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International Shoe v. Federal Trade Commission
United States Supreme Court
280 U.S. 291 (1930)
McElwain Company made and sold shoes and retained a large inventory of hides and shoes. Beginning in 1920, shoe prices began to fall and McElwain found itself in significant debt. Its officers concluded that the company was in deep financial distress and that selling McElwain or its stock was the only way the company could survive in any form. McElwain’s competitor International Shoe (defendant) acquired McElwain’s capital stock. International Shoe decided to purchase McElwain’s stock rather than its entire business, including its shoe inventory, in order to allow McElwain to retain its own staff. International Shoe’s financial standing was excellent at the time. In fact, it was experiencing such growth that it had to cancel some shoe orders. As part of the merger agreement, International Shoe got access to McElwain’s factories, which it could use to manufacture enough shoes to meet its demand. The Federal Trade Commission (FTC) (plaintiff) commenced an action after International Shoe’s purchase, finding that the merger was anticompetitive and ordered the divestiture of McElwain’s stock. International Shoe appealed, arguing that the merger was legal because International Shoe was the only available purchaser and McElwain was insolvent.
Rule of Law
Holding and Reasoning (Sutherland, J.)
Dissent (Stone, J.)
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