Swift and Co. v. United States

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 at its own plants. The purchasers would then ship the fresh meat by rail, often out 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, Swift could logically point out that its own businesses, in each case, did not extend beyond a few miles between the stockyard and its own slaughterhouses and meat-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 appear at stock auctions and artificially bid to give the appearance of competitive bidding, keeping the price low. However, on occasion, the buyers would temporarily bid up a price to ensure that the press would report particularly high prices 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 regular full price for its meat products. It was practices such as these that caused the 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 was to 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 had interstate effects, and the company sought and obtained rebates from railroad companies. Furthermore, the issue of "insincere bidding" did not simply mean that 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 market to 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.