Stafford v. Wallace Burton
[Syllabus from pages 495-497 intentionally omitted]

These cases involve the constitutionality of the Packers and Stockyards Act of 1921, approved August 15, 1921, so far as that act provides for the supervision by federal authority of the business of the commission men and of the live stock dealers in the great stockyards of the country. They are appeals from the orders of the District Court for the Northern District of Illinois refusing to grant interlocutory injunctions as prayed. The bills sought to restrain enforcement of orders of the Secretary of Agriculture in carrying out the act, directed against the appellants in No. 687, as the commission men in the Union Stockyards of Chicago, and against the appellants in No. 691, as dealers in the same yards. The ground upon which the prayers for relief are based is that the Secretary's orders are void, because made under an act invalid as to each class of appellants. The bill in No. 687 makes defendants the Secretary of Agriculture and the United States attorney for the Northern District of Illinois, averring that the latter is charged with the duty of enforcing the severe penalties imposed by the act for failure to comply with orders of the Secretary thereunder. The bill in No. 691 makes the United States attorney the only defendant, with the same averment.

The two bills in substance allege that the Union Stockyards & Transit Company was incorporated by the state of Illinois in 1865, and given authority to acquire, construct, and maintain inclosures, structures, and railway lines for the reception, safe-keeping feeding, watering, and for weighing, delivery, and transfer, of cattle and live stock of every description, and to carry on a public live stock market, with all the necessary appurtenances and facilities; that it is the largest stockyards in the world, and in 1920 handled 15,000,000 head of live stock of all descriptions, including cattle, calves, hogs, and sheep, shipped mainly from outside the state of Illinois; that the live stock are loaded at the point of origin and shipped under a shipping contract which is a straight bill of lading, consigning them to the commission merchants at the yard; that on arrival the live stock are at once driven from the cars by the commission merchant, who is the consignee, to the pens assigned by the stockyards company to such merchant for his use; that they are then in the exclusive possession of the commission merchant, and are watered and fed by the stockyards company at his request; that with the delivery to the commission merchant the transportation is completely ended; that all the live stock consigned to commission merchants are sold by them for a commission or brokerage, and not on their own account; that they are sold at the stockyards, and nowhere else; that the commissions are fixed at an established rate per head; that the commission men remit to the owners and shippers the proceeds of sale, less their commission and the freight and yard charges paid by them; that the live stock are sold (1) to purchasers, who buy the same for slaughter at packing houses, located at the stockyards or adjacent thereto; (2) to purchasers, who buy to ship to packing houses outside the state of Illinois for slaughter; (3) to purchasers, who buy to feed and fatten the same; and (4) to dealers or traders; that about on-third of all the live stock received are sold to the dealers; that not until after the delivery of the live stock to the commission merchants and the transportation has completely ceased, does the business of the dealers begin; that they do not buy or sell on commission, but buy and sell for cash exclusively for their own profit; that the greater part of live stock received by commission men at the yards are in carload or trainload lots, and a substantial part are not graded or conditioned to meet the specific requirements of the buyers; that the dealers, after purchase, put the live stock in pens assigned to them by the stockyards owner and do the sorting and classification; that the dealers buy in open market in competition with each other; that they pay the expense of the custody, care, and feeding and watering the stock while they hold them; that they sell promptly, and have nothing to do with the shipment of the live stock they sell from the yards to points outside.

In the bill in No. 691, the appellants aver that they are members of the Chicago Live Stock Exchange and of the National Live Stock Exchange, the members of which are dealers in all the stockyards of the country, numbering 2,000, and that they bring their bill for all of them who may choose to join and take the benefit of the litigation.

The chairman of the Committee of Agriculture, in reporting to the House of Representatives the bill, which became the act here in question (May 18, 1921, 67th Congress, 1st Session, Report No. 77, to accompany H. R. 6320), referred to the testimony printed in the House Committee Hearings of the 66th Congress, 2d Session, Committee on Agriculture, vols. 220-2 and 220-3, as furnishing the contemporaneous history and information of the evils to be remedied upon which the bill was framed.

It appeared from the data before the committee that for more than two decades it had been charged that the five great packing establishments of Swift, Armour, Cudahy, Wilson, and Morris, called the 'Big Five,' were engaged in a conspiracy in violation of the Anti-Trust Law (Comp St. §§ 8820-8823, 8827-8830), to control the business of the purchase of the live stock, their preparation for use in meat products, and the distribution and sale thereof in this country and abroad. In 1903 a bill in equity was filed by the United States to enjoin further conduct of this alleged conspiracy, as a violation of the Anti-Trust Law, and an injunction issued. United States v. Swift (C. C.) 122 Fed. 529. The case was taken on appeal to this court, which sustained the injunction. Swift v. United States, 196 U.S. 375, 25 Sup. Ct. 276, 49 L. Ed. 518. In 1912, these same defendants, or their successors in business, were indicted and tried for such violation of the Anti-Trust Law, and acquitted. See House Committee Hearings before Committee on Agriculture, 1820, vol. 220-2, subject, Meat Packer Legislation, 718. It further appeared that on February 7, 1917, the President directed the Federal Trade Commission to investigate and report the facts relating to this industry and kindred subjects. The Commission reported that the 'Big Five' packing firms, had complete control of the trade from the producer to the consumer, had eliminated competition, and that one of the essential means by which this was made possible was their ownership of a controlling part of the stock in the stockyards companies of the country. The Commission stated its conclusions as follows:

'The big packers' control of these markets is much greater than these statistics indicate. In the first place, they are the largest and in some cases practically the only buyers at these various markets, and as such hold a whip hand over the commission men who act as the intermediaries in the sale of live stock.

'The packers' power is increased by the fact that they control all the facilities through which live stock is sold to themselves. Control of stockyards comprehends control of live stock exchange buildings, where commission men have their offices; control of assignment of pens to commission men; control of banks and cattle loan companies; control of terminal and switching pacilities; control of yardage services and charges; control of weighing facilities; control of the disposition of dead animals and other profitable yard monopolies; and in most cases control of all packing house and other business sites. Packer-owned stockyards give these interests access to records containing confidential shipping information, which is used to the disadvantage of shippers who have attempted to forward their live stock to a second market.'

Summary of Report of the Federal Trade Commission on Meat-Packing Industry, July 3, 1918.

Following the report of the Federal Trade Commission, and before the passage of this act, a bill in equity for injunction was filed in 1920, in the Supreme Court of the District of Columbia, in which, on February 27th of that year, was entered a decree against the same Big Five packers, consented to by them, with the saving clause that it should not be considered as an admission that they had been guilty of violations of law. The decree enjoined the packers from doing many acts in pursuance of a combination to monopolize the purchase and control the price of live stock, and the sale and distribution of meat products and of many by-products in preparation of meats and in unrelated lines, not here relevant, and from continuing to own or control, directly or indirectly, any interest in any public stockyard market company in the United States, or in any stockyard market journal, or in any stockyard terminal railroad or in any public cold storage warehouse. House Committee Hearings, Committee on Agriculture, 1920, vol. 220-2, p. 720, 'Meat Packer Legislation.'

It appears from these committee hearings that the dealers do not buy fat cattle generally, or largely compete with packers in such purchases. They buy either the thin cattle, known as 'stockers and feeders,' which they dispose of to farmers and stock feeders, to be taken to the country for farm use and fattening, or they buy mixed lots, and cull out of them the fat cattle. These they dispose of to packers, either directly or through commission men. The proportion of all the hogs passing through the yards in 1919 handled by these traders, speculators, or scalpers, as they are indifferently called. was 30 per cent. Of all the butcher cattle they handled 20 per cent., of the beef cattle 10 per cent., and of 'the stockers and feeders' 80 per cent. At Kansas City, this last figure was higher, reaching 95 per cent. Committee Hearings, p. 2140.

It was conceded that, of all the live stock coming into the Chicago stockyards and going out, only a small percentage, less than 10 per cent., is shipped from or to Illinois.

The complaints of the shippers of live stock against the charges and practices, working to their prejudice in the conduct of the stockyards, the commission men, and the dealers, were: First, suppression of competition in purchases through agreement, by which one packer would buy a carload or trainload of cattle and turn over half of it to the only other packer buying in the local market. Second, 'wiring on.' A shipper would send a carload or trainload of stock to one stockyard. Finding the market unsatisfactory, he would ship them further east. The packers' agents were promptly advised at the second stockyards and, controlling the price there, they made it the same as at the first stockyards, though the shipper had paid the freight, and had to stand the 'shrink' of the cattle from the journey. Third, the charges in the stockyards for hay and other facilities were excessive. Fourth, the duplication of commissions through the collusion of the commission men and the dealers, by which commission men would sell at a lower price to dealers than to outside buyers, and drive the latter to buying from dealers through commission men, forcing two commissions. Fifth, the monopoly conferred by the stockyards owner on a company in which packers were largely interested, of buying at a fixed price of $5 a head all dead cattle for rendering purposes, when they were worth more. Sixth, the frequency with which commission men reported to shippers that live stock had been crippled and had to be sold in that condition at a lower price, arousing suspicion as to the fact and if it was a fact, as to the cause of the crippling. Pages 22, 23, 24; also 466 et seq., 1086; 2125, 2244, et seq. Committee of House Hearings, Committee of Agriculture, vol. 220-2, 66th Congress, 2d Session.

Mr. E. G. Godman, of Chicago, Ill., for appellants Stafford and others.

[Argument of Counsel from pages 503-506 intentionally omitted]

Mr. Levy Mayer, of Chicago, Ill., for appellants Burton and others.

[Argument of Counsel from pages 506-507 intentionally omitted]

Mr. Solicitor General Beck, of Washington, D. C., for appellees.

[Argument of Counsel from pages 508-512 intentionally omitted]

Mr. Chief Justice TAFT, after making the foregoing statement of the case, delivered the opinion of the Court. 

Notes
United States Supreme Court decisions on constitutionality Automated categorization