In the late 1920s, farmers across the country generally did not participate in the prosperity of the decade. They were often unable to sell their crops to distributors for sufficient prices to cover their costs of production. Especially in New York, where the milk industry was the cornerstone of agricultural economy, tension between dairy farmers and distributors resulted in angry confrontations. The Great Depression further exacerbated economic chaos and hardship throughout the American economy, making it even more difficult for farmers to adjust to the economic collapse. One farmer wrote to a local newspaper in 1932, “Every can of milk we sell leaves us further in debt than we were before we produced it. This robbery must stop soon or reform will be too late to help us.” By March and April of 1933, farmers and dairymen in various areas joined together in “Milk Wars” and “Farm Strikes” to try to prevent farm products from getting to towns and cities, in hopes that the resulting scarcity would lead to higher prices. They set up blockades to stop any trucks carrying dairy and farm products, seized the cargo and destroyed it.
The New York legislature sought to resolve the unrest by managing the marketing and sale of milk. Declaring that the production of milk was “a business affecting the public health and interest,” the legislature enacted a Milk Control Law in April of 1933 to regulate milk prices, setting the minimum price that retailers could charge at nine cents per quart. The result was a temporary end to the strikes. However, many of the state’s farmers believed that the price-fixing would benefit large corporations and co-ops rather than family farmers, and they once again took matters into their own hands. In spite of police guards accompanying milk truck convoys, the strikers attacked, leading to violent confrontations in multiple New York counties. The August 10, 1933 Syracuse Herald reported numerous incidents of violent clashes resulting in the dumping of thousands of gallons of milk, dynamite blasts, hand-to-hand combat, and many arrests.
In the midst of the controversy, and only two days after the Milk Control Board set the minimum price for a quart of milk, Rochester grocer Leo Nebbia carried out his own steps to keep his small grocery store afloat. Struggling to make ends meet through the kind of creative marketing that many retailers were attempting, he gave away a five-cent loaf of bread with the sale of two quarts of milk, bringing the price of milk below the 9-cent minimum. In a March 9, 1934 letter, Nebbia wrote, “I thought I was doing good, to the welfare of the people, also to compete with the chain stores, even today the price of milk is chiseled. I do not like to cut prices, but if I don’t cut prices I can’t stay in business.”
He was convicted of violating the price regulations, but Nebbia argued that the price-fixing legislation destroyed his liberty of contract, violating the Due Process Clause of the Fourteenth Amendment. The county court and court of appeals both upheld Nebbia’s conviction, and he appealed his case to the U.S. Supreme Court.
The central question in Nebbia v. New York, 1934, was whether the New York price regulation violated the Due Process Clause of the Fourteenth Amendment. In a 5-4 decision, the Court upheld the New York law. Writing for the majority, Justice Owen Roberts explained that:
neither property rights nor contract rights are absolute, [and] the power to promote the general welfare is inherent in government…[A] state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare … Price control, like any form of regulation, is unconstitutional, only if arbitrary, discriminatory, or demonstrably irrelevant …
The phrase “affected with a public interest,” Justice Roberts wrote, can mean that the legislature has decided that an industry is subject to their control for some good reason, and the courts are “both incompetent and unauthorized” to rule on the wisdom, adequacy, or practicability of such a regulation.
Justice James C. McReynolds wrote for the dissenters. He argued that the regulation of business “has long been upheld as permissible legislative action,” but he thought that price-fixing was something different. He wrote that the New York legislation was “not regulation, but management, control, dictation.” The problem with government control and management of private market interactions was that, “It amounts to the deprivation of the fundamental right which one has to conduct his own affairs honestly, and along customary lines.” The statute interfered both with the right of Mr. Nebbia to conduct his business as he pleased and with the “liberty of twelve million consumers to buy a necessity of life in an open market.” The legislature, the dissenters held, harkening back to arguments made by James Madison in his essay “On Property,” could not “lawfully destroy guaranteed rights of one man with the prime purpose of enriching another, even if, for the moment, this may seem advantageous to the public.” If this were allowed to occur, they warned, then “all rights will be subject to the caprice of the hour; government by stable laws will pass.”
For more than forty years the High Court had ruled consistently that constitutional government must not fix prices to override the laws of supply and demand. In response to the hardships of the Great Depression, the majority ruling in Nebbia helped set the stage for all three branches of state and federal government to regulate the economy in ever-increasing ways through the New Deal and beyond. The New Deal at the federal level sought to fix prices with the National Industrial Recovery Act and the Agricultural Adjustment Act. Echoing the procedures of New York farmers during the Milk Wars, the federal government directed the destruction of millions of hogs and acres of wheat, and twenty-first century farmers are eligible for government subsidies if they abide by prescribed policies. The appropriate degree of government involvement in the economy continues to prompt controversy today.
Nebbia v. New York (1934) Supreme Court decision: https://supreme.justia.com/cases/federal/us/291/502/
Gennie Westbrook, formerly a classroom teacher, is a Madison Fellow (2000 TX), and senior advisor for education at The Bill of Rights Institute.
Dan Ernst, Legal History Blog: Leo Nebbia on the NRA, Feb. 10, 2016 http://legalhistoryblog.blogspot.com/2016/02/leo-nebbia-on-nra.html
Legal Information Institute Cornell University https://www.law.cornell.edu/supremecourt/text/291/502
Nebbia v. New York https://www.oyez.org/cases/1900-1940/291us502
Nebbia v. New York https://supreme.justia.com/cases/federal/us/291/502/
Nebbia v. New York, The Cornell Daily Sun, Volume 54, Number 115, 7 March 1934 http://cdsun.library.cornell.edu/cgi-bin/cornell?a=d&d=CDS19340307.2.44
Nebbia v. New York – Supreme Court Declares That The State Can Regulate Any Business http://law.jrank.org/pages/25135/Nebbia-v-New-York-Supreme-Court-Declares-that-State-Can-Regulate-Any-Business.html#ixzz4cyUnoLIZ
This Month in History: The Milk Strike of 1933. Many Arrests in Milk Strike, August 10, 1933 http://www.cnyhistory.org/2016/08/milk-strike-1933/
Melvin I. Urofsky, 100 Americans Making Constitutional History: A Biographical History CQ Press, 2004, pages 145-147.