Article I, Section 8, Clause 3:
[The Congress shall have Power . . . ] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; . . .
To curb the growth of industrial combinations, Congress passed the Sherman Antitrust Act (Sherman Act) in 1890. Under the Sherman Act, Congress sought to regulate commerce as “traffic.” The Sherman Act prohibited “every contract, combination in the form of trust or otherwise,” or “conspiracy in restraint of trade and commerce among the several States, or with foreign nations” 1 and made it a misdemeanor to “monopolize or attempt to monopolize any part of such commerce.” 2
In 1895, the Court considered the Sherman Act in United States v. E. C. Knight Co. (Sugar Trust C)3 in which the government asked the Court to cancel certain agreements whereby the American Sugar Refining Company had acquired “nearly complete control of the manufacture of refined sugar in the United States.” 4 The Court rejected the government’s claim on the grounds that the activities of the Sugar Trust had only an indirect effect on commerce, which Congress’s Commerce Clause powers did not reach. Although the Court did not directly rule on the Sherman Act’s constitutional validity, it analyzed the scope of Congress’s commerce power when considering what activities the Sherman Act barred. Explaining the federal government’s role in mitigating commercial power, Chief Justice Melville Fuller stated:
[T]he independence of the commercial power and of the police power, and the delimitation between them, however sometimes perplexing, should always be recognized and observed, for, while the one furnishes the strongest bond of union, the other is essential to the preservation of the autonomy of the States as required by our dual form of government; and acknowledged evils, however grave and urgent they may appear to be, had better be borne, than the risk be run, in the effort to suppress them, of more serious consequences by resort to expedients of even doubtful constitutionality.5
The E. C. Knight Court reasoned that a hard and fast line should exist between commercial and police powers based on (1) production being local and subject to state oversight; (2) commerce among the states does not begin until goods “commence their final movement from their State of origin to their destination;” (3) a product’s sale is merely an incident of its production and, while capable of “bringing the operation of commerce into play,” affects it only incidentally; (4) such restraint as would reach commerce, as just defined, in consequence of combinations to control production “in all its forms,” would be “indirect, however inevitable and whatever its extent,” and as such beyond the purview of the Act.6 Applying this reasoning, the E. C. Knight Court stated:
The object [of the combination] was manifestly private gain in the manufacture of the commodity, but not through the control of interstate or foreign commerce. It is true that the bill alleged that the products of these refineries were sold and distributed among the several States, and that all the companies were engaged in trade or commerce with the several States and with foreign nations; but this was no more than to say that trade and commerce served manufacture to fulfill its function.7
. . . [I]t does not follow that an attempt to monopolize, or the actual monopoly of, the manufacture was an attempt, whether executory or consummated, to monopolize commerce, even though, in order to dispose of the product, the instrumentality of commerce was necessarily invoked. There was nothing in the proofs to indicate any intention to put a restraint upon trade or commerce, and the fact, as we have seen, that trade or commerce might be indirectly affected was not enough to entitle complainants to a decree.8
Four years later, in Addyston Pipe and Steel Co. v. United States,9 the Court applied the Sherman Act to hold an industrial combination unlawful. The defendants in Addyston were manufacturing concerns that had effected a division of territory among them, which the Court held to be a “direct” restraint on the distribution and transportation of the products of the contracting firms. In reaching its holding, however, the Court did not question E. C. Knight, which remained substantially undisturbed until the Court’s 1905 Swift decision.10
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Footnotes
- 1
- 26 Stat. 209 (1890); 15 U.S.C. §§ 1–7.
- 2
- Id.
- 3
- 156 U.S. 1 (1895).
- 4
- Id. at 9.
- 5
- Id. at 13.
- 6
- Id. at 13–16.
- 7
- Id. at 17.
- 8
- Id. at 17. The doctrine of the case boiled down to the proposition that commerce was transportation only, a doctrine Justice John Marshall Harlan undertook to refute in his dissenting opinion. Justice Harlan stated: “Interstate commerce does not, therefore, consist in transportation simply. It includes the purchase and sale of articles that are intended to be transported from one State to another—every species of commercial intercourse among the States and with foreign nations.” 156 U.S. at 22. Justice Harlan further stated:
Any combination, therefore, that disturbs or unreasonably obstructs freedom in buying and selling articles manufactured to be sold to persons in other States or to be carried to other States—a freedom that cannot exist if the right to buy and sell is fettered by unlawful restraints that crush out competition—affects, not incidentally, but directly, the people of all the States; and the remedy for such an evil is found only in the exercise of powers confided to a government which, this court has said, was the government of all, exercising powers delegated by all, representing all, acting for all.
156 U.S. at 33 (citing McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 405 (1819)).
- 9
- 175 U.S. 211 (1899).
- 10
- 196 U.S. 375 (1905). The Court applied the Sherman Act to break up combinations of interstate carriers in United States v. Trans-Mo. Freight Ass’n, 166 U.S. 290 (1897); United States v. Joint-Traffic Ass’n, 171 U.S. 505 (1898); and N. Sec. Co. v. United States, 193 U.S. 197 (1904).
In Mandeville Island Farms v. Am. Crystal Sugar Co., 334 U.S. 219, 229–39 (1948), Justice Wiley Rutledge, for the Court, critically reviewed the jurisprudence of the limitations on the Act and the deconstruction of the judicial constraints. In recent years, the Court’s decisions have permitted the reach of the Sherman Act to expand along with the expanding notions of congressional power. Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186 (1974); Hosp. Bldg. Co. v. Rex Hospital Trustees, 425 U.S. 738 (1976); McLain v. Real Estate Bd. of New Orleans, 444 U.S. 232 (1980); Summit Health, Ltd. v. Pinhas, 500 U.S. 322 (1991). The Court, however, does insist that plaintiffs alleging that an intrastate activity violates the Act prove the relationship to interstate commerce set forth in the Act. Gulf Oil Corp, 419 U.S. at 194–99.