BEEF TRUST versus UNITED STATES
Locale: Washington, D.C.
Key Figures
Theodore Roosevelt (1858-1919), president of the United States, 1901-1909
Gustavus F. Swift (1839-1903), American meatpacking company owner
Philip Danforth Armour (1832-1901), American meatpacking company owner
Oliver Wendell Holmes, Jr. (1841-1935), associate justice of the United States, 1902-1932
Philander C. Knox (1853-1921), U.S. attorney general,1901-1904
Upton Sinclair (1878-1968), American novelist
Summary of Event
Each indictment was overruled by the U.S. Supreme Court on grounds that pooling—a practice in which businesses strike agreements not to compete—comported with current business philosophy and that stockyard transactions, which were local, formed no part of interstate commerce. Although the Supreme Court had ruled against legal arguments of federal attorneys, those rulings had neither resulted in a slackening of press campaigns against the beef trust nor allayed the public’s disquiet about prospects of a monopoly or exercise of monopoly power.
From his service in the Spanish-American War, Roosevelt had first hand knowledge of the scandal about the “embalmed beef” supplied to American forces. Complaints from businesses and consumers continued to pour into the office of Philander C. Knox, the U.S. attorney general, about the rising prices of beef trust products and about the big packers’ collusion with railroads. More directly, Knox was bombarded by demands from influential members of the House of Representatives to reveal the government’s intentions in regard to actions against this trust.
By 1902, therefore, at Roosevelt’s initiative, Knox launched antitrust inquiries concerning activities in the meatpacking industry. The evidence subsequently amassed showed the six leading meatpackers (the “big six”) to be engaged in price fixing, conspiracies to divide markets in regard to purchases of livestock and meat sales, blacklisting of competitors or of businesses failing to conform to trust practices, false bidding in dealings with public institutions, and acceptance of rebates from railroads. The six companies brought under federal scrutiny were Swift, Armour, Morris, Cudahy, Wilson, and Schwartzchild, all of which consorted in pooling agreements.
The overall industrial reach was far more extensive, and the industrial importance of these meatpackers was much greater than their substantial trade in beef, because they also handled calves, hogs, and sheep. They drew significant parts of their $700 million yearly business from the purchase, storage, and sales of dairy and poultry products. Furthermore,in most major cities they owned packing plants, stockyards, and grain elevators. They all had subsidiaries that dealt in or manufactured by-products such as hides, fats, animal foods, fertilizers, glue, soap, and canned fruits, and they owned refrigeration plants as well as railroad refrigerator cars for transporting their wares.
Capitalized in the aggregate at $93 million in 1903, these industry leaders could boast impressive achievements for their firms as well as for consumers. Philip Armour, originally based in Milwaukee, Wisconsin, and Nelson Morris, nearby in Chicago, Illinois, had profited from government Civil War contracts. With the postwar projection of railways into the prairies, they had stimulated the great cattle drives from Texas to the transcontinental railroads. In so doing, they contributed to the existence and prosperity of many prairie communities. Gustavus Swift, arriving in Chicago from Massachusetts in 1875, revolutionized the industry through the regular employment of refrigerator cars and through efforts, soon followed by other packers, to attain the efficiencies of vertical integration. He played a large part in making Chicago famous as the world’s greatest meatpacking and meat-processing center.
The meatpacers’ outraged response to government action, typified by Jonathan Ogden Armour’s Saturday Evening Post articles defending his industry, was predictable if not commendably accurate.
Saddled with Sherman Act injunctions in May, 1902, for pooling agreements and for taking railroad rebates, Swift, Armour, and Morris dissolved their pool, destroyed its records, and contracted to merge their firms into one. Cudahy and Schwartzchild quickly consentedto join, and many other meatpacking companies were rapidly purchased by these three companies. Failing to secure adequate financing from Wall Street to expand their merger, they formed the National Packing Company in 1903.
National’s leaders were the same figures who had dominated the previous pool, and they continued meeting to regulate their trade. In response, the federal injunctions were made permanent. The government’s equity proceeding was heard by the U.S. Supreme Court in 1905, shortly after the Roosevelt administration’s much-heralded victory in the Northern Securities case of 1904. The Court’s decision in that case had broadened the meaning of interstate commerce and provided a favorable context for a decision against the beef trust.
In Swift & Company v. United States, Justice Oliver Wendell Holmes, Jr., spoke for the Court. Holmes took his cues from the narrow interpretation of interstate commerce propounded in United States v. E. C. Knight Company (1895) as modified by the Northern Securities decision and broadened the concept of interstate commerce.
Granting that many sales and transactions by the enjoined meatpackers occurred as local ones, Holmes emphasized the steady movement of animals and meat products in and out of stockyards and localities to and from all parts of the nation. The reality was that they were actually a part of the “stream of commerce.” Having concluded that this was true, Holmes asserted that activities of the beef trust fell under federal jurisdiction, as did all matters pertaining to interstate commerce, and were therefore in violation of the Sherman Act. The Supreme Court’s decision was unanimous.
Significance
The Swift decision had several ramifications. The Roosevelt administration clearly had won a political victory against an unpopular trust, even though the trust’s leaders were heavy Republican contributors. Roosevelt, who was basically a moderate conservative, earned respectful enmity in corporate circles while gaining a reputation as an ardent reformer in many other quarters. His action in the beef trust prosecution, strengthened by forty more antitrust suits during his tenure in office, also contributed to the public’s impression that the federal government was becoming an effective umpire of the nation’s economic affairs. Roosevelt’s position on trusts, which constituted a significant step toward a stronger, more interventionist federal government, helped establish precedents for later presidencies.
The Supreme Court also contributed to foundations of the modern state in advancing Holmes’s “stream of commerce” doctrine. In the short run, this doctrine encouraged the federal government to pursue other antitrust cases, many of which were prosecuted successfully. Over the long term, the “stream of commerce” doctrine became a working concept basic to expanded understandings of the federal government’s control of commerce.
During the late 1930’s, judicial applications of the doctrine served to break down earlier Supreme Court decisions that had isolated manufacturing from commerce. In so doing, they allowed federal authorities to initiate a vast array of economic legislation and a broad spectrum of social programs.
Government prosecution of the beef trust focused on the trust’s business practices, their effects on competition, and restraints of trade. Health and working conditions within the industry lay beyond the scope of these government inquiries. Such limitations, however, did not inhibit journalists (“muckrakers”) and writers whose attention was directed to the beef trust by government injunctions or by judicial decisions. A series of articles written by Charles Edward Russell, appearing in Everybody’s Magazine during 1904 and 1905, condemned the trust as greedy while impugning a number of public officials as its dupes. More impressive and influential was novelist Upton Sinclair’s dramatic exposé of specific sanitary and working conditions in Chicago packing plants in his 1906 book 'The Jungle'.
Forced to address the public alarm generated by Sinclair’s novel, government officials characterized its depictions as misleading and false. These and similar exposures of practices of the meatpacking industry led to the passage of both the Pure Food and Drug Act and the Meat Inspection Act in 1906. These acts greatly augmented federal inspection powers, and both came to be ranked, less for immediate effectiveness than for precedents set, among the most memorable legislation of Theodore Roosevelt’s presidency.
Because its products were items of daily consumption in the nation’s households, the meatpacking industry remained under government investigation and attack long after the Swift decision was rendered and reform legislation had been passed. Federal criminal and civil charges, for example, were filed against officials of the National Packing Company and additional companies in 1910.The companies were charged with infractions ranging from rigged agreements on livestock purchases to use of uniform accounting practices and the establishment of market quotas by trust members. National’s officers won acquittal, but they were defeated by the firm’s own inefficiencies and dissolved it in 1912.
A Federal Trade Commission (FTC) investigation into the meatpacking industry initiated by President Woodrow Wilson in 1917 gathered a mass of evidence on unfair competition, and the FTC subsequently recommended government ownership.
By 1920, after their purchase of thirty-one smaller companies, the industry’s leaders were confronted once more by FTC and Justice Department charges that they had violated antitrust provisions of the Sherman Act and the Clayton Antitrust Act of 1914. Responding to what became a famous antitrust consent decree, the companies disposed of substantial holdings in stockyard companies, stockyard railroads, and trade newspapers. They also agreed to abandon dealing in 114 nonmeat and dairy products as well as to give up their retail outlets. Authorities on the industry, in concert with its spokespersons, later acknowledged that these federal antitrust measures had redounded to the ultimate benefit of the industry.
The principal result of the FTC’s investigation and the consent decree was the passage of the Packers and Stockyards Act of 1921, which brought the meatpacking and related industries under federal regulation. The act placed stockyard markets and those operating with them under federal rules and supervision by the U.S. secretary of agriculture.
In effect, the industry could thereafter be perceived as a kind of public utility. The act also comprehensively forbade anyone manufacturing or preparing meats to engage in price fixing, price discrimination, or the apportionment of markets. On balance, the federal investigations and antitrust suits, and the judicial decisions arising from them, left the meatpacking industry with an oligopolistic concentration of leading firms but with access to the industry much more open to smaller competing firms. Antitrust proceedings beginning in 1902 destroyed the industry leaders’ pool and helped prevent the evolution of such agreements into something approximating a genuine monopoly.
By Clifton K. Yearley in the book 'The 20th Century 1901-1940', Editor Robert F. Gorman, Salem Press Inc., Pasadena & Hackensack U.S.A, 2007, v.1 p.402-405. Edited to be posted by Leopoldo Costa.
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