UNITED STATES V. E.C. KNIGHT COMPANY

In 1895 the Supreme Court decision in the case of United States v. E.C. Knight Company severely undermined the Sherman Anti-Trust Act of 1890. In an eight-to-one ruling, the high court determined that, although a monopoly in manufacturing, the American Sugar Company and its subsidiary, the E.C. Knight Company, had not monopolized trade. The government had prosecuted the sugar company for owning 98 percent of the nation's sugar-refining capacity, seeing this as a clear violation of the Sherman Anti-Trust Act's pronouncement that "every contract, combination in the form of trust or otherwise, or conspiracy in the restraint of trade" is illegal. But according to the Supreme Court justices, the Sherman act had given Congress the right to regulate interstate commerce only; since the Knight Company's manufacturing operations were all located within Pennsylvania, the federal government had no jurisdiction.

The court's narrow interpretation of the Sherman Anti-Trust Act delivered a painful blow to those who wanted government to break up or at least limit the powerful monopolies. Though the Sherman legislation provided the basis for trust-busting, its might would not be used until the first decade of the 1900s, when, after a change in political climate, Standard Oil Company and American Tobacco Company would be charged with, and (in 1911) found guilty of violating the Sherman Act. In 1913, antitrust cases were also brought against the Union and Southern Pacific Railroad merger, International Harvester Corporation, American Telephone and Telegraph (AT&T), and the New York, New Haven, and Hartford Railroad.

In 1914, national anti-trust legislation was strengthened by the passage of the Clayton Anti-Trust Act, which outlawed price fixing (the practice of pricing below cost to eliminate a competitive product). The Clayton Act also made it illegal for the same executives to manage two or more competing companies (a practice called interlocking directorates), and prohibited any corporation from owning stock in a competing corporation.

See also: American Tobacco Company, Clayton Anti-Trust Act, Sherman Anti-Trust Act, Tobacco Trust

UNITED STATES V. E.C. KNIGHT COMPANY

UNITED STATES V. E.C. KNIGHT COMPANY, 156 U.S. 1 (1895), the case in which the U.S. Supreme Court first applied the Sherman Antitrust Act (1890) and severely limited its reach. Through mergers, American Sugar Refining had acquired 98 percent of the national sugar market, and it was fixing sugar prices. The U.S. government sought an injunction. The Court held business acquisitions, refining, and manufacturing did not amount to interstate commerce, and so were not in violation of the act, protecting manufacturing trusts and monopolies from regulation. The distinction between manufacture and commerce, and this immunity from federal regulation, was overturned in National Labor Relations Board v. Jones and Laughlin Steel Corporation (1937).

BIBLIOGRAPHY

Taft, William H. The Anti-Trust Act and The Supreme Court. 1914. Reprint, Littleton, Colo: Rothman, 1993.

SteveSheppard