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Photo of a sugar refinery in the American south at the turn of the 20th century.
The 1895 case U.S. v. E. C. Knight dealt with the federal government's attempt to enforce the Sherman Antitrust Act against a sugar manufacturer. Above, a sugar refinery in the American south at the turn of the 20th century.

Reproduction courtesy of the Library of Congress
United States v. E. C. Knight (1895)

In United States v. E. C. Knight (1895), the Supreme Court interpreted the Sherman Antitrust Act of 1890, which was designed to limit the dangerous growth of corporate monopoly in the last quarter of the 19th century. The act provided that "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."

The case involved the American Sugar Refining Company. Not long after the Sherman Act was passed, American Sugar bought out four other sugar refineries, increasing its control over national sugar production to 98 percent. In response, the U.S. government sought to invalidate American Sugar's purchase in a lower federal court on the grounds that it violated the Sherman Act. The lower court dismissed the case, and the government appealed to the Supreme Court.

In an 8-1 decision written by Chief Justice Melville W. Fuller, the Court ruled that the government lacked power under the Constitution to enforce the Sherman Act against the company's manufacturing operations. Congress's powers are limited to those enumerated in the Constitution, the Court argued, and only one of those powers, that given by the Constitution's Commerce Clause, allows Congress to "regulate commerce ... among the several States." Manufacturing operations are not "interstate commerce," the Court asserted, because such operations occur entirely in one state. In short, Congress has the power to regulate trade but not manufacturing.

In formulating its ruling, the Court attempted to reconcile Congress's powers under the Commerce Clause with the economic realities of the industrial age. By the late 19th century, as the American economy became more national in scope, and the Court felt obligated to "draw a line" between commercial activities that are "mercantile" in nature, which Congress could regulate, and those "industrial" in nature, which the Court ruled Congress could not regulate. The Commerce Clause only permitted federal regulation of the buying, selling, and transportation of goods between states. If the government were also permitted to regulate the production of goods, as it attempted to do in this case, "comparatively little of business operations would be left for state control."

Like Lochner v. New York (1905), United States v. E. C. Knight proved to be a serious obstacle to the New Deal reforms during the Great Depression. Also like Lochner, Knight was effectively overturned by the late 1930s. In N.L.R.B. v. Jones & Laughlin Steel Corp. (1937), the Supreme Court ruled that an in-state commercial activity like manufacturing may be deemed a part of interstate commerce if the activity has a "close and substantial relationship" to interstate commerce. The Jones & Laughlin decision opened the door for expansive federal regulation of the economy. Judging by U.S. v. Lopez (1995), however, the Court's permissive approach to congressional authority under the commerce clause may be coming to an end.

AUTHOR'S BIO
Alex McBride is a third year law student at Tulane Law School in New Orleans. He is articles editor on the TULANE LAW REVIEW and the 2005 recipient of the Ray Forrester Award in Constitutional Law. In 2007, Alex will be clerking with Judge Susan Braden on the United States Court of Federal Claims in Washington.

Fletcher v. Peck U.S. v. E. C. Knight Swift and Co. v. U.S. Lochner v. New York Schenck v. U.S. Adkins v. Children's Hospital Schechter v. U.S. U.S. v. Curtiss-Wright West Coast Hotel Co. v. Parrish view all landmark cases