United States v. E.C. Knight Co. 156 U.S. 1 (1895) In 1890, the US Congress enacted the Sherman Antitrust Act, an attempt to curb concentrations of economic power that significantly reduced competition between businesses. o One of its two main provisions outlawed all trade combinations or agreements that severely restricted trade between States or with foreign powers. o The second provision outlawed any attempts to monopolize trade within the United States. In 1892 the American Sugar Refining Company gained control of the E. C. Knight Company which itself controlled 98% of the American sugar refining industry. President Cleveland directed the Federal government to sue Knight under the provisions of the Sherman Antitrust Act to prevent the acquisition. Could the Sherman Antitrust Act suppress a monopoly in the manufacture of a good, as well as its distribution? The US Supreme Court held that the Sherman Antitrust Act did not apply to activities such as manufacturing which occurred completely within a single State. o The Court held 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". o The Court ruled 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." Project Wonderful - Your ad here, right now, for as low as $0 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." Under the Knight decision, any action against manufacturing monopolies would need to be taken by individual States, making such regulation more difficult. The ruling prevailed until the end of the 1930s, when the court took a different position on the Federal government's power to regulate the economy. Justice Harlan dissented. o He felt that Knight's monopoly affected all the States, therefore it was the Federal Government's business to interfere. o Eventually, the Court rulings in later cases were a lot closer to Harlan's argument. 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 this case was distinguished from United States v. E.C. Knight Co 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?