The U.S. government’s successful prosecution of the beef trust represented an early and notable antitrust victory from which sprang an important new legal concept concerning interstate commerce.
Still new in his presidency, Theodore Roosevelt wrote to a U.S. senator in 1902 that he was fully aware that the American people were “very bitter” about operations of the “beef trust.” Roosevelt was accurate. Independent butchers, businesspeople, farmers, and consumers had complained since the 1880’s that the large packinghouses, led by Gustavus F. Swift, Nelson Morris,
From his service in the Spanish-American War, Roosevelt had firsthand 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.
Together, the big six controlled about half of the American beef-packing industry, a proportion that rose in the eastern United States to as much as 60 percent in Pittsburgh and Philadelphia, 75 percent in New York City, and 85 percent in Boston. 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.
Editorial cartoon shows President Theodore Roosevelt hunting down the beef trust.
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 meatpackers’ 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 consented to 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.
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.
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,
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
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Crunden, Robert M. Ministers of Reform: The Progressives’ Achievement in American Civilization, 1889-1920. New York: Basic Books, 1982. Clear, informative reading. Chapter 6 is excellent on muckraking journalists and especially on Upton Sinclair and his influence on the Pure Food and Drug Act. Includes a useful index. -
Hovenkamp, Herbert. Federal Antitrust Policy: The Law of Competition and Its Practice. 2d ed. Eagan, Minn.: West, 1999. Covers nearly all aspects of U.S. antitrust policy in a manner understandable to people with no background in economics. Chapter 2 discusses “history and ideology in antitrust policy.” -
Purdy, Harry L., Martin L. Lindahl, and William A. Carter. Corporate Concentration and Public Policy. New York: Prentice-Hall, 1942. Good survey filled with specifics. Chapter 23 deals with the meat industry and provides good background material in a balanced account that takes note of the industry’s problems. No bibliography, but ample page notes. -
Sinclair, Upton. The Jungle. New York: New American Library, 1906. A classic of literary realism. Sinclair had firsthand experience in Chicago packing plants. This graphic and engaging novel is stronger on conditions in the meatpacking industry than on character development. -
Thorelli, Hans B. The Federal Antitrust Policy: Origination of an American Tradition. Baltimore: The Johns Hopkins University Press, 1955. Scholarly and dense but very valuable. Chapter 7 is excellent on the development of Theodore Roosevelt as a trust buster and his decision to pursue the beef trust. Many page notes, bibliography, table of cases, and good index. Good for context on the antitrust movement in general. -
Whitney, Simon N. Antitrust Policies: American Experience in Twenty Industries. 2 vols. New York: Twentieth Century Fund, 1958. Clear and authoritative treatment written by a scholar and FTC official. Concentrates on meatpacking in chapter 1. Superb on post-1920 developments. Includes page notes and a table of cases. -
Wiebe, Robert H. The Search for Order, 1877-1920. New York: Hill & Wang, 1967. A fine interpretive history, well written and informative. Offers perspectives on the antitrust and antimonopoly movement throughout. Excellent for explanations of concepts and context on trusts. Bibliographical essay for each chapter. Index.
U.S. Supreme Court Rules Against Northern Securities
U.S. Supreme Court Establishes the “Rule of Reason”
U.S. Supreme Court Breaks Up the American Tobacco Company
Clayton Antitrust Act
United States v. United States Steel Corporation
U.S. Government Loses Its Suit Against Alcoa
Eastman Kodak Is Found to Be in Violation of the Sherman Act
Antitrust Prosecution Forces RCA to Restructure