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CHAPTER IV.

MANUFACTURE AND PRODUCTION.

IV.

Manufac production

ture and

as matters

of domestic

concern.

S the power delegated to Congress is limited Chapter 66 to commerce with foreign nations, and among the several States, and with the Indian tribes," there is an internal commerce which is subject to the exclusive control of the States. The principle that manufacture and production are not commerce was clearly stated by Mr. Justice Lamar in Kidd v. Pearson.1 He said: He said: " No distinction is more popular to the common mind, or more clearly expressed in economic and political literature, than that between manufactures and commerce. Manufacture is transformation - the fashioning of raw materials into a change of form for use. The functions of commerce are different. The buying and selling and the transportation incidental thereto constitute commerce; and the regulation of commerce in the constitutional sense embraces the regulation at least of such transportation." And it was said by Chief Justice Fuller, in U. S. v. E. C. Knight Co.,2 that" Commerce succeeds to manufacture, and is not a part of it."

In the Kidd v. Pearson case, supra, it was held that a statute of Iowa which, as construed by the State Supreme Court, provided that intoxicating

1 (1888) 128 U. S. 1.

Packing houses are not engaged in interstate commerce. U. S. v. Boyer, (1898) 85 Fed. Rep. 425.

2 (1895) 156 U. S. 1.

Prohibiting

manufac

ture for

export.

IV.

Chapter liquors might be manufactured and sold within the State for chemical, medicinal, culinary, and sacramental purposes, but for no other - not even for the purpose of transportation beyond the limits of the State was within the police power of the State, and that one who manufactured liquors exclusively for exportation and sale outside the State was within the prohibition of the statute. The court distinctly recognized and applied the rule that the fact that an article is manufactured for export to another State does not of itself make it an article of interstate commerce within the meaning of the Constitution.3

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This question of the power of a State to control corporations engaged in manufacture was raised in a peculiar way under a statute of Wisconsin requiring that a company incorporated elsewhere file a copy of its charter with the Secretary of State, and pay a small fee as a condition of doing business there. A foreign corporation entered into a contract within the State for the erection of a factory to be operated under the supervision of the officers of the foreign corporation, and the fact that the product was intended to be used outside the State, and that, indeed, very little could be used within the State, was held not to exempt the foreign corporation from compliance with the requirements of the State statutes. An Ohio statute allowing the manufacture and sale of oleomargarine when free from any coloring matter or other ingredient causing it to look like or to appear to be butter as defined in the statute, and expressly forbidding the manufacture or sale within the State of any

3 See infra, p. 152, and Mugler v. Kansas, (1887) 123 U. S. 623. ♦ Diamond Glue Co. v. U. S. Glue Co., (1903) 187 U. S. 611.

IV.

oleomargarine which contained any methyl orange, Chapter butter yellow, annotto, aniline dye, or any other coloring matter, was held not to violate this clause when all the acts of the corporation which were complained of related to oleomargarine manufactured by it in the State of Ohio, in violation of the laws of that State, and therefore operated on the corporation within the State and affected the product manufactured by it before it had become a subject of interstate commerce.5

In Addyston Pipe, etc., Co. v. U. S. the defendants were engaged in the manufacture, sale, and transportation of iron pipe at their respective places of business in the States of their residence, and had entered into a combination among themselves by which they agreed that there should be no competition between them in any of the States or Territories mentioned in the agreement in regard to the manufacture and sale of cast-iron pipe. Thus provision was made, not alone for the manufacture but for the sale of the manufactured product, and the contract directly affected, not as a mere incident of manufacture, the sale of the articles over the territory embraced in the contract. The contract was held to be within the terms and purpose of the Sherman Anti-Trust Act."

It was urged that this case was within the principle of the decision in the E. C. Knight Co. case, supra. In that case it was held that although the American Sugar Refining Company, by means of a combination, had obtained a practical monopoly of the business of manufacturing sugar, yet the Act of

5 Capital City Dairy Co. v. Ohio, (1902) 183 U. S. 238. (1899) 175 U. S. 211.

Act of Congress of July 2, 1890, c. 64, 7 Fed. Stat. Annot. 336.

Combinamanufac

tion of

turers to abstain

from comsales of

petition in

products.

Combinamanufacmonopolize

tion of

turers to

manufacture.

IV.

Chapter Congress did not touch the case, because the combination related to manufacture only and not to commerce among the States or with foreign nations. The direct purpose was the control of the manufacture of sugar; there was no combination or agreement, in terms, regarding the future disposition of the manufactured article, nothing looking to a transaction in the nature of interstate commerce. On the other hand, in the Addyston Pipe, etc., Co. case, supra, while no particular contract regarding the furnishing of pipe and the price for which it should be furnished was in the contemplation of the parties to the combination at the time of its formation, yet it was their intention to increase, directly and by means of such combination, the price for which all contracts for delivery within the territory embraced by the contract should be made.

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As giving point to the distinction between the domestic business of the defendants, so far as it consisted of the manufacture and sale wholly within their respective States, and that part of their business which related to the delivery of pipe after manufacture from their respective States to the other States and Territories covered by their contract, the court modified the judgment of the Court of Appeals so far as it included in its scope the enjoining of the defendants from combining in regard to contracts for selling pipe in their own State, and limited it to that portion of the combination or agreement which had relation to interstate sales.

And as adding further emphasis to this distinction, Mr. Justice Harlan, after reviewing, in the case of Northern Securities Co. v. U. S.,8 the cases which had been decided under the statute, sum

8 (1904) 193 U. S. 197.

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