INTERSTATE COMMERCE ACT

The Interstate Commerce Act of 1887 (24 Stat. 379 [49 U.S.C.A. § 1 et seq.]) stands as a watershed in the history of the federal regulation of business. Originally designed to prevent unfair business practices in the railroad industry, the statute shifted responsibility for the regulation of economic affairs from the states to the federal government. It has been amended over the years to embrace new and different forms of interstate transportation, including pipelines, water transportation, and motor vehicle transportation. Among its many provisions, it established the interstate commerce commission (ICC).

As part of its mission, the ICC heard complaints against the railroads and issued cease- and-desist orders to combat unfair practices. It later regulated many other forms of surface transportation, including motor vehicle and water transportation. The ICC was abolished in 1995, and many of its remaining functions were transferred to the transportation department.

The Interstate Commerce Act was passed as a result of public concern with the growing power and wealth of corporations, particularly railroads, during the late nineteenth century. Railroads had become the principal form of transportation for people and goods, and the prices they charged and the practices they adopted greatly influenced individuals and businesses. In some cases, the railroads abused their power as a result of too little competition, as when they charged scandalously high fares in places where they exerted monopoly control. Railroads also grouped together to form trusts that fixed rates at artificially high levels.

Too much competition also caused problems, as when railroads granted rebates to large businesses in order to secure exclusive access to their patronage. The rebates prevented other railroads from serving those businesses. Larger railroads sometimes lowered prices so much that they drove other carriers out of business, after which they raised prices dramatically. Railroads often charged more for short hauls than for long hauls, a scheme that effectively discriminated against smaller businesses. These schemes resulted in bankruptcy for many rail carriers and their customers.

Responding to a widespread public outcry, states passed laws that were designed to curb railroad abuses. However, in an 1886 decision, Wabash, St. Louis, & Pacific Railway Co. v. Illinois, 118 U.S. 557, 7 S. Ct. 4, 30 L. Ed. 244, the U.S. Supreme Court ruled that state laws regulating interstate railroads were unconstitutional because they violated the commerce clause, which gives Congress the exclusive power "to regulate Commerce with foreign nations, and among the several States, and with the Indian Tribes" (art. I, § 8). Wabash left a regulatory void that was soon filled by Congress. The following

year, it passed the Interstate Commerce Act, which President grover cleveland signed into law on February 4, 1887.

The law required that railroad rates be "reasonable and just," but it did not empower the federal government to fix specific rates. It prohibited trusts, rebates, and discriminatory fares. It also required carriers to publish their fares, and allowed them to change fares only after giving the public ten days' notice.

Now referred to as the Revised Interstate Commerce Act of 1978 (P.L. 95–473), the act was again revised in 1983 (P.L. 97–449) and 1994 (P.L.103–272). The latter revisions and recodifications simplified the language of the act and reorganized certain sections; no major substantive changes were made. The statute remains the bastion of regulatory guidance for the transportation and freight industries and for any other entity acting as a broker, shipper or shipper's exclusive agent, or carrier.

further readings

Interstate Commerce Commission. 1979. Interstate Commerce Commission … in the Public Interest.

Transportation Consumer Protection Council, Inc. 1996. "Freight Claims in Plain English." 3d ed. Available online at www.transportlaw.com (cited May 18, 2003)

cross-references

Railroad; Shipping Law.

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