U.S. v. E.C. Knight: Supreme Court Shields Sugar Trust and Eviscerates Antitrust Law

On January 21, 1895, the U.S. Supreme Court decided United States v. E.C. Knight Co. (156 U.S. 1) by a vote of 8-1, effectively gutting the Sherman Antitrust Act just five years after its passage. The case arose when the American Sugar Refining Company (the “Sugar Trust”) acquired four Philadelphia sugar refineries in March 1892—including E.C. Knight Company—giving it control of 98% of sugar manufacturing in the United States. President Grover Cleveland ordered the government to sue under the Sherman Act, arguing this near-total monopoly illegally interfered with interstate commerce and should be dissolved.

Chief Justice Melville Fuller’s majority opinion created a fatal distinction between “manufacturing” and “commerce,” ruling that Congress could not regulate manufacturing even when it created monopolies controlling entire national markets. The Court held that because the acquired refineries were all located in Pennsylvania and sugar refining occurred within state lines, regulatory power belonged exclusively to states—not the federal government. This reasoning ignored the obvious reality that the Sugar Trust’s monopoly power derived precisely from its control over interstate markets. The decision permitted manufacturing combinations to operate beyond the reach of federal antitrust law, putting most monopolies beyond government authority.

Justice John Marshall Harlan’s lone dissent recognized the catastrophic implications: “the doctrine of the autonomy of the states cannot properly be invoked to justify a denial of power in the national government to meet such an emergency.” He argued the Constitution gives Congress “authority to enact all laws necessary and proper” to regulate commerce, citing McCulloch v. Maryland. For the next decade, there were few anti-monopolization prosecutions as E.C. Knight effectively neutered federal antitrust enforcement. The decision was not overruled until the Supreme Court’s 1904 Northern Securities ruling affirmed government power to challenge railroad mergers. E.C. Knight demonstrated how judicial interpretation could nullify democratic legislation, with the Supreme Court serving as the final line of defense for monopoly capitalism against democratic accountability. The decision revealed judicial capture as a sophisticated mechanism for preserving corporate power despite apparent regulatory frameworks.