156 U.S. 1 (1895)
The United States filed a bill in the Circuit Court of the United States for the Eastern District of Pennsylvania on April 30, 1890.1 The bill was against the E. C. Knight Company and other defendants engaged in sugar refining.2 It alleged that the defendants had entered into a combination for the purpose of controlling the price of sugar throughout the United States.3 The bill also alleged that the defendants had obtained a practical monopoly of the business of manufacturing sugar in violation of the Sherman Act of July 2, 1890.4
The combination centered on the American Sugar Refining Company acquiring the stock of four Philadelphia refineries.5 The refineries were the E.C. Knight Company, the Franklin Sugar Refining Company, Spreckels' Sugar Refining Company, and the Delaware Sugar House.6 The acquisitions occurred through contracts made in March 1892 using shares of its own stock.7 Prior to these acquisitions, the American Sugar Refining Company controlled all sugar refineries in the United States except for these four Pennsylvania companies and a small Boston refinery.8
The Pennsylvania companies produced about thirty-three percent of the refined sugar.9 The Boston refinery accounted for about two percent.10 The purchases gave the New Jersey corporation absolute control over the entire business of sugar refining in the United States except for the minor Boston operation.11 The refined sugar produced was sold and shipped to other states.12
The defendants demurred to the bill on the ground that it did not state a case within the jurisdiction of the court or under the act of Congress.13 The Circuit Court sustained the demurrer and dismissed the bill.14 An appeal followed to the Circuit Court of Appeals for the Third Circuit.15 That court certified questions to the Supreme Court.16 The Supreme Court ordered the entire record sent up for decision.17
The bill sought cancellation of the stock transfer agreements, redelivery of the stock, and an injunction against further performance of the agreements and violations of the act.18 The object of the combination was to obtain greater influence or more perfect control over the business of refining sugar in that State.19
Whether the Sherman Act of July 2, 1890 applies to the acquisition by one corporation of the stock of competing sugar refineries located in a single state, when the effect is to create a monopoly in the manufacture of sugar?20
The Sherman Act declares illegal every contract or combination in restraint of trade or commerce among the several States and makes it a misdemeanor to monopolize any part of such trade or commerce.21 The act reaches only direct restraints upon interstate commerce and does not extend to the internal trade or manufacturing operations of the several States, which remain subject to state authority under the dual system of government.22
No. The acquisition by the American Sugar Refining Company of the stock of the four Philadelphia refineries occurred entirely within Pennsylvania.23 The refineries were the E.C. Knight Company, the Franklin Sugar Refining Company, Spreckels' Sugar Refining Company, and the Delaware Sugar House. These transactions took place through contracts made in March 1892 using shares of its own stock.24 The transactions had as their object greater control over the business of refining sugar in that State.25
They bore no direct relation to commerce among the several States, even though the resulting monopoly affected the price of sugar sold and shipped nationwide.26 The bill alleged only that the refined sugar was later sold and shipped to other States.27 That indirect consequence does not bring the manufacturing combination within the statute.28
The Sherman Act therefore does not apply to the stock acquisitions at issue.29
Related opinions on this issue
Justice Harlan dissented on the ground that the combination imposed direct restraints upon interstate commerce.30 The bill alleged that the defendants entered into a combination for the purpose of controlling the price of sugar throughout the United States and had obtained a practical monopoly of manufacturing sugar.31
The effect of the combination was to restrain commerce among the States in the article of sugar.32 Justice Harlan maintained that the power of Congress to regulate commerce among the several States is supreme.33 It is not to be restricted by any consideration of the internal trade of the States.34
The manufacture of sugar is a necessary part of the process by which sugar is supplied to the people of the United States.35 If the combination controls the manufacture of sugar with a view to the control of the price of sugar in the United States, it is a combination in restraint of interstate commerce.36 The power of Congress extends to the suppression of monopolies that affect interstate commerce.37
He concluded that the bill states a case within the act of Congress and that the demurrer should have been overruled.38
Whether the manufacture of sugar within one state constitutes part of interstate commerce subject to congressional regulation under the Commerce Clause when the finished product is sold and shipped to other states?39
The power to regulate commerce among the several States is the power to prescribe rules governing intercourse, traffic, and the purchase, sale, and transportation of commodities between States.40 Manufacturing is a local activity that precedes commerce; the finished product enters the stream of interstate commerce only when it commences its final movement from the State of origin to its destination.41 The Commerce Clause does not authorize Congress to regulate the internal manufacturing operations of the States merely because the resulting goods may later be sold and shipped interstate.42
No. The sugar was manufactured in Pennsylvania refineries, and the refining process itself took place entirely within that State.43 Although the finished product was sold and shipped to purchasers in other States, the bill charged no restraint upon those sales or shipments.44 It charged only the acquisition of manufacturing stock and the resulting monopoly over production.45 Under the distinction between manufacture and commerce, the former remains subject to state police power while the latter alone falls within congressional authority.46
The manufacture of sugar within one state does not constitute part of interstate commerce subject to congressional regulation under the Commerce Clause.47
Whether a combination whose object is to control manufacturing within a state and that only indirectly affects interstate commerce falls within the prohibitions of the Sherman Act?48
A combination falls within the Sherman Act only when it directly restrains trade or commerce among the several States.49 An indirect or incidental effect upon interstate commerce, however inevitable, does not bring the combination within the statute; the line separating national from state power is clearly marked and cannot be erased by refinements of reasoning that would convert every local manufacturing monopoly into a federal case.50
No. The combination's object, as shown by the stock purchases of the Philadelphia refineries, was to obtain more perfect control over the business of refining sugar in Pennsylvania.51 Any resulting enhancement of sugar prices or restriction upon the volume of sugar available for interstate sale was at most an indirect consequence of the manufacturing monopoly, not a direct restraint upon interstate trade or commerce.52 The act of Congress is limited to restraints of trade or commerce among the several States or with foreign nations. It does not embrace the internal commerce of the States.53
A combination whose object is to control manufacturing within a state and that only indirectly affects interstate commerce does not fall within the prohibitions of the Sherman Act.54