Federal Regulatory Agencies

Federal Regulatory Agencies. The first federal regulatory agency was the Interstate Commerce Commission (ICC). Created in 1887 after decades of controversy over “the railroad problem,” the ICC in many ways served as a model for future agencies. Like the ICC, they were established by Congress in response to crises in particular industries (or, occasionally, across industries). Staffed with persons thought to be experts and bipartisan or nonpartisan by law, most were nevertheless plagued by continual controversy.

The ICC found its power limited by the federal courts. In a pattern repeated later with other regulatory commissions, Congress then proceeded to strengthen the original Interstate Commerce Act through a series of laws passed between 1903 and 1940 that, in effect, gave the commission de facto rate‐making authority for railroads, pipelines, trucks, and barges. The ICC's staff evolved complicated standards to set rates for passengers and freight carried by diverse modes of transportation over different routes. Its primary principle sought to assure transportation companies a “fair rate of return” on the “fair value of property used and useful” in performing their services. This seemingly simple idea involved the ICC in arbitrary estimates, dubious valuation schemes to determine the “rate base,” and unworkable attempts to allocate traffic “fairly” among various modes of transportation.

In reality, American capitalism proved too fluid and complex to lend itself to minute regulatory control as developed by the ICC, and industries under ICC supervision tended to stagnate because entrepreneurial opportunity was too constricted. Not until the deregulation movement of the 1980s and 1990s did some ICC‐regulated industries again become vibrant parts of the national economy, by which time the ICC itself had been abolished by Congress.

Economic Regulation

. Meanwhile Congress had created nine other federal regulatory agencies to address different areas of the economy. Five agencies were given primarily economic functions and four were assigned social or environmental regulatory duties. The five economic agencies are

1. The Federal Trade Commission (FTC), created in 1914 and assigned the ambiguous task of maximizing competition in business. The FTC's biggest successes came in presenting to Congress detailed industry studies that prompted important legislation such as the Public Utility Holding Company Act of 1935 and several laws restricting the fixing of retail prices.

2. The Federal Power Commission (FPC), created in 1920, strengthened in 1930 and 1935, and in the 1980s renamed the Federal Energy Regulatory Commission. The dynamism of the energy sector overwhelmed this agency, and by the 1950s it could not manage its huge caseload effectively. Beginning in the 1960s and culminating with congressional deregulation of natural gas during the 1980s, a series of reforms alleviated the impossible pressures under which the FPC worked.

3. The Federal Communications Commission (FCC), created in 1934 with jurisdiction over radio, interstate telephone communication, and later television. The FCC was plagued by a fundamental lack of clarity about its proper functions. In the broadcasting industry, should it promote growth? Should it censor content? Should it take the draconian step of rescinding the licenses of wayward stations? As for the telephone industry, how could the FCC effectively regulate the monopolistic American Telephone and Telegraph Company, which, until the divestiture of regional operating companies in 1984, under pressure from antitrust authorities, was America's largest single business firm? The FCC never successfully resolved these questions.

4. The Securities and Exchange Commission (SEC), created in 1934 and assigned the task of reviving and policing the nation's Depression‐battered capital markets. Compared to other agencies, the SEC achieved remarkable success. It did so by working through allies in the private sector (especially lawyers, accountants, and officials of organized exchanges), whose interests were aligned by statutes and rulings with the goals the SEC defined as best for the industry and the public.

5. The Civil Aeronautics Board (CAB), created in 1938 and abolished during the 1980s. The CAB restricted entry into the airline industry, allocated the routes companies flew, standardized prices along these routes, and in general supervised a cartel. Although efforts to determine a fair rate of return made some sense for such “natural monopoly” industries as railroads and electric utilities, it did not for airlines, where entry was easy, competition keen, and business flexibility high.

Social and Environmental Regulation

. The four social and environmental regulatory agencies reflected the heightened attention to civil rights, environmental, and consumer issues in the 1960s and 1970s. These agencies are:

1. The Equal Employment Opportunity Commission (EEOC), created in 1964 and charged with administering Title VII of the Civil Rights Act of that year. The EEOC coordinates federal efforts at affirmative action for the employment of women and minorities. It investigates charges of violation, promotes awareness of the law, and publishes statistical reports on employment patterns.

2. The Environmental Protection Agency (EPA), created in 1970 and granted a broad range of responsibilities for the control of air and water pollution and the cleanup of hazardous waste sites. As the largest of all federal regulatory agencies measured by both size of budget and number of employees (over 10,000 by 1980), the EPA has formidable powers.

3. The Occupational Safety and Health Administration (OSHA), created in 1970, headed by an assistant secretary of labor, and charged with developing regulations for workplace safety. OSHA's effectiveness suffered from the difficulty of conducting a sufficient number of inspections at the nation's millions of worksites.

4. The Consumer Product Safety Commission, created in 1972 to enforce safety standards on potentially dangerous items such as hand tools, lawnmowers, flammable clothing, and children's toys. Its rules are often cited in product liability suits brought by private parties.

In addition to these major regulatory agencies, many other governmental bodies, including the National Highway Traffic Safety Administration, the Federal Aviation Administration, the Food and Drug Administration, the National Labor Relations Board, the Nuclear Regulatory Commission, and the Federal Reserve Board, also have important regulatory responsibilities.
See also Airplanes and Air Transport; Aviation Industry; Business; Civil Rights Legislation; Civil Rights Movement; Consumer Movement; Environmentalism; Federal Reserve System; Industrial Diseases and Hazards; Industrialization; New Deal Era, The; Progressive Era; Pure Food and Drug Act; Sixties, The; Stock Market.

Bibliography

Marver H. Bernstein , Regulating Business by Independent Commission, 1955.
Ari Hoogenboom and and Olive Hoogenboom , A History of the ICC, 1976.
James Q. Wilson, ed., The Politics of Regulation, 1980.
David Vogel , The New ‘Social’ Regulation in Historical and Comparative Perspective, in Regulation in Perspective: Historical Essays, ed. Thomas K. McCraw, 1981, pp. 155–85.
Thomas K. McCraw , Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kahn, 1984.
Walter Rosenbaum , Environmental Politics and Policy, 1994.
Walter Rosenbaum , Environmental Politics and Policy, 1994.

Thomas K. McCraw