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 monopoly.
  • The US sued Knight under the Sherman Antitrust Act to prevent the acquisition.
    • 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 Knight.
    • 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 trade?