The authority of the Interstate Commerce Commission (ICC), established 1887 by act of Congress, was later fortified by the Hepburn Act of 1906 and the Mann-Elkins Act of 1910. In 1920 Congress again increased the power of the regulatory agency by passing the Transportation Act. Among the provisions of the 1920 legislation was the rule, which allowed the ICC to establish rates at levels that were just high enough to yield a fair return on investment (ROI) for the railroad companies. Any returns to the railroads that were in excess of the established rate levels were to be "recaptured" by the government, placed in a fund, and from that fund, loans were to be made to struggling rail carriers. The act also empowered the ICC to override state regulatory statutes that fixed rate levels lower for intrastate carriers than they were for interstate carriers; Congress viewed such state regulations as discriminatory and, therefore, harmful to interstate commerce. Finally, the act loosened restrictions on railway pooling and railroad acquisitions, even directing the ICC to lead an initiative to consolidate the railroads into fewer, stronger systems.
After three decades of legislation, regulation, and antitrust litigation to curb the powerful railroads, the Transportation Act of 1920 was a double-edged sword: the recaptured earnings prevented any one railroad from becoming too big; but at the same time, the ICC was charged with overseeing the consolidation of the railroad industry. The stage was set for the decline of the nation's railroad systems: over the next two decades, competition for passenger and freight service was increased as automobiles, trucks, and airplanes proliferated. The railroads, limited by federal regulations, were unable to respond swiftly enough to remain competitive: rail companies could not adjust their rates or services without seeking state or federal approval first. Even those rail companies that remained solvent amidst the increased regulations had been weakened by the Transportation Act's policy of recaptured earnings, which prevented any accumulation of capital resources. Lack of reserves made it difficult for companies when the American transportation industry became more diverse and competitive. In the middle of the twentieth century, railroads foundered; many companies went into receivership pending their reorganization.
See also: Interstate Commerce Commission Act, Hepburn Act, Mann-Elkins Act
"Transportation Act." Gale Encyclopedia of U.S. Economic History. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/transportation-act
"Transportation Act." Gale Encyclopedia of U.S. Economic History. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/transportation-act
Congress passed the Mann-Elkins Act in June 1910. It amended the Interstate Commerce Act of 1887, expanding the Interstate Commerce Commission's (ICC) responsibilities to include the regulation of telephone, telegraph, and cable companies. The new law declared such companies to be common carriers subject to ICC regulations.
The 1910 act also strengthened the ICC's enforcement of regulations regarding short-haul versus long-haul rail rates. The legislation was one in a series of laws passed by the federal legislature during the 1900s to broaden the jurisdiction and increase the power of the Interstate Commerce Commission. The laws originally gave the agency control over interstate rail rates and practices. The 1910 bill was partly sponsored by Representative James Robert Mann (1856–1922) of Illinois. Mann had also sponsored earlier legislation (1903) to increase the ICC's authority.
When the bill was brought before Congress in 1910 President William Howard Taft (1909–1913) succeeded in amending it to include a provision for a special court to supervise the activities of the ICC. The Mann-Elkins Act was hotly debated in Congress, but passed as amended. The experiment of the Commerce Court, however, proved a failure. In 1912 both houses of Congress voted to abolish the court, which had tried to interfere in the ICC's investigative powers. The U.S. Supreme Court reversed many rulings of the Commerce Court. Congress therefore felt that the special court had exceeded its jurisdiction. President Taft vetoed the congressional legislation that would have dissolved the judicial body.
In January 1913 judge Robert Archbald was impeached and convicted by the Senate for improprieties committed while holding office at the Commerce Court. Suspicions long-held by lawmakers that U.S. Commerce Court judges could be open to influence by the very companies they were charged with overseeing were borne out. Congress moved again to disband the Commerce Court. In October 1913 newly elected President Woodrow Wilson (1913–1921) signed legislation abolishing the Commerce Court. Other provisions of the Mann-Elkins bill remained intact.
See also: Interstate Commerce Act, Interstate Commerce: Regulation and Deregulation
"Mann-Elkins Act." Gale Encyclopedia of U.S. Economic History. . Encyclopedia.com. (July 26, 2017). http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/mann-elkins-act
"Mann-Elkins Act." Gale Encyclopedia of U.S. Economic History. . Retrieved July 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/mann-elkins-act