Knight Company, E. C., UNITED STATES v. 156 U.S. 1 (1895)

• Author: David Gordon
• Pages: 1539-1540

Page 1539

The issue in the Supreme Court's first interpretation of the SHERMAN ANTITRUST ACT hung on the lawfulness of the Sugar Trust's acquisition of its competitors, and the decision nearly eviscerated the act. An 8?1 Court used the doctrine of DUAL FEDERALISM in dismissing a government suit to dissolve the trust.

When the American Sugar Refining Company (the Sugar Trust) acquired four Philadelphia refineries in 1892 it controlled ninety-eight percent of domestic sugar manufacturing. Attorney General RICHARD OLNEY, who inherited the case from his predecessor, believed that the Sherman Act was founded on a false economic theory; he believed that free competition had been "thoroughly discredited" and that the act should have regulated trusts as a natural development, not prohibited them. There is, however, little evidence of deliberate carelessness in Olney's preparation of the case. Although the MAJORITY OPINION commented upon a lack of EVIDENCE to demonstrate a restraint of trade, the government never believed that such a showing was necessary. Prior decisions had clearly held sales to be a part of commerce; the majority would admit as much here, and a lower court conceded that the trust had sought control of both refining and sales. Clever defense strategy successfully shifted the Court's attention from restraint of INTERSTATE COMMERCE to a consideration whether the commerce power extended to manufacturing.

Chief Justice MELVILLE W. FULLER'S opinion for the Court endorsed the defendants' argument. By repeating that manufacturing was separable from commerce, the Court made a formally plausible distinction based solely on precedent. (See KIDD V. PEARSON.) Although the Sugar Trust had monopolized manufacturing, the Court found no Sherman Act violation because the acquisition of the Philadelphia refineries involved INTRASTATE COMMERCE. Although manufacturing "involves in a certain sense the control of its disposition ? this is a secondary and not the primary sense." The trust did not lead to control of inter-state

Page 1540

commerce and so "affects it only incidentally and indirectly." This directindirect effects test of the reach of federal regulation had been mentioned in earlier cases (see EFFECTS ON COMMERCE) and was here employed to reach unrealistic ends: "Contracts, combinations, or conspiracies to control domestic enterprise in manufacture, agriculture, mining, PRODUCTION in all its forms, or to raise or lower...