Antitrust Status of Farmer Cooperatives: - USDA Rural Development ...

In 1892, the American Sugar Refining Company, a New Jersey
corporation which controlled a majority of the sugar refining
companies in the United States, obtained nearly complete control of the
manufacture and distribution of refined sugar by purchasing the stock
of the E. C. Knight Company and three other Philadelphia refineries.
The United States brought an action alleging American Sugar Refining
was a "combination... in restraint of trade and commerce among the
several states" made illegal by Section 1 of the Sherman Act.
The Court, still dominated by the laissez-faire philosophy, held on
an 8-1 vote that the Sherman Act could not be applied to a virtual
monopoly of the sugar industry because the manufacture of sugar was
not an act committed in interstate commerce. 69
In his lone dissent, Justice Harlan expressed astonishment that the
majority could so easily distinguish manufacturing from commerce.
He cited several State court decisions that, like State v. Standard Oil
Company, 70 had held monopoly arrangements null and void as contrary
to public policy. He remarked that " while the opinion of the Court
does not declare the act of 1890 to be unconstitutional, it defeats the
main object for which it was passed." 71
Whether bowing to popular opinion as reflected in the emerging
influence of the progressive movement, Justice Harlan's dissent, or for
some other reason, the Court quickly abandoned the philosophy of the
E. C. Knight opinion. Future cases acknowledged a broad application
of the concept of commerce. They focused on finding the proper
69 United States v. E. C. Knight Co., 156 U.S. 1 (1895).
70 State v. Standard Oil Com pany, 30 N.E. 279 (Ohio 1892). In this
case, the Ohio Supreme Cour t held Standard Oil of Ohio violated common
law on two grounds, (1) the shareholders acted illegally in turning over
control of the company to the trustees of the N ew York-based Standard Oil
Trust, and (2) the trust's possession of 90 per cent of the country's refining
capacity constituted a monopoly contrary to public policy.
The court issued an order to the company to term inate its connection to
the trust, which was soon dissolved. The individual com panies continued to
collabora te under a looser community-of-interest arrangement. In 1899, the
group created a more formal legal relationship by forming a holding company,
the Standard Oil Company of N ew Jersey, to hold the shares of the various
companies and to ow n outright several r efineries.
71 156 U.S. at 42.
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