Nebbia v. New York
291 U.S. 502 (1934)

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U.S. Supreme Court

Nebbia v. New York, 291 U.S. 502 (1934)

Nebbia v. New York

No. 531

Argued December 4, 5, 1933

Decided March 5, 1934

291 U.S. 502

Syllabus

1. As a basis for attacking a discriminatory regulation of prices, under the equal protection clause of the Fourteenth Amendment, the party complaining must show that he himself is adversely affected by it. P. 291 U. S. 520.

2. A regulation fixing the price at which storekeepers may buy milk from milk dealers at a higher figure than that allowed dealers in buying from producers, and allowing dealers a higher price than it allows storekeepers in sales to consumers, held consistent with the equal protection clause of the Fourteenth Amendment because of the distinctions between the two classes of merchants. P. 291 U. S. 521.

3. As part of a plan to remedy evils in the milk industry which reduced the income of the producer below cost of production and threatened to deprive the community of an assured supply of milk, a New York statute sought to prevent destructive price-cutting by stores which, under the peculiar circumstances, were able to buy at much lower prices than the larger distributors and to sell without incurring delivery costs, and, to that end, an order of a state board acting under the statute fixed a minimum price of ten cents per quart for sales by distributors to consumers and of nine cents per quart for sales by stores to consumers. Held that, as applied to a storekeeper, the regulation could not be adjudged in conflict with the due process clause of the Fourteenth Amendment, since, in view of the facts set forth in the opinion, it appeared not to be unreasonable or arbitrary or without relation to the purpose of the legislation. Pp. 291 U. S. 530 et seq.

4. The use of private property and the making of private contracts are, as a general rule, free from governmental interference; but they are subject to public regulation when the public need requires. P. 291 U. S. 523.

5. The due process clause of the Fourteenth Amendment conditions the exertion of regulatory power by requiring that the end shall be accomplished by methods consistent with due process, that the regulation 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. P. 291 U. S. 525.

Page 291 U. S. 503

6. 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. P. 291 U. S. 525.

7. The power of a State to regulate business in the public interest extends to the control and regulation of prices for which commodities may be sold, where price regulation is a reasonable and appropriate means of rectifying the evil calling for the regulation. Pp. 291 U. S. 531 et seq.

8. There is no principle limiting price regulation to businesses which are public utilities, or which have a monopoly or enjoy a public grant or franchise. Munn v. Illinois, 94 U. S. 113. P. 291 U. S. 531.

9. To say that property is "clothed with a public interest," or an industry is "affected with a public interest," means that the property or the industry, for adequate reason, is subject to control for the public good. Pp. 291 U. S. 531-536.

10. 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. P. 291 U. S. 536.

11. Decisions denying the power to control prices in businesses found not to be "affected with a public interest" or "clothed with a public use" must rest finally upon the basis that the requirements of due process were not met because the laws were found arbitrary in their operation and effect. P. 291 U. S. 536.

12. 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. P. 291 U. S. 503.

13. The legislature is primarily the judge of the necessity of such an enactment; every possible presumption is in favor of its validity, and though the court may think the enactment unwise, it may not be annulled unless palpably in excess of legislative power. P. 291 U. S. 537.

Page 291 U. S. 504

14. 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, 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. P. 291 U. S. 538.

15. This is especially clear where 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. P. 291 U. S. 538.

16. The Constitution does not secure to anyone liberty to conduct his business in such fashion as to inflict injury upon the public at large, or upon any substantial group of people. P. 291 U. S. 539.

17. 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. P. 291 U. S. 539.

262 N.Y. 259; 186 N.E. 694, affirmed.

The New York Court of Appeals affirmed the conviction of a storekeeper for selling milk at a price below that allowed by an order promulgated by a state board pursuant to statutory authority. The appeal here is from the judgment of the County Court entered on remittitur.

Page 291 U. S. 515

Primary Holding
A state can regulate a business in any area, including fixing prices, if it is done properly and under the proper circumstances.
Facts
The New York legislature determined that milk is an essential item of diet, and producers might relax their protections against contamination, which threatens the public safety, if they are insufficiently compensated for their sales. It also found that milk was a paramount industry in the state that affects its population at large. Consequently, the Milk Control Board in New York received authority from the legislature to fix minimum and maximum retail prices that stores could charge to customers. For example, it set the price of a quart of milk at nine cents. Nebbia offered two quarts of milk and a five-cent loaf of bread for a total of 18 cents.

Opinions

Majority

  • Owen Josephus Roberts (Author)
  • Charles Evans Hughes
  • Harlan Fiske Stone
  • Benjamin Nathan Cardozo
  • Louis Dembitz Brandeis

Property rights and contract rights generally are free from intrusion by the government, although this is not always the case. States may regulate in a way that benefits the public welfare, notwithstanding constitutional protections of private interests such as due process. Rational basis review is appropriate for economic regulations. It requires that the law is not unreasonable or arbitrary and also that there is a reasonable relationship between the law and the interest that it serves.

Price regulations are not an inappropriate way to serve the public interest, especially when an industry is particularly tied into a public interest and thus more subject to the state police powers. Courts may not override policy decisions by states in this area on the grounds of due process unless rational basis review is not satisfied. Price regulations are not per se beyond the framework of due process.

Concurrence

  • James Clark McReynolds (Author)
  • Willis Van Devanter
  • George Sutherland
  • Pierce Butler

Case Commentary

The government generally passes rational basis review, which is the standard applied to economic legislation. It merely must show that it has a legitimate interest and that the chosen means is reasonably related to it. Only if the law is completely arbitrary will it be struck down.

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