Swift & Co. v. Federal Trade Commission

• Decision Date: 13 October 1925
• Docket Number: No. 3215.,3215.
• Citation: 8 F.2d 595
• Parties: SWIFT & CO. v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Seventh Circuit

8 F.2d 595 (1925)

SWIFT & CO. v. FEDERAL TRADE COMMISSION.^*

No. 3215.

Circuit Court of Appeals, Seventh Circuit.

February 16, 1925.

Rehearing Denied October 13, 1925.

James M. Sheean, of Chicago, Ill., for petitioner.

Adrien F. Busick and Everett F. Haycraft, both of Washington, D. C., for respondent.

Before ALSCHULER, EVANS, and PAGE, Circuit Judges.

EVAN A. EVANS, Circuit Judge.

Petitioner seeks to set aside an order of the Federal Trade Commission directing it to:

"(1) Cease and desist from further violating section 7 of the Clayton Act by continuing to own or hold, either directly or indirectly, by itself or by any one for its use and benefit, any of the capital stock of the Moultrie Packing Company and of the Andalusia Packing Company, or either of them, and cease and desist from holding, controlling and/or operating, or causing to be held, controlled and/or operated by others for its use and benefit, the former property and business either of the said Moultrie Packing Company or of the said Andalusia Packing Company, which have been held, controlled, and operated by respondent and its employees and agents, following and as a result of respondent's unlawful acquisition of the capital stocks of said named corporations; and to that end, respondent shall:

"(2) So divest itself of all the capital stock heretofore acquired by respondent, including all the fruits of such acquisitions, in whatever form they now are, whether held by respondent or by any one for its use and benefit, of the Moultrie Packing Company, a corporation, and of the Andalusia Packing Company, a corporation, or either of them, in such manner that there shall not remain to respondent, either directly or indirectly, any of the fruits of said acquisitions, including the control and/or operations of said corporations, or either of them, resulting from such acquisitions and/or holdings of such capital stocks.

"(3) In so divesting itself of such capital stocks, respondent shall not sell or transfer, either directly or indirectly, any of such capital stocks to any officer, director, stockholder, employee, or agent of respondent, or to any person under the control of respondent, or to any partnership or corporation either directly or indirectly owned or controlled by respondent. * * *"

A record of inexcusable length discloses facts almost free from controversy.

Petitioner, in June, 1917, acquired all of the stock of the Moultrie Packing Company, of Moultrie, Ga., and in July, 1917, all of the capital stock of the Andalusia Packing Company, of Andalusia, Ala. It immediately went into possession of both plants and managed and operated them.

The Moultrie Packing Company was organized in 1913 by local business men of Moultrie, Ga., and its growth was rapid, its business prosperous, and its profits large and increasing.

The Andalusia Company of Andalusia, Ala., was similarly organized in October, 1915, with a somewhat larger capitalization, and its brief history was one of growth and profit. Both packing companies slaughtered cattle and hogs. Their history is briefly written by the following table:

                                           1914.       1915.       1916.       1917
                  Moultrie Packing                                             (Five
                      Company.                                                Months.)
                  Pork ........ lbs.     200,598    2,199,441    7,305,506   3,907,909
                  Beef ........ lbs.      24,739      442,221      196,333     252,280
                  Lard ........ lbs.      20,320      326,580    1,171,875     827,576
                

In the five months of 1917, its profits exceeded 60 per cent. of its paid-up capital.

                                                                   1916.       1917
                  Andalusia Packing                                            (Five
                       Company.                          (Part of Year.)      Months.)
                  Pork ........ lbs.                           3,065,341     2,914,692
                  Beef ........ lbs.                               6,426       189,523
                  Lard ........ lbs.                             383,774       564,293
                

For the year ending May 1, 1917, its profits were $62,646.80, or about 50 per cent. of its paid-up capital.

Petitioner was in direct competition with these two packing companies, although the hogs slaughtered by the Moultrie and Andalusia companies were not corn fattened, and the pork was known as "soft." The two packing companies, however, furnished all of the competition which petitioner and the four other large Chicago packing houses met in southeastern United States. Though the total number of hogs and cattle slaughtered at these two packing houses was but a small fraction of 1 per cent. of that killed in the United States, the competition in fresh pork sales which they furnished in this territory was substantial and direct.

Section 7 of the so-called Clayton Act (Comp. St. § 8835g) provides:

"Sec. 7. That no corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of another corporation engaged also in commerce, where the effect of such acquisition may be to substantially lessen competition between the corporation whose stock is so acquired and the corporation making the acquisition, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce.

"No corporation shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of two or more corporations engaged in commerce where the effect of such acquisition, or the use of such stock by the voting or granting of proxies or otherwise, may be to substantially lessen competition between such corporations, or any of them, whose stock or other share capital is so acquired, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce.

"This section shall not apply to corporations purchasing such stock solely for investment and not using the same by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition. Nor shall anything contained in this section prevent a corporation engaged in commerce from causing the formation of subsidiary corporations for the actual carrying on of their immediate lawful business, or the natural and legitimate branches or extensions thereof, or from owning and holding all or a part of the stock of such subsidiary corporations, when the effect of such formation is not to substantially lessen competition."

The Commission found, and no other finding could have been made, that the purchaser was engaged in interstate commerce; that, while so engaged, it purchased all the stock of the Moultrie Packing Company and the stock of the Andalusia Packing Company, both of which companies were also engaged in interstate commerce; and that the effect of such acquisition was to substantially lessen competition between the corporation whose stock was acquired, and the corporation making the acquisition.

These findings would necessarily dispose of the application were it not for petitioner's insistent urge that the statute does not mean what it says, and that the court should read into it "the rule of reason" and insert additional requirements, viz.: That the competition between the two companies prior to consolidation was substantial, and the effect of the acquisition was injurious to the public.

It further contends that said section 7 is unconstitutional unless these essential facts are read into it.

The general object and purpose of this statute is so evident that it is hardly necessary to state it. It and the parent legislation, the Sherman law (Comp. St. §§ 8820-8823, 8827-8830), sought to maintain a wholesome competition between those engaged in competitive interstate commerce. The agitation and discussion preceding their enactment are matters of history of which we must take judicial notice. In its title to this legislation, the Congress stated its purpose, thus: "An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes."

It particularly referred to a previous act "to protect trade and commerce against unlawful restraints and monopolies."

The report of the Senate Judiciary Committee confirms this conclusion.

"Broadly stated, the bill, in its treatment of unlawful restraints and monopolies, seeks to prohibit and make unlawful certain trade practices which, as a rule, singly and in themselves, are not covered by the Act of July 2, 1890, or other existing anti-trust acts, and thus by making these practices illegal, to arrest the creation of trusts, conspiracies, and monopolies in their incipiency and before consummation."

The Clayton Act "was intended to supplement the Sherman Act, and within its limited sphere established its own rule." United Shoe Mach. Co. v. United States, 258 U. S. 451, 42 S. Ct. 363, 66 L. Ed. 708.

As was stated in Standard Co. v. Magrane-Houston Co., 258 U. S. 346, 42 S. Ct. 360, 66 L. Ed. 653:

"The Clayton Act sought to reach the agreements embraced within its sphere in their incipiency, and in the section under consideration to determine their legality by specific tests of its own. * * *"

The statute does not prohibit all acquisitive contracts. It is only when such acquisition produces "the effect" described that the statute condemns. It is worthy of note that such effect may be either to (a) substantially...