, 209 N.Y. 218, 103 N.E. 166; People v. Beakes Dairy Co., 222 N.Y. 416, 119 N.E. 115; People v. Teuscher, 248 N.Y. 454, 162 N.E. 484; People v. Perretta, 253 N.Y. 305; 171 N.E. 72; People v. Ryan, 230 App.Div. 252, 243 N.Y.S. 644; Mintz v. Baldwin, 289 U.S. 346.
7. See Cahill's Consolidated Laws of New York, 1930, and Supplements to and including 1933: Chap. 21, §§ 270-274; Chap. 41, §§ 435, 438, 1740, 1764, 2350-2357; Chap. 46, §§ 6-a, 20, 21.
8. Munn v. Illinois, 94 U.S. 113, 124, 125; Orient Ins. Co. v. Daggs, 172 U.S. 557, 566; Northern Securities Co. v. United States, 193 U.S. 197, 351, and see the cases cited in notes 16-23, infra.
9. Allgeyer v. Louisiana, 165 U.S. 578, 591; Atlantic Coast Line v. Riverside Mills, 219 U.S. 186, 202; Chicago, B. & Q. R. Co. v. McGuire, 219 U.S. 549, 567; Stephenson v. Binford, 287 U.S. 251, 274.
10. Gibbons v. Ogden, 9 Wheat. 1, 203.
11. New York v. Miln, 11 Pet. 102, 139.
12. License Cases, 5 How. 504, 583
13. United States v. Dewitt, 9 Wall. 41; Gloucester Ferry Co. v. Pennsylvania, 114 U.S. 196, 215.
14. Addyston Pipe & Steel Co. v. United States, 175 U.S. 211, 228-229.
15. Barbier v. Connolly, 113 U.S. 27, 31; Chicago, B. & Q. R. Co. v. Drainage Comm'rs, 200 U.S. 561, 592.
16. Clark v. Nash, 198 U.S. 361; Strickley v. Highland Boy Mining Co., 200 U.S. 527.
17. Cusack Co. v. Chicago, 242 U.S. 526; St. Louis Poster Advertising Co. v. St. Louis, 249 U.S. 269.
18. Packer Corp. v. Utah, 285 U.S. 105.
19. Jackman v. Rosenbaum Co., 260 U.S. 22.
20. Fischer v. St. Louis, 194 U.S. 361; Welch v. Swasey, 214 U.S. 91; Hadacheck v. Sebastian, 239 U.S. 394; Reinman v. Little Rock, 237 U.S. 171.
21. Euclid v. Ambler Realty Co., 272 U.S. 365; Zahn v. Board of Public Works, 274 U.S. 325; Gorieb v. Fox, 274 U.S. 603.
22. Yick Wo v. Hopkins, 118 U.S. 356, 369.
23. Terrace v. Thompson, 263 U.S. 197; Webb v. O'Brien, 263 U.S. 313.
24. Forbidding transmission of lottery tickets, Lottery Case, 188 U.S. 321; transportation of prize fight films, Weber v. Freed, 239 U.S. 325; the shipment of adulterated food, Hipolite Egg Co. v. United States, 220 U.S. 45; transportation of women for immoral purposes, Hoke v. United States, 227 U.S. 308; Caminetti v. United States, 242 U.S. 470; transportation of intoxicating liquor, Clark Distilling Co. v. Western Maryland Ry. Co., 242 U.S. 311; requiring the public weighing of grain, Merchants Exchange v. Missouri, 248 U.S. 365; regulating the size and weight of loaves of bread, Schmidinger v. Chicago, 226 U.S. 578; Petersen. Baking Co. v. Bryan, 290 U.S. 570; regulating the size and character of packages in which goods are sold, Armour & Co. v. North Dakota, 240 U.S. 510; regulating sales in bulk of a stock in trade, Lemieux v. Young, 211 U.S. 489; Kidd, Dater & Price Co. v. Musselman Grocer Co., 217 U.S. 461; sales of stocks and bonds, Hall v. Geiger-Jones Co., 242 U.S. 539; Merrick v. Halsey & Co., 242 U.S. 568; requiring fluid milk offered for sale to be tuberculin tested, Adams v. Milwaukee, 228 U.S. 572; regulating sales of grain by actual weight, and abrogating exchange rules to the contrary, House v. Mayes, 219 U.S. 270; subjecting state banks to assessments for a state depositors' guarantee fund, Noble State Bank v. Haskell, 219 U.S. 104.
25. Prescribing hours of labor in particular occupations, Holden v. Hardy, 169 U.S. 366; B. & O. R. Co. v. I.C.C., 221 U.S. 612; Bunting v. Oregon, 243 U.S. 426; prohibiting child labor, Sturges & Burn Co. v. Beauchamp, 231 US. 320; forbidding night work by women, Radice v. New York, 264 U.S. 292; reducing hours of labor for women, Muller v. Oregon, 208 U.S. 412; Riley v. Massachusetts, 232 U.S. 671; Miller v. Wilson, 236 U.S. 373; fixing the time for payment of seamen's wages, Patterson v. Bark Eudora, 190 U.S. 169; Strathearn S.S. Co. v. Dillon, 252 U.S. 348; of wages of railroad employes, St. Louis, I. M. & St.P. Ry. Co. v. Paul, 173 U.S. 404; Erie R. Co. v. Williams, 233 U.S. 685; regulating the redemption of store orders issued for wages, Knoxville Iron Co. v. Harbison, 183 US. 13; Keokee Consolidated Coke Co. v. Taylor, 234 U.S. 224; regulating the assignment of wages, Mutual Loan Co. v. Martell, 222 US. 225; requiring payment for coal mined on a fixed basis other than that usually practiced, McLean v. Arkansas, 211 U.S. 539; Rail & River Coal Co. v. Yaple, 236 U.S. 38; establishing a system of compulsory workmen's compensation, New York Central R. Co. v. White, 243 U.S. 188; Mountain Timber Co. v. Washington, 243 U.S. 219.
26. Sales of stock or grain on margin, Booth v. Illinois, 184 U.S. 425; Brodnax v. Missouri, 219 U.S. 285; Otis v. Parker, 187 U.S. 606; the conduct of pool and billiard rooms by aliens, Clarke v. Deckebach, 274 U.S. 392; the conduct of billiard and pool rooms by anyone, Murphy v. California, 225 U.S. 623; the sale of liquor, Mugler v. Kansas, 123 U.S. 623; the business of soliciting claims by one not an attorney, McCloskey v. Tobin, 252 U.S. 107; manufacture or sale of oleomargarine, Powell v. Pennsylvania, 127 U.S. 678; hawking and peddling of drugs or medicines, Baccus v. Louisiana, 232 U.S. 334; forbidding any other than a corporation to engage in the business of receiving deposits, Dillingham v. McLaughlin, 264 U.S. 370, or any other than corporations to do a banking business, Shallenberger v. First State Bank, 219 U.S. 114.
27. Physicians, Dent v. West Virginia, 129 U.S. 114; Watson v. Maryland, 218 U.S. 173; Crane v. Johnson, 242 U.S. 339; Hayman v. Galveston, 273 U.S. 414; dentists, Douglas v. Noble, 261 U.S. 165; Graves v. Minnesota, 272 U.S. 425; employment agencies, Brazee v. Michigan, 241 U.S. 340; public weighers of grain, Merchants Exchange v. Missouri, 248 U.S. 365; real estate brokers, Bratton v. Chandler, 260 U.S. 110; insurance agents, La Tourette v. McMaster, 248 U.S. 465; insurance companies, German Alliance Ins. Co. v. Lewis, 233 U.S. 389; the sale of cigarettes, Gundling v. Chicago, 177 U.S. 183; the sale of spectacles, Roschen v. Ward, 279 U.S. 337; private detectives, Lehon v. Atlanta, 242 U.S. 53; grain brokers, Chicago Board of Trade v. Olsen, 262 U.S. l; business of renting automobiles to be used by the renter upon the public streets, Hodge Co. v. Cincinnati, 284 U.S. 335.
28. Champlin Refining Co. v. Corporation Comm'n, 286 U.S. 210. Compare Bandini Petroleum Co. v. Superior Court, 284 U.S. 8, 21-22.
29. Contracts of carriage, Atlantic Coast Line v. Riverside Mills, 219 U.S. 186; agreements substituting relief or insurance payments for actions for negligence, Chicago, B. & Q. R. Co. v. McGuire, 219 U.S. 549; affecting contracts of insurance, Orient Ins. Co. v. Daggs, 172 US. 557; Whitfield v. Aetna Life Ins. Co., 205 U.S. 489; National Union Fire Ins. Co. v. Wanberg, 260 U.S. 71; Hardware Dealers Mut. F. I. Co. v. Glidden Co., 284 U.S. 151; contracts for sale of real estate, Selover, Bates & Co. v. Walsh, 226 U.S. 112; contracts for sale of farm machinery, Advance-Rumely Co. v. Jackson, 287 U.S. 283; bonds for performance of building contracts, Hartford Accident & Indemnity Co. v. Nelson Mfg. Co., 291 U.S. 352.
30. Central Lumber Co. v. South Dakota, 226 U.S. 157.
31. Rast v. Van Deman & Lewis Co., 240 U.S. 342.
32. Van Camp & Sons Co. v. American Can Co., 278 U.S. 245.
33. State statutes: Smiley v. Kansas, 196 U.S. 447; National Cotton Oil Co. v. Texas, 197 U.S. 115; Waters-Pierce Oil Co. v. Texas (No. 1), 212 U.S. 86; Hammond Packing Co. v. Arkansas, 212 U.S. 322; Grenada Lumber Co. v. Mississippi, 217 U.S. 433; International Harvester Co. v. Missouri, 234 U.S. 199.
Federal statutes: United States v. Joint Traffic Assn., 171 U.S. 505, 559, 571-573; Addyston Pipe & Steel Co. v. United States, 175 U.S. 211, 228-229; Northern Securities Co. v. United States, 193 U.S. 197, 332; United Shoe Mach. Corp. v. United States, 258 U.S. 451, 462-464.
34. Slaughter-House Cases, 16 Wall. 36; Conway v. Taylor's Executor, 1 Black 603; Crowley v. Christensen, 137 U.S. 86.
35. Madera Water Works v. Madera, 228 U.S. 454; Jones v. Portland, 245 U.S. 217; Green v. Frazier, 253 U.S. 233; Standard Oil Co. v. Lincoln, 275 U.S. 504.
36. As instances of Acts of Congress regulating private businesses consistently with the due process guarantee of the Fifth Amendment, the court cites those fixing rates to be charged at private wharves, by chimney-sweeps and hackneys, cartmen, wagoners and draymen in the District of Columbia (p. 125).
37. Chicago, B. & Q. R. Co. v. Iowa, 94 U.S. 155. It will be noted that the emphasis is here reversed, and the carrier is said to be in a business affecting the public, not that the business is somehow affected by an interest of the public
38. Peik v. C. & N.W. Ry. Co., 94 U.S. 164.
39. See Wolff Packing Co. v. Industrial Court, supra; Tyson & Bro. v. Banton, 273 U.S. 418; Ribnik v. McBride, 277 U.S. 350; Williams v. Standard Oil Co., 278 U.S. 235.
40. See McLean v. Arkansas, 211 U.S. 539, 547; Tanner v. Little, 240 U.S. 369, 385; Green v. Frazier, 253 U.S. 233, 240; O'Gorman & Young v. Hartford Fire Ins. Co., 282 U.S. 251, 257-258; Gant v. Oklahoma City, 289 U.S. 98, 102.
41. See note 32, supra.
42. Public Service Comm'n v. Great Northern Utilities Co., 289 U.S. 130; Stephenson v. Binford, supra. See the Transportation Act, 1920, 41 Stat. 456, §§ 418, 422, amending § 15 of the Interstate Commerce Act, and compare Anchor Coal Co. v. United States, 25 F.2d 462; New England Divisions Case, 261 U.S. 184, 190, 196.
43. See Public Service Comm'n v. Great Northern Utilities Co., supra.