Article I, Section 1:
All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.
The Court has upheld statutory delegations to private persons in the form of contingency legislation. It has upheld, for example, statutes providing that restrictions upon the production or marketing of agricultural commodities are to become operative only upon a favorable vote by a prescribed majority of those persons affected. 1 The Court's rationale has been that such a provision does not involve any delegation of legislative authority, because Congress has merely placed a restriction upon its own regulation by withholding its operation unless it is approved in a referendum. 2
The Court has also upheld statutes that give private entities actual regulatory power, rather than that merely make regulation contingent on such entities' approval. The Court, for example, upheld a statute that delegated to the American Railway Association, a trade group, the authority to determine the standard height of draw bars for freight cars and to certify the figure to the Interstate Commerce Commission, which was required to accept it. 3 The Court simply cited Buttfield v. Stranahan, 4 in which it had sustained a delegation to the Secretary of the Treasury to promulgate minimum standards of quality and purity for imported tea, as a case
completely in point and resolving the issue without need of further consideration. 5 Similarly, the Court had enforced statutes that gave legal effect to local customs of miners with respect to claims on public lands. 6
The Court has struck down delegations to private entities, but not solely because they were to private entities. In Schechter, it condemned the involvement of private trade groups in the drawing up of binding codes of competition in conjunction with governmental agencies, but the Court’s principal objection was to the statute’s lack of adequate standards. 7 In Carter v. Carter Coal Co., 8 the Court struck down the Bituminous Coal Conservation Act in part because the statute penalized persons who failed to observe minimum wage and maximum hour regulations drawn up by prescribed majorities of coal producers and coal employees. But the problem for the Court apparently was not so much that the statute delegated to private entities as that it delegated to private entities whose interests were adverse to the interests of those regulated, thereby denying the latter due process. 9 And several later cases have upheld delegations to private entities. 10
Even though the Court has upheld some delegations to private entities by reference to cases involving delegations to public agencies, some uncertainty remains as to whether identical standards apply in the two situations. Schechter contrasted the National Industrial Recovery Act’s broad and virtually standardless delegation to the President, assisted by private trade groups, 11 with other broad delegations of authority to administrative agencies, characterized by the Court as bodies of experts
required to act upon notice and hearing, and further limited by the requirement that binding orders must be
supported by findings of fact which in turn are sustained by evidence. 12 The absence of these procedural protections, designed to ensure fairness – as well as the possible absence of impartiality identified in Carter Coal – could be cited to support closer scrutiny of private delegations. Although the Court has emphasized the importance of administrative procedures in upholding broad delegations to administrative agencies, 13 it has not, since Schechter and Carter Coal, relied on the distinction to strike down a private delegation.