United States v. E.C. Knight Co. (The Sugar Trust Case)

Brief Fact Summary.

The respondent, E.C. Knight Co., sought the cancellation of stock agreements made by the American Sugar Refining Company that made the company acquire nearly complete control of the manufacture of refined sugar within the United States, alleging that such monopoly violates the Commerce Clause.

Synopsis of Rule of Law.

A State shall have the power to protect the lives, health and property of its citizens and to preserve good order and the public morals. The power to govern citizens within its limits is a power originally and always belonging to the States, not surrendered by them to Congress nor directly restrained by the Constitution of the United States.

Facts.

The American Sugar Refining Company purchased the stock of the four Philadelphia refineries and acquired nearly complete control of the manufacture of refined sugar within the United States. The respondent complained that the contracts under these purchases constituted combinations in restraint of trade, and that entering into the agreements, the defendants conspired to restrain the trade and commerce in refined sugar among the several States contrary to the act of Congress. The respondent sought the cancellation of the agreements under which the stock was transferred.

Issue.

Can monopoly be directly suppressed under the act of Congress or specifically the Commerce Clause?

Held.

No, because Philadelphia is not imposing burdens on interstate commerce but merely using its police power in the marketplace. The regulation of commerce applies to the subjects of commerce no to matters of internal police. Contracts to buy, sell, or exchange goods to be transported among several States may be regulated but this is because they form part of interstate trade or commerce. Since this is not the case at issue, the respondent’s contracts may not be held void.

Discussion.

The contracts and acts of the defendants related exclusively to the acquisition of the Philadelphia refineries and the business of sugar refining in Pennsylvania, and bore no relation to commerce between the States. The object was manifestly private gain in the manufacture of the commodity, but not through the control of interstate commerce. While the products of the refineries were sold and distributed among several States, and all the companies were engaged in trade or commerce with several States, this is no more than to say that trade and commerce served manufacture to fulfill its functions. The attempt to monopolize the manufacture by the defendants was not an attempt to monopolize commerce even if the instrumentality of commerce was necessarily invoked. The respondent’s argument that the agreements in issue indirectly affected the commerce is without a merit. Thus, the acquisition of nearly complete control resulting from the contracts was lawful.