Stafford v. Wallace

258 U.S. 495

Case Year: 1922

Case Ruling: 7-1, Affirmed

Opinion Justice: Taft

FACTS

In the early 1900s the meatpacking industry presented a difficult challenge to the federal government's antitrust policies. Western ranchers sent their livestock to the stockyards located in the Midwestern states. Here the animals were sold, butchered, and packed for shipment to consumers in the East. The large meatpacking companies (for example, Armour, Cadahy, and Swift) controlled the stockyards where they could dictate the prices paid to the ranchers for their livestock, demand low transportation rates, set meat prices, and even withhold meat from the market when they did not get what they demanded. The meat companies argued that federal antitrust laws could not be applied to their control over the stockyards because when the livestock reached the stockyards interstate commerce stopped. The processing and packaging of the meat was intrastate commerce that only the states could constitutionally regulate. Interstate commerce did not begin again, according to the companies, until the packed meat was in transit to the East. In Swift & Co. v. United States (1905), the Supreme Court ruled against the meatpacking companies, holding that interstate commerce began when the livestock left the ranches in the West and did not end until the meat products reached the consumers in the East. The activities that occurred in the stockyards did not interrupt that "stream of commerce" from the West to the East. Therefore, the federal antitrust laws did apply to the stockyards.

Armed with the Swift & Company precedent, Congress in 1921 passed the Packers and Stockyard Act. This legislation attempted to go beyond antitrust considerations in regulating the meat-packing industry. In addition to making it unlawful for the packers to fix prices or engage in monopolistic practices, the law forbade packers in interstate commerce to engage in any unfair, discriminatory, or deceptive practices. It required all stockyard dealers and commission men to register with the secretary of agriculture. The transactions at the stockyards had to conform to a schedule of charges open for public inspection. Fees and charges could be changed only after ten days' notice to the secretary. The Agriculture Department had the authority delegated by Congress to make rules and regulations to carry out the act, set stockyard rates, and prescribe record-keeping procedures for stockyard officials.

Stafford and Company, a corporation engaged in commercial transactions of cattle, sued Secretary of Agriculture Henry Wallace asking the courts to enjoin his enforcement of the act. The lower court refused to issue the requested injunction, and the company appealed.

MR. CHIEF JUSTICE TAFT DELIVERED THE OPINION OF THE COURT.

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 for the market.

The chief evil feared is the monopoly of the packers, enabling them unduly and arbitrarily to lower prices to the shipper who sells, and unduly and arbitrarily to increase the price to the consumer who buys. Congress thought that the power to maintain this monopoly was aided by control of the stockyards. Another evil which it sought to provide against by the act, was exorbitant charges, duplication of commissions, deceptive practices in respect of prices, in the passage of the live stock through the stockyards, all made possible by collusion between the stockyards management and the commission men, on the one hand, and the packers and dealers on the other. Expenses incurred in the passage through the stockyards necessarily reduce the price received by the shipper, and increase the price to be paid by the consumer. If they be exorbitant or unreasonable, they are an undue burden on the commerce which the stockyards are intended to facilitate. Any unjust or deceptive practice or combination that unduly and directly enhances them is an unjust obstruction to that commerce....

The stockyards are not a place of rest or final destination. Thousands of head of live stock arrive daily by carload and trainload lots, and must be promptly sold and disposed of and moved out to give place to the constantly flowing traffic that presses behind. The stockyards are but a throat through which the current flows, and the transactions which occur therein are only incident to this current from the West to the East, and from one State to another. Such transactions can not be separated from the movement to which they contribute and necessarily take on its character. The commission men are essential in making the sales without which the flow of the current would be obstructed, and this, whether they are made to packers or dealers. The dealers are essential to the sales to the stock farmers and feeders. The sales are not in this aspect merely local transactions. They create a local change of title, it is true, but they do not stop the flow; they merely change the private interests in the subject of the current, not interfering with, but, on the contrary, being indispensable to its continuity. The origin of the live stock is in the West, its ultimate destination known to, and intended by, all engaged in the business is in the Middle West and East either as meat products or stock for feeding and fattening. This is the definite and well-understood course of business. The stockyards and the sales are necessary factors in the middle of this current of commerce.

The act, therefore, treats the various stockyards of the country as great national public utilities to promote the flow of commerce from the ranges and farms of the West to the consumers in the East. It assumes that they conduct a business affected by a public use of a national character and subject to national regulation. That it is a business within the power of regulation by legislative action needs no discussion.... Nor is there any doubt that in the receipt of live stock by rail and in their delivery by rail the stockyards are an interstate commerce agency. The only question here is whether the business done in the stockyards between the receipt of the live stock in the yards and the shipment of them therefrom is a part of interstate commerce, or is so associated with it as to bring it within the power of national regulation. A similar question has been before this court and had great consideration in Swift & Co. v. United States. The judgment in that case gives a clear and comprehensive exposition which leaves to us in this case little but the obvious application of the principles there declared....

The application of the commerce clause of the Constitution in the Swift Case was the result of the natural development of interstate commerce under modern conditions. It was the inevitable recognition of the great central fact that such streams of commerce from one part of the country to another which are ever flowing are in their very essence the commerce among the States and with foreign nations which historically it was one of the chief purposes of the Constitution to bring under national protection and control. This court declined to defeat this purpose in respect of such a stream and take it out of complete national regulation by a nice and technical inquiry into the non-interstate character of some of its necessary incidents and facilities when considered alone and without reference to their association with the movement of which they were an essential but subordinate part.

The principles of the Swift Case have become a fixed rule of this court in the construction and application of the commerce clause....

Of course, what we are considering here is not a bill in equity or an indictment charging conspiracy to obstruct interstate commerce, but a law. The language of the law shows that what Congress had in mind primarily was to prevent such conspiracies by supervision of the agencies which would be likely to be employed in it. If Congress could provide for punishment or restraint of such conspiracies after their formation through the Anti-Trust Law as in the Swift Case,certainly it may provide regulation to prevent their formation....

As already noted, the word "commerce" when used in the act is defined to be interstate and foreign commerce. Its provisions are carefully drawn to apply only to those practices and obstructions which in the judgment of Congress are likely to affect interstate commerce prejudicially. Thus construed and applied, we think the act clearly within congressional power and valid.

Other objections are made to the act and its provisions as violative of other limitations of the Constitution, but the only one seriously pressed was that based on the Commerce Clause and we do not deem it necessary to discuss the others.

The orders of the District Court refusing the interlocutory injunctions are

Affirmed.