United States v. E.C. Knight Co.
156 U.S. 1 (1895)
In 1890, the US Congress
enacted the Sherman Antitrust Act,
which was an attempt to stop the power to monopolies within the US.
The provisions of the Sherman
Antitrust Act were written in a way
to outlaw things that restricted trade between States.
That way the law could be
justified under the Interstate Commerce Clause.
The American Sugar Refining
Company gained control of the E. C. Knight Company which itself controlled
98% of the American sugar refining industry.
That's a pretty strong
The US sued Knight under the Sherman
Antitrust Act to prevent the
Knight argued that the Sherman
Antitrust Act could not be used to
suppress a monopoly in the manufacture of a good, it could only be used
to go after distributors.
The US Supreme Court found for
The US Supreme Court found
that the Sherman Antitrust Act
did not apply to activities such as manufacturing which occurred
completely within a single State.
The Court found that
"the result of the transaction was the creation of a monopoly in the
manufacture of a necessary of life" but ruled that it "could
not be suppressed under the provisions of the act".
The Court found that
manufacturing, in this case, refining, was a local activity not subject
to Congressional regulation of interstate commerce.
"That which belongs to
commerce is within the jurisdiction of the United States, but that which
does not belong to commerce is within the jurisdiction of the police
power of the State. Doubtless the power to control the manufacture of a
given thing involves in a certain sense the control of its disposition,
but affects it only incidentally and indirectly."
Basically, the fact that
the sugar was manufactured for export, does not mean that the manufacturer
is participating in interstate commerce.
"Commerce succeeds to
manufacturing, and is not a part of it."
Basically, this case said that
the Interstate Commerce Clause can
only be used to effect business that are interstate. Since Knight's factories didn't move around,
all of their business was conducted inside of a State, and therefore it
was only subject to State regulation.
In a dissent it was argued
that Knight's monopoly affected all the States, therefore it was the
Federal Government's business to interfere.
Later on, in Coronado Coal
Co. v. United Mine Workers, a company
used the Sherman Antitrust Act
to go after a Union for striking.
The argument was made that
that case was distinguished from this one because it was the intent of the union to restrict trade. But how is
that different from a monopolist, who also is attempting to restrict