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In 1935, Congress enacted the Bituminous Coal Conservation Act, also known as the Guffey Coal Act. The Act regulated prices, minimum wages, maximum hours, and "fair practices" of the coal industry. Although compliance was voluntary, tax refunds were established as incentives to abide by the regulations. Carter, a stockholder, brought suit against his own company in an attempt to keep it from paying the tax for noncompliance. This case was decided together with R.C. Tway Coal Co. v. Clark, R.C. Tway Coal Co. v. Glenn, and Halvering v. Carter.

Did the Bituminous Coal Conservation Act of 1935 exceed congressional powers under the Commerce Clause?

In a 5 to 4 decision, the Court held that the 1935 Act overstepped the bounds of congressional power. The Court ruled that "commerce" is plainly distinct from "production." Employing workers, setting wages and working hours, and mining coal were found to be part of the local process of production, separate from any trade of goods that could be regulated under the Commerce Clause. In striking down the law, Justice Sutherland argued that "[e]verything which moves in interstate commerce has had a local origin. Without local production somewhere, interstate commerce. . . would practically disappear."