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; . . .
Congress’s chief effort to regulate commerce in the primary sense of
traffic is embodied in the Sherman Antitrust Act of 1890, the opening section of which declares
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 to be
illegal, while the second section makes it a misdemeanor for anybody to
monopolize or attempt to monopolize any part of such commerce. 1 The act was passed to curb the growing tendency to form industrial combinations, and the first case to reach the Court under it was the famous Sugar Trust Case, United States v. E. C. Knight Co. 2 Here the government asked for the cancellation of certain agreements, whereby the American Sugar Refining Company, had
acquired, it was conceded,
nearly complete control of the manufacture of refined sugar in the United States.
The question of the validity of the Act was not expressly discussed by the Court but was subordinated to that of its proper construction. The Court, in pursuance of doctrines of constitutional law then dominant with it, turned the Act from its intended purpose and destroyed its effectiveness for several years, as that of the Interstate Commerce Act was being contemporaneously impaired. The following passage early in Chief Justice Fuller's opinion for the Court sets forth the conception of the federal system that controlled the decision:
It is vital that the independence of the commercial power and of the police power, and the delimination 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. 3
In short, what was needed, the Court felt, was a hard and fast line between the two spheres of power, and, in a series of propositions, it endeavored to lay down such a line: (1) production is always local, and under the exclusive domain of the states; (2) commerce among the states does not begin until goods
commence their final movement from their State of origin to that of their destination; (3) the sale of a product 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 above 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. 4 Applying this reasoning to the case before it, the Court proceeded:
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.
Sugar was refined for sale, and sales were probably made at Philadelphia for consumption, and undoubtedly for resale by the first purchasers throughout Pennsylvania and other States, and refined sugar was also forwarded by the companies to other States for sale. Nevertheless it 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. 5