Can the government prevent a single business trust from controlling 98 percent of the sugar production in the United States?

In the late 19th Century, businessmen discovered that whole industries could work together to quash competition and set higher prices for consumers and lower wages for workers. Workers demanded that Congress take action to break up these industrial “trusts” and allow the free market to work as intended. Finally, Congress agreed, giving the Justice Department the power to break up trusts if they acted in restraint of trade.

The first big test of the new Sherman Antitrust Act came when President Grover Cleveland’s administration declared that the American Sugar Refining Company controlled virtually all of the production of sugar in the country, giving it the power to set prices. In 1892, American Sugar had gained control of the E.C. Knight Company, along with a few other smaller companies, which meant that together they accounted for about 98 percent of the American sugar industry. But when the Justice Department moved to break up the trust, American Sugar challenged the constitutionality of the Sherman Antitrust Act, taking its case all the way to the Supreme Court, which was comprised at the time of many notoriously business-friendly justices.

Shockingly, those justices found that despite controlling 98 percent of the manufacturing of sugar, American Sugar was not a commercial monopoly, and that Congress had no power to interfere with the manufacturing of goods within states.

Sugar baron Claus Spreckels blasted the Sugar Trust for price-fixing, then joined it and benefited from the Supreme Court’s de- cision against the Sherman Anti-Trust Act, over Harlan’s passionate—and prescient— objection.

John Marshall Harlan was the lone dissenter. He accused the court’s majority of construing Congress’s power so narrowly as to deprive the democratically elected representatives of the tools to address a pressing national concern – the economic freedoms of workers and consumers. 

“The Constitution, which enumerates the powers committed to the nation for objects of interest to the people of all states, should not therefore be subjected to an interpretation so rigid, technical, and narrow that those objects cannot be accomplished,” Harlan wrote in his dissent. “Did anyone expect to find in the written agreements which resulted in the formation of this combination a distinct expression of purpose to restrain interests trade or commerce? Men who form and control these combinations are too cautious and wary to make such admissions orally or in writing.”

The Supreme Court’s decision in the E.C. Knight case was so reviled that even the justices who sided with American Sugar soon began to feel that Harlan had a point. After a decade, the court shifted its position enough to allow the government to break up trusts in other industries, raising wages for millions of workers and providing lower prices for consumers.