Swift and Co. v. United States

Appellant
Swift and Company
Appellee
United States
Appellant's Claim
That the meat packing operations of Swift and Company were entirely conductedwithin a state, and thus could not fall under the jurisdiction of the Interstate Commerce Clause of the Constitution,and could not be judged to be a violation of the Sherman Anti-Trust Act, which was only intended to regulate interstate trade. Further, that the provisions of the Sherman Act were so generaland vague that they could not be applied in a particular instance.
Chief Lawyers for Appellant
John S. Miler, Merritt Starr
Chief Lawyers for Appellee
William H. Moody, U.S. Attorney General; William A. Day
Justices for the Court
David Josiah Brewer, Henry Billings Brown, William Rufus Day, Melville WestonFuller, John Marshall Harlan I, Oliver Wendell Holmes (writing for the Court), Joseph McKenna, Rufus Wheeler Peckham, Edward Douglass White
Justices Dissenting
None
Place
Washington, D.C.
Date of Decision
30 January 1905
Decision
That the operations of Swift, although conducted locally, were national and interstate in scope, and subject to the Sherman Act.
Significance
This decision broke new ground in showing that the Sherman Anti-Trust Act would apply to businesses which, even when conducted on a local basis, were involved in selling a product which went into interstate trade. Holmes showed that the distinction between intrastate trade and interstate trade was often blurred, and that a major business such as the Swift meat-packing industry, which operated in several states, was an interstate business.
When is a business interstate?
The Swift meat-packers operated in a number of states, near stockyards in Chicago, East St. Louis, Omaha, St. Paul, Kansas City, and at other major railway terminal points. The company would purchase livestock at the stockyards, slaughter the stock in its own facilities, and then sell the meat to others atits own plants. The purchasers would then ship the fresh meat by rail, oftenout of state to wholesalers in many cities. Because Swift conducted each of its operations entirely within a particular state, it could argue its operations were local in each case. It purchased, processed, and sold locally. Even if the stock had been shipped a thousand miles through several states before purchasing it, and then the meat was shipped a thousand miles by others, Swiftcould logically point out that its own businesses, in each case, did not extend beyond a few miles between the stockyard and its own slaughterhouses andmeat-packing plants. Attorney General Moody and William A. Day, for the government, pointed out that while a business may be intrastate in operation, it could be interstate in overall effect. Swift company was such an operation.
As Justice Holmes further noted in his opinion, Swift and its affiliate companies had come to control about 60 percent of the national market in fresh meat. Many of the practices of the company were designed to manipulate the interstate price of the stock purchased. For example, several buyers would appearat stock auctions and artificially bid to give the appearance of competitivebidding, keeping the price low. However, on occasion, the buyers would temporarily bid up a price to ensure that the press would report particularly highprices for stock in a particular town. At that point, many stock shippers would send livestock to that town in order to get higher prices, flooding the market. Then the Swift buyers would return to their practice of offering low prices. In this way, by controlling the bidding, the company could get artificially low prices for its supplies, while at the same time charging its regularfull price for its meat products. It was practices such as these that causedthe government to bring its case under the Sherman Anti-Trust Act for conspiracy or combination in restraint of trade.
Regarding the question of interstate trade, the company's attorneys pointed out that all purchases and sales of the company were made locally. Thus, the operations of the company could not be considered interstate trade and fell beyond the scope of the federal government. Regarding the question of manipulation of market by bidding, the attorneys pointed out that in a competitive bidding situation, buyers were always able to accept any insincerely offered bid.
Holmes rejected both lines of thought, arguing that the company's intent wasto monopolize the industry. The company knew that its products were being sold interstate, and in fact, it could not have operated unless its products were intended for the interstate market. It also knew that the livestock it purchased were shipped interstate. Therefore, its manipulation of the market hadinterstate effects, and the company sought and obtained rebates from railroadcompanies. Furthermore, the issue of "insincere bidding" did not simply meanthat higher bids were offered as bluffs, as suggested by the attorneys for the firm. Rather, the bidding was set up in such a way as to cause the marketto rise, then fall. By manipulating the bidding, Swift could purchase livestock at well below what would have been a free market price.
Justice Holmes did agree that the language of the Sherman Act was vague and that the company could only learn what was prohibited by the Court's ruling that certain actions were regarded as restraint of trade. Thus, one of the purposes of the ruling in this case was to establish what sorts of practices would be illegal, and the only modifications to the lower court decision were made to clarify what was legal and illegal.
Related Cases

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• Northern Securities Co. v. United States, 193 U.S. 197 (1904).