156 U.S. 1 (1895),United States Supreme Court

Background
In 1890, the United States Congress enacted the Sherman Antitrust Act, an attempt to curb concentrations of economic power that significantly reduced competition between businesses. One of its two main provisions outlawed all trade combinations or agreements that severely restrict trade between states or with foreign powers. The second outlawed any attempts to monopolize trade within the United States. When the E.C. Knight Company acquired almost all of the sugar-producing capacity in the U.S., the government sought to divest it of its monopoly.

In 1892 the American Sugar Refining Company gained control of the E. C. Knight Company and several others which resulted in a 98% monopoly of the American sugar refining industry. President Grover Cleveland, in his second term of office (1893–1897), directed the national government to sue the Knight Company under the provisions of the Sherman Antitrust Act to prevent the acquisition. The question the court had to answer was, "could the Sherman Antitrust Act suppress a monopoly in the manufacture of a good, as well as its distribution?"

The decision
The court's 8-1 decision, handed down on January 21, 1895 and written by Chief Justice Melville Weston Fuller, went against the government. Justice John Marshall Harlan dissented.

The court held "that the result of the transaction was the creation of a monopoly in the manufacture of a necessary of life" but ruled that it "could not be suppressed under the provisions of the act". The court ruled that manufacturing—in this case, refining—was a local activity not subject to congressional regulation of interstate commerce. Fuller wrote:

That which belongs to commerce is within the jurisdiction of the United States, but that which does not belong to commerce is within the jurisdiction of the police power of the State. . . . Doubtless the power to control the manufacture of a given thing involves in a certain sense the control of its disposition, but . . . affects it only incidentally and indirectly.

Under the Knight decision, any action against manufacturing combinations would need to be taken by individual states, making such regulation more difficult. The ruling prevailed until the end of the 1930s, when the court took a different position on the national government's power to regulate the economy.

Later developments
Although the decision was never expressly overturned, the Court later retreated from this position in a series of cases that defined various steps of the manufacturing process as part of commerce. Eventually, E.C. Knight came to be a precedent narrowed to its precise facts, with no force whatsoever.