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UNITED STATES v. SWIFT & COMPANY

December 12, 1960

UNITED STATES OF AMERICA, PLAINTIFF,
v.
SWIFT & COMPANY, ARMOUR AND COMPANY, THE CUDAHY PACKING COMPANY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Julius J. Hoffman, District Judge.

  The petitioners, defendants in this historic litigation, have sought modification of the antitrust decree entered with their consent forty years ago. The government has vigorously opposed the petitions.

Following extensive discovery proceedings and the disposition of preliminary motions, the parties were afforded the plenary hearing required upon such a petition. Hughes v. United States, 1942, 342 U.S. 353, 72 S.Ct. 306, 96 L.Ed. 394. Oral testimony occupied some three and one-half months, producing a transcript in excess of eight thousand pages. Nearly one thousand exhibits have been received, containing an even greater volume of pages. As the record indicates, the court had grave doubt of the admissibility of portions of the petitioners' evidence, both oral and documentary. Much of it was remote and of tenuous relevancy, or entailed matters of general opinion. It was the position of the court, however, throughout the lengthy hearing, that the equitable nature of the proceeding warranted giving the petitioners every opportunity to support their request.

The court has been aided by detailed and exhaustive briefs, running to another thousand pages, and by full oral presentation of the parties' positions. The court also has before it the complete record of the prior proceedings in the case. The quality of representation on all sides has been exceptional.

The Original Decree.

The antitrust history of the defendants goes back to the turn of the century. In 1902 the government filed a civil suit against the defendants which eventuated in a general injunction. Swift & Co. v. United States, 1905, 196 U.S. 375, 25 S.Ct. 276, 49 L.Ed. 518. Subsequent criminal prosecutions failed. In 1917, at the direction of President Wilson, the Federal Trade Commission commenced a broad investigation of the meat packing industry. The report of this investigation, submitted in 1919, led to the commencement of the litigation in which this proceeding constitutes the latest chapter.

The Parties.

The suit was begun on February 27, 1920, in what was then called the Supreme Court of the District of Columbia. The principal defendants were the so-called Big Five of the meat packing industry: Swift & Company, Armour and Company, The Cudahy Packing Company, Wilson & Co., Inc., and Morris & Company. Eighty other corporations, comprising those subsidiaries of the principal defendants which were engaged in slaughtering, packing, or selling meats, were also joined as defendants. Fifty of the officers, directors, and stockholders of the corporate defendants were named and joined individually as defendants. Of these one hundred and thirty-five original defendants, only six are now before the court as petitioners. One of the five principal defendants, Morris & Company, was absorbed by Armour and Company in 1923. Another, Wilson & Co., Inc., has not petitioned for modification or entered its appearance in this proceeding. The remaining three principal defendants, appearing here as petitioners, will be called Swift, Armour, and Cudahy. All of their subsidiaries which were joined as parties originally have since been dissolved with the exception of two Swift subsidiaries, Swift and Company, Inc., and Derby Foods, Inc., which will be included in the designation Swift. The sole survivor of the officers, directors, and stockholders of these corporate defendants who had been joined individually as parties who has petitioned here is E.A. Cudahy, Jr. The petitioners are, therefore, Swift, including its two subsidiaries, Armour, Cudahy, and E.A. Cudahy, Jr.

The Complaint.

The equity bill which commenced this suit consists of some thirty pages. The stated object of the action was to put an end to monopolies achieved by the defendants affecting the food supply of the nation, and to prevent the extension of this domination into other fields.

The defendants' principal business, it was alleged, consisted of the purchase and slaughter of livestock, namely, cattle, hogs, sheep, and calves, the dressing of the carcasses, and the distribution and sale of the dressed meats. Domination of the purchase of livestock, it was charged, had been achieved, pursuant to a common purpose, plan, and design, by various means. First, the complaint recited, the defendants had acquired controlling interests in some twenty-two of the nation's stockyards, the public markets where livestock were bought and sold. Through the fees, charges, and services of the yards, they thereby gained power over the throat of the commerce involved. Through their interests in these yards, the defendants were also able to determine the number and location of packing plants in the desirable locations at and adjacent to the stockyards. Terminal railways, connecting the long-haul roads with the stockyards and the packing plants, had also fallen under the domination of the defendants according to the bill, giving them power to discriminate against other packers and independent buyers. Dominion over the other facilities required by traders and dealers at the yards was also achieved. Included was the allocation of office space, pens, and sites for stockyard banks, cattle loan companies, and rendering plants for the disposal of stock killed by accident or disease in the yards. According to the allegations of the government's complaint, the defendants had also gained control of the trade newspapers and market journals which cattle raisers must rely upon for accurate and unbiased reporting of demand. As a consequence, the defendants were furnished with a means of increasing or decreasing the flow of livestock to the yards in their own interests.

By wielding these powers, it was charged, the defendants had gradually forced out their competitors as dominating factors in the marketing of livestock. To eliminate competition among themselves, the government claimed, the defendants had entered into percentage purchase arrangements, apportioning the livestock offered at the several stockyards to the respective defendants in predetermined shares.

Concerning the marketing side of the defendants' businesses, the complaint alleged that the packers had developed a nationwide system for distributing and selling meats. A principal instrumentality in the system was called the branch house, a storage station with facilities for cooling and preserving fresh meats, from which sales were made to butchers, hotels, restaurants and other large consumers. The defendants maintained 1120 of these branch houses in various large towns and cities throughout the United States, according to the bill, while competing interstate slaughterers maintained only 139.

To supplement the branch houses, and to serve the smaller communities, the defendants employed refrigerated railroad cars traveling over specified routes and filling orders for smaller quantities. The route cars operated by the defendants, it was alleged, constituted 90% of the total number operated in the packing industry. As an adjunct, the defendants, and particularly Armour, employed motor trucks to serve purchasers not conveniently reached by rail, in a total of 20,836 towns throughout the United States. As a part of their distribution system, it was stated, the defendant packers owned for their private use a number of cold storage warehouses where fresh meat products might be stored, and had acquired control as well of public cold storage warehouses engaged in the general business of leasing space for products requiring refrigeration.

Having eliminated competition in meats, the defendants, according to the government, set out to control the substitute foods to which the consuming public might turn from high-priced meats. To accomplish this purpose, the defendants had begun to deal, directly and through subsidiaries, in fish, vegetables, fruits, cereals, milk, poultry, butter, eggs, cheese, and other so-called substitute foods as well as in meats. In addition, they acquired a large number of concerns manufacturing or selling these substitute foods, availing themselves of the financial resources amassed through their dominance in meats. Further control over other foods was achieved, it was alleged, through contracts for the defendants' purchase of the entire or exclusive output of many companies engaged in the production of these foods. In marketing these non-meat foods, the defendants availed themselves of their distribution systems and facilities designed principally for the handling of meats "with comparatively no increase of overhead." This advantage enabled the defendants to reach remote spots, it was alleged, and was employed temporarily to fix prices so low as to eliminate competition.

As the result of these activities, the complaint averred, the defendants had enjoyed an extraordinary rate of growth and had achieved immense size. In the fifteen years from 1904 to 1919, the combined net worth of Swift, Armour, Cudahy and Wilson had increased fivefold to nearly half a billion dollars. The net profits of the five principal defendants for the year 1917 nearly equalled their total net worth in 1904. Their combined sales amounted to three billion two hundred million dollars for 1918. The principal corporate defendants and the individual defendants and their families held controlling interests in 574 corporations and concerns, and lesser or indefinite interests in another 188.

In its concluding paragraphs, the government's bill of complaint prayed generally for an injunction prohibiting the defendants from entering into or carrying out any contract or combination in restraint of trade, from monopolizing or attempting to monopolize commerce in livestock or foods, and from engaging in unlawful practices or unfair competition to restrain or monopolize trade or commerce. Specifically, the complaint requested a decree requiring the defendants to divest themselves of the instrumentalities of monopoly in meats, including retail meat markets, stockyards, terminal railways, market or trade journals, and public cold storage warehouses. In the field of substitute foods, so-called, the government demanded that the defendants divest themselves of all interests in concerns dealing in such foods, and discontinuue direct dealings. To assure this divestiture, the government asked that the decree enjoin the defendants from re-acquiring any interests so divested, from obtaining any new interest in any concern dealing in prohibited substitute foods, and from engaging themselves in any dealings in these foods. To complete the divorcement of meats from substitute foods, the bill demanded that the defendants be enjoined from permitting their railroad cars, motor trucks, branch houses, or other distributive facilities to be used by anyone in the handling of prohibited commodities.

The Decree.

On the same day that the government filed its complaint with the court, a separate answer was filed on behalf of each of the five principal defendants and its corporate subsidiaries and affiliated individual defendants. These answers responded in extensive and minute detail to all the averments of the government's bill, and denied each material allegation.

At the same time, the parties presented to the court a stipulation, agreeing to the entry of an attached decree of injunction. On behalf of the defendants, the stipulation stated that while maintaining the truth of their answers and their innocence of any violation, they desired "to avoid every appearance of placing themselves in a position of antagonism to the Government" and therefore consented, with the proviso that their consent should not be regarded as an admission, nor the decree as an adjudication, that they had in fact violated any law of the United States.

The stipulated decree was entered that day. Its recital of the parties' consent was followed by eighteen operative paragraphs. Summarized in numerical order, these paragraphs decreed as follows:

First. The corporate defendants were enjoined, jointly and severally, from contracting, combining, or conspiring to restrain, and from monopolizing, or attempting or conspiring to monopolize, trade or commerce;

Second. The defendants, jointly and severally, were restrained from owning any interest in any stockyard, terminal railroad, or market newspaper or journal;

Third. The corporate defendants were enjoined from using or permitting others to use their distributive system and facilities, including branch houses, railroad cars, and motor trucks, for handling or dealing in the non-meat foods specified in paragraph Fourth; the defendants were permitted to dispose of surplus or obsolete facilities free of the restrictions of the decree, subject to a requirement of court approval for sale of any substantial part of the system;

Fifth. The individual defendants were enjoined from holding a controlling interest in any concern handling or dealing in the commodities listed in paragraph Fourth;

Sixth. The defendants were restrained from owning or conducting any retail meat markets, other than for the accommodation of employees at their plants;

Seventh. The defendants were enjoined from owning any interest in public cold storage warehouses except in connection with their packing plants or as necessary in handling meats and other permitted commodities;

Eighth. The corporate defendants were enjoined from handling or dealing in fresh milk or cream, and from owning any interest in any concern so engaged, except as necessary to their dealing in condensed, evaporated, or powdered milk, butter, oleomargarine, ice cream, cheese, or buttermilk, or in combination with meats or other permitted items;

Ninth. The corporate defendants were enjoined from engaging in illegal trade practices;

Tenth. The defendants were directed to submit to the court, within 90 days, a plan for divesting themselves of ownership in stockyards, terminal railroads, and market newspapers and journals, and to dispose of these interests within the time and upon terms fixed by the court;

Eleventh. The defendants were directed, within nine months and with court approval, to divest themselves and dispose of their interests in retail meat markets and public cold storage warehouses;

Twelfth. The defendants were directed, within two years and with court approval, to divest themselves of all interest in concerns engaged in handling the prohibited items enumerated in paragraph Fourth, to divorce or discontinue any branches or departments so engaged, and to dispose of all such commodities in stock or on hand;

Thirteenth. In the disposition of their interests in any stockyard at which they maintained packing plants, the defendants and their purchasers were required to agree to continue the operation of the stockyard and the packing plants, respectively, for a period of ten years.

Fourteenth. Nothing in the decree should be construed to prohibit the defendants from doing anything, otherwise lawful, in the United States in connection with their export trade or foreign commerce;

Fifteenth. Nothing in the decree should be construed to preclude the government from proceeding, civilly or criminally, against the defendants for any violation of law in the buying or selling of poultry, butter, eggs, or cheese, or any other business or activity not mentioned in the decree;

Sixteenth. The defendants were directed to supply information upon the request of the Attorney General and to permit inspection of their books and records, for the purpose of assuring compliance with the decree;

Seventeenth. All the defendants' sales or dispositions of properties or businesses which had been made within the five months preceding the entry of the decree and which otherwise would have been required by the decree were to be submitted to the court for determination of whether they were in accordance with the spirit and purpose of the decree;

Eighteenth. The court retained jurisdiction to take any further action that might be necessary to carry out the decree and to entertain any applications by the parties with respect to it.

It is apparent that the decree was the product, in principal part, of negotiation between the defendants and the government. Within a single day the government filed its complaint, the defendants appeared and filed lengthy answers, the parties presented their stipulation and consent to a detailed and complex decree, and the decree was entered. The circumstances precluded extensive judicial consideration or analysis. No evidence was offered, no findings of fact were made, and no opinion was prepared to explain the decree.

In large part, the decree was responsive to the government's complaint. As demanded in its prayer, the defendants were required to divest themselves of their interests in stockyards, terminal railways, market newspapers and journals, public cold storage warehouses, and retail meat markets. They were also required to divest themselves of the business of handling certain of the items described by the complaint as substitute foods, although in this respect the decree does not extend to the full limits of the complaint. The government had charged the defendants specifically with seeking to control fish, vegetables, fruits, cereals, milk, poultry, butter, eggs, and cheese; the decree as entered reached only the first five of these commodities, and left the defendants free to engage in the business of handling poultry, butter, eggs, and cheese, along with a miscellany of non-meat foods not prohibited by the decree and a wide range of non-food commodities. The core of the defendants' business activities remained untouched. They were left free to engage in meat packing, including slaughter, dressing and processing, and distributing at wholesale, without hindrance. In this field, their corporate empires were not dismembered, and they retained their huge size. The decree confined their power, however, and prevented its exercise or extension in the meat industry either backward in the direction of livestock marketing, or forward in the direction of retail marketing. What is known as vertical integration was foreclosed thereby to a significant degree. Although short of monopolization the defendants were free to expand their operations horizontally, as meat packers, they were excluded, for all practical purposes, from participating generally in the food industry. Their economic power was thus not destroyed but rather hemmed in.

Subsequent Proceedings.

With the entry of the consent decree, this litigation entered its second phase. In 1921, the National Wholesale Grocers Association and the American Wholesale Grocers Association were permitted to intervene in the proceedings for the limited purpose of receiving notice and being heard in opposition to any proposed change in the decree that would deprive them of its protections. On April 19, 1922, the California Cooperative Canneries filed an intervening petition, seeking to invalidate the consent decree in its entirety. It appeared that this intervenor had agreed with Armour to supply Armour's total requirements of California canned fruits for a ten year period, and had committed the principal part of its output to this contract. The petition claimed the consent decree was void on several grounds. The defendants' refusal to admit any violation of law, it was argued, deprived the court of power to enter the decree. Since the complaint did not charge that it was illegal for the defendants to engage in the grocery business, that portion of the decree, at least, could not be supported, it was claimed. The intervenor contended, too, that the decree was so general as to be a nullity, and that it was superseded by the Packers and Stockyards Act of August 15, 1921, 42 Stat. 159, 163, 7 U.S.C.A. § 181 et seq. The motion for leave to intervene was denied in the trial court, but the Court of Appeals for the District of Columbia reversed the denial in September, 1924. (California Cooperative Canneries v. United States, 1924, 55 App.D.C. 36, 299 F. 908).

These motions were argued together. The trial court denied the motion to vacate the decree presented on behalf of Swift and Armour, but by order of May 1, 1925, suspended the operation of the decree, in pursuance of the Court of Appeals' mandate, until the intervening petition of California Cooperative Canneries could be fully heard on the merits.

Upon appeal from the denial of the Swift and Armour motions, the United States Supreme Court affirmed, upholding the validity of the decree. Swift & Co. v. United States, 1928, 276 U.S. 311, 48 S.Ct. 311, 72 L.Ed. 587. The suspension, however, remained in force until set aside a year later by the Supreme Court in United States v. California Cooperative Canneries, 1929, 279 U.S. 553, 49 S.Ct. 423, 73 L.Ed. 838. Upon receipt of the mandate of the United States Supreme Court, the trial court on July 24, 1929, revoked the suspension of the decree. On the same day, however, Swift and Armour filed motions to extend the time for compliance with the decree, and the court granted a temporary extension for all defendants until the motions could be fully heard. Before these motions came on for hearing, however, and on August 10, 1929, they were superseded by petitions on behalf of Swift and Armour to modify the decree and to vacate its principal prohibitions.

The petitions for modification, as amended on April 2, 1930, accepted the consent decree as valid and lawful when entered. This request for relief from its prohibitions was based therefore not upon any asserted defect in the original proceedings, but rather upon the claim that the decree had become, in the ten years since its entry, unnecessary and unjust in view of "radical and revolutionary changes" in economic conditions. These changes, it was claimed, were both unexpected and unforeseen, and worked a revolution in food distribution methods.

Because the petitions now before the court proceed upon the same underlying theory, the 1930 petitions warrant ...


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