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Stafford v. Wallace

Taking On The Monopolies

Swift appealed an injunction under the bill, and the case went before the Supreme Court in 1905 as Swift v. United States. The Court sustained the injunction, with a unanimous opinion written by Justice Holmes: "Although the combination alleged embraces restraint and monopoly of trade within a single state," Holmes wrote, "its effect upon commerce among the States is not accidental, secondary, remote, or merely probable." He then went on to deign the "stream of commerce" doctrine thus:

When cattle are sent for sale from a place in one state, with the expectation that they will end their transit, after purchase, in another, and when in effect they do so, with only the interruption necessary to find a purchaser at the stock yards, and when this is a typical constantly recurring course, the current thus existing is a current of commerce among the states, and the purchase of the cattle is a part and incident of such commerce.

Seven years later, in 1912, Swift was again indicted for violation of anti-trust laws, and acquitted. A 1917 Federal Trade Commission (FTC) investigation found that the packers of the "Big Five" did indeed have a conspiracy in operation, whereby they controlled all aspects of the facilities through which livestock were sold. A bill in equity filed in 1920 with the Supreme Court of the District of Columbia illustrated the effects of this control through tactics such as "wiring on." Under the latter scheme, an unsuspecting shipper might take his stock to one yard and, not being pleased with the price offered, might take it to another yard--not knowing that the two yards were in collusion. Once he got to the second yard, he would find the price offered was the same as at the first, with his profit further reduced by the loss incurred in his shipping of the livestock to the second yard. Such factors influenced the passing of the Packers and Stockyards Act of 1921, a law aimed at preventing such unfair practices. With Stafford v. Wallace, and the associated case of Burton v. Clyne, the act came under challenge.

Writing for a 7-1 majority (Justice Day took no part in the proceedings), Chief Justice Taft began by clarifying the issue in question. The case had come to the Court's attention not so that it could decide who was right--Stafford and Company on the one hand, the FTC and Congress on the other--about specific violations of antitrust law; but rather to determine whether Congress had authority to pass, and the government to enforce, the Packers and Stockyards Act of 1921. Under the latter, stockyards were defined, as were stockyard owners, commission people, and dealers, and the dealers were required to register with the state. The secretary of agriculture (who at that time was Henry C. Wallace) had power to make rules, prescribe the means by which the different entities had to keep their accounts, and to fix rates. All of this was established, Taft indicated, for the purpose of ensuring a steady "stream of commerce":

The object to be secured by the act is the free and unburdened flow of live stock from the ranges and farms of the West and the Southwest through the great stockyards and slaughtering centers on the borders of that region, and thence in the form of meat products to the consuming cities of the country in the Middle West and East, or, still, as live stock, to the feeding places and fattening farms in the Middle West or East for further preparation in the market.

"The chief evil" whose fear instigated the passage of the bill, Taft wrote, was the collusion of packers, commission people, and dealers who in some combination could affect prices to their benefit--and to the harm of the people who raised the cattle, not to mention the consumer. Given the monopolies at work in the stockyard, there was a situation "full of opportunity and temptation, to the prejudice of the absent shipper and owner."

Additional topics

Law Library - American Law and Legal InformationNotable Trials and Court Cases - 1918 to 1940Stafford v. Wallace - Significance, Stockyards In The Stream Of Commerce, Taking On The Monopolies, Defining And Expanding The Concept