Federal Trade Commission v. Western Meat Co Thatcher Mfg Co v. Federal Trade Commission Swift Co v. Same

• Decision Date: 23 November 1926
• Docket Number: No. 231,No. 96,No. 213,96,213,231
• Citation: 71 L.Ed. 405,47 S.Ct. 175,272 U.S. 554
• Parties: FEDERAL TRADE COMMISSION v. WESTERN MEAT CO. THATCHER MFG. CO. v. FEDERAL TRADE COMMISSION. SWIFT & CO. v. SAME
• Court: U.S. Supreme Court

272 U.S. 554

47 S.Ct. 175

71 L.Ed. 405

FEDERAL TRADE COMMISSION

v WESTERN MEAT CO.

THATCHER MFG. CO.

v. FEDERAL TRADE COMMISSION.

SWIFT & CO.

v. SAME.

No. 96.

No. 213.

No. 231.

Argued Oct. 25 and 26, 1926.

Decided Nov. 23, 1926.

Mr. Adrien F. Busick, of Washington, D. C., and The Attorney General, for petitioner in No. 96 and for respondent in Nos. 213 and 231.

Messrs. Edward Barry, of Bloomington, Ill., and J. F. Sullivan, of San Francisco, Cal., for respondent in No. 96.

Messrs. James M. Sheean, Albert H. Veeder, and Henry Veeder, all of Chicago, Ill., for petitioner in No. 231.

Messrs. Herbert Knox Smith, of Hartford, Conn., and Charles Henry Butler, of Washington, D. C., for petitioner in No. 213.

[Argument of Counsel from page 555 intentionally omitted] Mr. Justice McREYNOLDS delivered the opinion of the Court.

I. These causes necessitate consideration of the power of the Federal Trade Commission, where it finds that one corporation has acquired shares of a competitor contrary to the inhibition of the Clayton Act, approved October 15, 1914, c. 323, 38 Stat. 730, 731. That act 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. * * *' Comp. St. § 8835g.

Section 8 (Comp. St. § 8835h) forbids interlocking directors.

'Sec. 11. That authority to enforce compliance with sections two, three, seven and eight of this act by the persons respectively subject thereto is thereby vested in the Interstate Commerce Commission where applicable to common carriers, in the Federal Reserve Board where applicable to banks, banking associations and trust companies, and in the Federal Trade Commission where ap- plicable to all other character of commerce, to be exercised as follows:

'Whenever the commission or board vested with jurisdiction thereof shall have reason to believe that any person is violating or has violated any of the provisions of sections two, three, seven and eight of this act, it shall issue and serve upon such person a complaint. * * * If upon such hearing the commission or board, as the case may be, shall be of the opinion that any of the provisions of said sections have been or are being violated, it shall make a report in writing in which it shall state its findings as to the facts, and shall issue and cause to be served on such person ('person' includes corporation) an order requiring such person to cease and desist from such violations, and divest itself of the stock held or rid itself of the directors chosen contrary to the provisions of sections seven and eight of this act, if any there be, in the manner and within the time fixed by said order. * * *' Comp. St. § 8835j.

Section 5 of the Act to Create a Federal Trade Commission, approval September 26, 1914, c. 311, 38 Stat. 717, 719 (Comp. St. § 8836e), declares unfair methods of competition in commerce unlawful, prescribes the procedure to be followed, and gives the Commission power to require an offending party to cease and desist from such methods. This section is not presently important; the challenged orders sought to enforce obedience to section 7 of the Clayton Act.

II. No. 96. The Western Meat Company, a California corporation, and the Nevada Packing Company, of Nevada, were interstate competitors engaged in manufacturing, selling and distributing meat products. December 30, 1916, the former purchased all stock of the latter and has continued to hold it. In a proceeding begun November 24, 1919, the Commission found such purchase and con- tinued ownership contrary to law and entered an order directing—

That the respondent, Western Meat Company, shall forthwith cease and desist from violating the provisions of section 5 of said Act of Congress approved September 26, 1914, entitled 'An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,' and also the provisions of section 7 of said Act of Congress approved October 15, 1914, entitled 'An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,' and particularly to so divest itself absolutely of all capital stock of the Nevada Packing Company as to include in such divestment the Nevada Packing Company's plant and all property necessary to the conduct and operation thereof as a complete, going packing plant and organization, and so as to neither directly or indirectly retain any of the fruits of the acquisition of the capital stock of said Nevada Packing Company, a corporation.

That in such divestment, no stock or property above mentioned to be divested shall be sold or transferred, directly or indirectly, to any stockholder, officer, director, employee, or agent of, or anyone otherwise directly or indirectly connected with or under the control or influence of, respondent or any of its officers, directors or stockholders or the officers, directors, or stockholders of any of respondent's subsidiaries or affiliated companies.

The court below held this order went beyond the Commission's authority and directed that it be modified by eliminating 'the injunction against the acquisition by the petitioner of the plant and property of the Nevada Packing Company.'

Respondent maintains that the Commission's authority is strictly limited by the statute, and that where there has been an unlawful purchase of stock it can do no more than enter 'an order requiring such person to cease and desist from such violations and divest itself of the stock held'; also, that the Commission has no power to prevent or annul the purchase of a competitor's plant and business, as distinguished from stock therein. Wilder Manufacturing Co. v. Corn Products Refining Co., 236 U. S. 165, 174, 35 S. Ct. 398, 59 L. Ed. 520, Ann. Cas. 1916A, 118; Federal Trade Commission v. Beech-Nut Packing Co., 257 U. S. 441, 453, 42 S. Ct. 150, 66 L. Ed. 307, 19 A. L. R. 882; Federal Trade Commission v. Sinclair Refining Co., 261 U. S. 463, 475, 43 S. Ct. 450, 67 L. Ed. 746-are relied upon.

Without doubt the Commission may not go beyond the words of the statute properly construed, but they must be read in the light of its general purpose and applied with a view to effectuate such purpose. Preservation of established competition was the great end which the Legislature sought to secure.

The order here questioned was entered when respondent actually held and owned the stock contrary to law. The Commission's duty was to prevent the continuance of this unlawful action by an order directing that it cease and desist therefrom and divest itself of what it had no right to hold. Further violations of the act through continued ownership could be effectively prevented only by requiring the owner wholly to divest itself of the stock and thus render possible once more free play of the competition which had been wrongfully suppressed. The purpose which the lawmakers entertained might be wholly defeated if the stock could be further used for securing the competitor's property. And the same result would follow a transfer to one controlled by or acting for the respondent.

Although the respondent held all the capital stock, the plant and other property of the Nevada Packing Company had not been acquired. The Commission directed that it so divest itself of all...