ArtI.S1.4.4.2 Delegations to Private Entities

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.

Footnotes

  1.  Currin v. Wallace, 306 U.S. 1 (1939); United States v. Rock Royal Co-operative, Inc., 307 U.S. 533, 577 (1939); Wickard v. Filburn, 317 U.S. 111, 115-116 (1942); United States v. Frame, 885 F.2d 1119 (3d Cir. 1989), cert. denied, 493 U.S. 1094 (1990).
  2.  Currin v. Wallace, 306 U.S. 1, 15, 16 (1939).
  3.  St. Louis, Iron Mt. & So. Ry. v. Taylor, 210 U.S. 281 (1908).
  4.  192 U.S. 470 (1904).
  5.  210 U.S. at 287.
  6.  Jackson v. Roby, 109 U.S. 440 (1883); Erhardt v. Boaro, 113 U.S. 527 (1885); Butte City Water Co. v. Baker, 196 U.S. 119 (1905).
  7.  A. L. A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 537 (1935). In two subsequent cases, the Court referred to Schechter as having struck down a delegation for its lack of standards. Mistretta v. United States, 488 U.S. 361, 373 n.7 (1989); Whitman v. American Trucking Ass’ns, 531 U.S. 457, 474 (2001).
  8.  298 U.S. 238 (1936). But compare Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 (1940) (upholding a delegation in the Bituminous Coal Act of 1937).
  9.  One person may not be entrusted with the power to regulate the business of another, and especially of a competitor. 298 U.S. at 311.
  10.  See, e.g., Schweiker v. McClure, 456 U.S. 188 (1992) (adjudication of Medicare claims, without right of appeal, by hearing officer appointed by private insurance carrier upheld under due process challenge); Association of Amer. Physicians & Surgeons v. Weinberger, 395 F. Supp. 125 (N.D. Ill.) (three-judge court) (delegation to Professional Standards Review Organization), aff’d per curiam, 423 U.S. 975 (1975); Noblecraft Industries v. Secretary of Labor, 614 F.2d 199 (9th Cir. 1980) (Secretary authorized to adopt interim OSHA standards produced by private organization). Executive Branch objections to these kinds of delegations have involved appointments clause arguments rather than delegation issues per se.
  11.  The Act conferred authority on the President to approve the codes of competition, either as proposed by the appropriate trade group, or with conditions that he added. Thus the principal delegation was to the President, with the private trade groups being delegated only recommendatory authority. 295 U.S. at 538-39.
  12.  295 U.S. at 539.
  13.  See, e.g., Yakus v. United States, 321 U.S. 414, 424-25 (1944).