The Sherman anti-trust act of 1890 sought to restrict the amount of market share a corporation could achieve in order to achieve an economically efficient level of competition. The American Sugar Refining Company acquired defendants in this case, thereby gaining roughly a 98% share of the American sugar market. Per the Act, the US government took legal action against break up its monopoly. They did so by suing the defendant corporation in order to prevent the monopoly from occurring. E.C. knight argued that the government could not regulate the manufacturing of goods through the Sherman Act (they could only regulate its distribution); and therefore, the Sherman Act was unconstitutional.
Whether Congress may break up a monopoly through regulation of the manufacturing of goods rather than their distribution.
No. The manufacturing of a good is an inherently local activity. It is not “interstate commerce” until it travels across state lines. The business itself does not move from state to state, nor does the actual manufacturing process; it stays within one state. Therefore, the portions of the Sherman Act are unconstitutional.
Furthermore, the acquisition of E.C. Knight Co., was not an act of interstate commerce because it did not “lead to control” of interstate commerce.
The result of the case was to uphold a system where action against monopolies must started and ended in state court. Moreover, a company in state A could monopolize the markets in all other states, except its own, and still conduct its business legally.