Swift & Co. v. Wallace
| Decision Date | 15 July 1939 |
| Docket Number | No. 6709.,6709. |
| Citation | 105 F.2d 848 |
| Parties | SWIFT & CO. v. WALLACE, Secretary of Agriculture. |
| Court | U.S. Court of Appeals — Seventh Circuit |
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John Lord O'Brian, of Buffalo, N. Y., and C. B. Shaw, of Chicago, Ill. (Albert H. & Henry Veeder and E. B. Kixmiller, all of Chicago, Ill., John F. Rich, of Boston, Mass., and William I. Morey, of Buffalo, N. Y., of counsel), for petitioner.
Thurman Arnold, Asst. Atty. Gen., Mastin G. White, C. E. Miles, Wendell Berge, Sp. Asst. to Atty. Gen., and Edward J. Hickey, Jr., all of Washington, D. C., for respondent.
Paul M. Godehn and Dean Lake Traxler, both of Chicago, Ill., amicus curiæ.
Before MAJOR, TREANOR, and KERNER, Circuit Judges.
This cause comes before this court on a petition to set aside an order of the respondent, Secretary of Agriculture. Respondent found that petitioner was violating Section 202 of the Packers and Stockyards Act of 1921,1 and on the basis of such finding entered a cease and desist order authorized by Section 203(b) of the Act.2 Petitioner seeks a review of such order under authority of Section 204(a).3
Petitioner3a is a packer within the definition of the act. Respondent instituted proceedings against petitioner by the issuance of a complaint, which as amended, alleged among other things that petitioner was engaged in the following practices: (a) Price discrimination, (b) credit discrimination, (c) monopolizing and restraining commerce by the aforesaid price and credit discriminations, (d) giving unreasonable preferences in the form of price discounts, (e) making unfair and unjust discrimination in weight basis.
Respondent's report and findings of fact state that charges (a) and (c) were not supported by the evidence. The other charges, (b), (d) and (e) were found to be supported by the evidence and the order was based thereon. The findings may be summarized as follows: (1) Petitioner had given unreasonable preferences and effected unreasonable prejudice in commerce by granting longer terms of credit to certain customers than to others; and by granting discounts to certain customers and not to others. (2) Petitioner had engaged in the unfair and unjustly discriminatory practice of requiring certain customers to buy according to weight of meat at the time of packing, paper wrappings being included in such weight, and permitting other customers to buy according to actual weight at time of delivery. It was also found that the purchasers who bought according to actual weight at the time of delivery, which was known as the "stripped weight" basis, paid the same per pound prices as those who did not receive the benefit of "stripped weight" basis.
The persons who claim to have been prejudiced by the practices of petitioner are known as "purveyors," the term "purveyor" being defined as one catering to or engaged in supplying meat to hotels, restaurants, clubs, steamship lines, and institutions, both public and private. The purveyors buy their meat products from petitioner and all other packers who are engaged in business in what is described as the "New York Area." By shopping among all packers a purveyor is able to furnish special quality and cuts of meat to customers. The packers, including petitioner, solicit and sell directly to the hotels, restaurants, clubs, steamship lines and public institutions, whose trade is the chief market sought by purveyors and is known to the packers and purveyors as institutional trade. Some purveyors act as retail butchers. Also, petitioner and other packers own subsidiary corporations which furnish the services which are supplied by purveyors.
Petitioner customarily sells to its customers on credit terms of approximately one week, which is the credit term allowed to 95% of its trade; and respondent found "that weekly terms of credit have been the usual and accepted practice for a number of years; that the only exceptions relate to sales made to state, county, and municipal governments, and in a much lesser degree to restaurants and hotels." The custom of packers generally is to confine the trade to the weekly term, with the exceptions noted in the case of the institutional trade. The purveyors extend the same credit terms to the institutional trade as do the packers. As between purveyors the petitioner makes no distinctions as to terms of credit, all receiving the usual weekly term. Petitioner pays for livestock on a "spot cash" basis and pays its labor on a weekly basis. Petitioner points out that the purveyors receive better terms of credit from it than it receives from its vendors.
The provisions of the act which are pertinent to the present proceeding are as follows:
"(b) Make or give, in commerce, any undue or unreasonable preference or advantage to any particular person or locality in any respect whatsoever, or subject, in commerce, any particular person or locality to any undue or unreasonable prejudice or disadvantage in any respect whatsoever * * *". 7 U.S.C.A. § 192.
The foregoing language does not purport to confer upon the Secretary of Agriculture any authority directly to regulate prices, or discounts, or sales methods; and clearly does not contemplate the exercise of any authority to establish uniformity of practice in respect thereto. Differences or variations in prices, or in the terms of credit, or amounts of discount, or in practices do not come within the ban of the act unless they in fact constitute engaging in or using an unfair or unjustly discriminatory or deceptive practice or device in commerce or unless they constitute a making or giving, in commerce, of an undue or unreasonable preference or advantage, or result in undue or unreasonable prejudice or disadvantage as between persons or localities.
Respondent contends that the distinction in credit treatment between purveyors and institutional trade by petitioner was an unreasonable preference and a violation of Section 202 (b) of the act. The report of the Secretary of Agriculture reveals that the Secretary was of the opinion that the fact of competition was not material to the question of unreasonableness of preference. The report states that "it can hardly be said that an extension of credit by respondent to hotels and restaurants can lawfully be withheld from a purveyor merely because the extension of such terms of credit to hotels and restaurants was for the purpose of meeting competition." The report further states that "it is probable that credit may be granted or withheld, depending upon the financial responsibility of the purchaser, but it is believed that respondent cannot discriminate against customers and escape the operation of the statute merely by asserting that such discrimination was for the purpose of meeting competition." The report does not make any finding as to the nature of the competition that existed, whether fair or unfair, nor who initiated such competition. It is clear that the respondent considered competition of any kind as wholly without significance, and that the only justification for differences of credit terms was difference in credit rating.
Respondent contends that a review of the findings of unreasonable preference and unjust discount is limited to a review of a finding of fact; and states that "since Congress in the Packers and Stockyards Act adopted language practically identical to (the) provision in the Interstate Commerce Act (49 U.S.C.A. § 3 (1) it is only reasonable to presume a similar construction"; and in support of the foregoing respondent calls attention to cases involving the Interstate Commerce Act in which are found statements generally in accordance with respondent's contention. But the statements of the Supreme Court on the point have not been without qualification; and in Central R. Co. v. United States,4 cited by respondent, the pertinent statement is as follows: "As to administrative orders operating in futuro, the Commission's findings of fact are conclusive, subject to qualifications here not pertinent; and a finding that the discrimination is unjust is ordinarily a finding of fact." (our italics.) On the other hand, petitioner cites cases arising under the Federal Trade Commission Act which hold that an "unfair method of competition" is a question of law.5 But apart from the question whether a review of a finding of "any undue or unreasonable preference or advantage" presents a question of fact or law, it is clear that the Supreme Court frequently has recognized certain criteria for the determination of what is undue discrimination under the Interstate Commerce Act, and has at times ordered the setting aside of the Commission's finding or order for failure to apply such criteria. In Interstate Commerce Commission v. Alabama Midland Railway Co.6 the Supreme Court recognized the duty of the Interstate Commerce Commission to consider the fact of competition in making a finding of undue or unreasonable preference or advantage. The court pointed out that it was not holding "that the mere fact of competition, no matter what its character and extent, necessarily relieves the carrier from the restraints of the third and fourth sections, but only that these sections are not so stringent and imperative as to exclude in all cases the matter of competition from consideration, in determining the questions of `undue or unreasonable preference or advantage,' or what are `substantially similar circumstances and conditions.'"
The evidence establishes beyond any question that competition was a substantial factor in creating the practice of extending credit to institutional trade beyond the normal term of a week; that all vendors in the New York Area grant longer than weekly terms to the institutional trade, and that this is...
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