ArtI.S8.C3.5.7 Public Utility Holding Company and Bituminous Coal Conservation Acts of 1935

Article I, Section 8, Clause 3:

[The Congress shall have Power . . . ] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; . . .

In 1935, Congress passed the Public Utility Holding Company Act ( “Wheeler-Rayburn Act” )1 and the Bituminous Coal Conservation Act.2 The Wheeler-Rayburn Act required covered companies to register with the Securities and Exchange Commission and report on their business, organization, and financial structure or be prohibited from using mails and other interstate commerce facilities. Under Section 11, the so-called “death sentence” clause, the Wheeler-Rayburn Act closed channels of interstate communication after a certain date to certain types of public utility holding companies whose operations, Congress found, were calculated chiefly to exploit the investing and consuming public. In a series of decisions, the Court sustained these provisions,3 relying principally on Gibbons v. Ogden.

The Court, however, disallowed the Guffey-Snyder Bituminous Coal Conservation Act (BCCA) of 1935,4 which regulated the price of soft coal that was sold both in interstate commerce and “locally,” and the hours of labor and wages in the mines. The BCCA declared these provisions to be separable, so that the invalidity of one set would not affect the validity of the other. However, a majority of the Court, in an opinion written by Justice George Sutherland, held that (1) these provisions were not separable because the BCCA constituted one connected scheme of regulation, and (2) the BCCA was unconstitutional because it invaded the reserved powers of the states over conditions of employment in productive industry.5 Taking Chief Justice Charles Hughes’ assertion in A. L. A. Schechter Poultry Corp. v. United States of the “fundamental” distinction between “direct” and “indirect” effects, which, in turn, drew upon the Sugar Trust, Justice Sutherland stated:

Much stress is put upon the evils which come from the struggle between employers and employees over the matter of wages, working conditions, the right of collective bargaining, etc., and the resulting strikes, curtailment and irregularity of production and effect on prices; and it is insisted that interstate commerce is greatly affected thereby. But . . . the conclusive answer is that the evils are all local evils over which the Federal Government has no legislative control. . . . Such effect as they may have upon commerce, however extensive it may be, is secondary and indirect. An increase in the greatness of the effect adds to its importance. It does not alter its character.6

Footnotes
1
49 Stat. 803, 15 U.S.C. §§ 79–79z-6. back
2
49 Stat. 991. back
3
Elec. Bond Co. v. SEC, 303 U.S. 419 (1938); N. Am. Co. v. SEC, 327 U.S. 686 (1946); Am. Power & Light Co. v. SEC, 329 U.S. 90 (1946). back
4
49 Stat. 991. back
5
Carter v. Carter Coal Co., 298 U.S. 238 (1936). back
6
Id. at 308–09. back