United States vs. E. C. Knight Company (1895)

a.k.a. Sugar Trust Case

Background Information:

In the year 1890 the United States government passed the Sherman Antitrust Act in an attempt to prevent companies from establishing industrial monopolies. These monopolies would give companies the power to control an industry in whatever manner they pleased because they would have no competition to give the people a more reasonable offer. Part of the Sherman Act reads, "every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States shall be deemed guilty of a felony."

Soon after this piece of legislation was passed, the American Sugar Refining Company bought out four other sugar companies in the Philadelphia area, giving itself control over 98% of the industry.

President Grover Cleveland commanded Congress to sue the company under the provisions of the Sherman Act and the charge that they had established a monopoly.
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A sugar refinery in the late 19th century
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The American Sugar Refining Company

The Court Case and Decision

The government first tried to sue the Knight company in a lower court but the case was dismissed. An appeal was then made to the Supreme Court. The case reached the Supreme Court and was argued on October 24, 1894. On January 21, 1895 a decision was made where, with an almost unanimous vote of 8 to 1, the court ruled that the government did not have the authority under the Sherman Antitrust Act to enforce action against the company.

The Court was, at the time, headed by Chief Justice Melville W. Fuller, claimed that, though the Sherman Act itself is Constitutional, it did not apply to manufacturing. The legislation was meant to regulate commerce, and did not apply to potential production monopolies. The Knight Company HAD monopolized the manufacturing side of business but the government had no grounds for its lawsuit under the Sherman Act.

The Commerce Clause in the Constitution grants Congress the power to "regulate commerce... among the several states." The Court claimed that because manufacturing functions take place entirely in one state, they are not considered under the power of Congress' commerce powers.
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Chief Justice Fuller

Shortest Version of the Court's Decision:
Congress has the power to regulate trade but it does not have the power to regulate manufacturing.