United States v. E.C. Knight Company

Supreme Court of the United States · 1895 · Constitutional Law

156 U.S. 1 (1895)

Updated July 29, 2026

Constitutional LawCommerce ClauseAntitrustSherman Actmanufacture vs commercedirect vs indirect effectsinterstate commercemonopoly

Facts

The American Sugar Refining Company purchased the stock of four Philadelphia refineries using shares of its own stock and thereby acquired nearly complete control of the manufacture of refined sugar within the United States. The government alleged that the stock-purchase contracts constituted combinations in restraint of trade and attempts to monopolize trade and commerce in refined sugar among the several States and with foreign nations in violation of the Sherman Act. The relief sought was rescission of the agreements, return of the transferred stock, and an injunction against further performance. The transactions and acts challenged related to acquisition of the Philadelphia refineries and the business of sugar refining in Pennsylvania.

Issue

Whether, assuming the challenged transactions created a monopoly in the manufacture of refined sugar, Congress could directly suppress that monopoly under the Sherman Act as a restraint of interstate or foreign commerce. More specifically, the question was whether the acquisition of manufacturing stock and control of sugar refining bore the direct relation to interstate commerce required for federal regulation.

Rule

The Commerce Clause gives Congress exclusive power to regulate interstate and foreign commerce, but that power extends to commerce itself and to transactions that form part of interstate trade or commerce. Manufacture precedes commerce and is not part of it; therefore, a monopoly or restraint in manufacture that affects interstate commerce only indirectly and incidentally is not directly reachable under the Sherman Act as a monopoly or restraint of interstate commerce.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Prairie Alloy Works, a corporation based in Indiana, acquires the stock of every steel-rail mill in Gary and East Chicago. After the acquisitions, most of the rails produced in those mills are sold to wholesalers in Michigan, Illinois, and Ohio.

If the United States seeks to unwind the stock acquisitions under a federal antitrust statute solely because the deals created a monopoly in rail manufacturing, what is the strongest argument against federal relief under the majority's approach?

Explanation. The majority drew a sharp line between manufacture and commerce. Even assuming a monopoly in manufacture exists, Congress may not directly suppress it under the commerce power when the challenged conduct relates to production or acquisition of manufacturing property rather than interstate trade itself. The later interstate sale of the product does not convert manufacturing into commerce; the effect on interstate commerce is only indirect and incidental. (Derived from United States v. E.C. Knight Company (1895).)