Interstate Commerce Act

Interstate Commerce Act, 1887 regulatory law. Railroads were the earliest major corporations whose interests transcended state boundaries. In some places, railroads competed for traffic, but over long stretches of their tracks they were monopolies. As common carriers, they were forbidden by their charters to discriminate among customers. Nevertheless, to lure traffic between competitive points, railroads offered larger shippers rebates—and charged less for a competitive long haul than for a monopolistic short haul. With their prosperity threatened by railroad pricing practices, farmers, merchants, communities, and even entire regions turned to politics for redress. Abandoning their free‐market laissez‐faire notions, protestors convinced several states to regulate railroads.

The U.S. Supreme Court upheld state regulation of railroads in Munn v. Illinois (1876), then reversed itself in Wabash v. Illinois (1886), triggering demands in the West and the South for federal action. In 1887, Congress passed the Interstate Commerce Act (ICA), designed to prevent railroad rate discrimination. The only significant opposition came from the Northeast and California. Since divergent bills had passed the House and Senate, the ICA was a compromise measure that incorporated some provisions that railroads opposed and other features that reformers disliked. The ICA tried to eliminate price discrimination between long and short hauls, required railroads to charge their published rates and established the Interstate Commerce Commission (ICC) to administer the law.

The ICC worked effectively until 1897, when the Supreme Court outlawed its power to set rates and to prevent the long‐haul/short‐haul abuse. During the Progressive Era, Congress amended the ICA through the Hepburn Act (1906), giving the ICC the power to set maximum freight rates and extending its jurisdiction to express companies and oil pipelines. In 1910, the Mann‐Elkins Act again empowered the ICC to enforce the long‐haul/short‐haul clause. Following World War I, the Esch‐Cummins Transportation Act of 1920 amended the ICA by granting the ICC enormous power to consolidate railroads into about twenty competing systems and to regulate minimum rates as well as maximum ones. The Motor Carrier Act of 1935 subjected the trucking industry to ICC regulation, and the Transportation Act of 1940 gave the ICC jurisdiction over water carriers, while ordering it to protect equally all modes of transportation.

Railroads declined after World War II, partly because minimum‐rate regulation prevented them from competing successfully with motor and water carriers. In the Transportation Act of 1958, Congress attempted but failed to clarify minimum‐rate‐policy by giving the ICC two contradictory tasks: preserving rail, motor, and water carriers while also promoting competition among them. That act also facilitated railroads' abandonment of passenger service, which had become unprofitable because of airline competition. By the 1970s and 1980s, critics declared the much amended ICA a failure.

Presidents and Congress agreed. The Motor Carrier Act of 1980 deregulated the trucking business, and the Staggers Rail Act (1980) allowed railroads to compete with trucks. In 1982, Congress reduced the ICC from eleven to five members, and in 1985 the Office of Management and Budget proposed that the ICC by abolished. With budget‐cutting mania sweeping Washington, that proposal was carried out, and the Interstate Commerce Act became a dead letter on 31 December 1995.
See also Economic Regulation; Gilded Age; Granger Laws; Granger Movement.

Bibliography

Ari Hoogenboom and and Olive Hoogenboom , A History of the ICC: From Panacea to Palliative, 1976.

Ari Hoogenboom