The owner of a small farm was penalized under the Agricultural Adjustment Act for growing wheat in excess of a quota for that year.
Under the Commerce Clause, Congress may regulate an activity as long as it exerts a substantial economic effect on interstate commerce.
Congress passed the Agricultural Adjustment Act of 1938 (“Act”) to control the volume of wheat in commerce to avoid surpluses and shortages that lead to fluctuating wheat prices and obstruction to commerce. Among other provisions, the Act allowed the Secretary of Agriculture to impose a marketing quota on wheat farmers when it appeared that the total supply of wheat as of the beginning of the marketing year would exceed a normal year’s consumption and export by over 35 percent, and more two-thirds of the affected farmers voted in favor of the quota. The quota would be imposed even on farmers who do not intend to sell their wheat, and to use it for home consumption instead.
Filburn operated a small farm, on which he grew wheat that he sold and used to feed his livestock, to make flour for home consumption, to use for the next crop’s seeding, and to sell. His 1941 wheat crop exceeded the quota established under the Act for that year, and he was issued a penalty of $117.11. Filburn sought to enjoin enforcement against him of the marketing penalty, arguing it exceeded the scope of the Commerce Clause.
Does the Commerce Clause empower Congress to regulate goods that are not put on the market?
Yes, the Commerce Clause empowers Congress to regulate goods that are not put on the market.
The Supreme Court established a new standard for Commerce Clause regulation: Congress may regulate activity that is not regarded as commerce as long as it exerts a substantial economic effect on interstate commerce, regardless of whether the activity is local or not, or of whether its effect is direct or indirect. The Supreme Court then established that homegrown wheat did have a substantial economic effect on interstate commerce. According to the Supreme Court, a decline in export trade left a large surplus in wheat production, which lead to congestion in several markets, tied up railroad cars, and other consequences. The government could maintain the price of wheat by sustaining or increasing the demand, and limiting the supply.