INTERSTATE COMMERCE COMMISSION

INTERSTATE COMMERCE COMMISSION. On 31 December 1995, after 108 years of operation, the Interstate Commerce Commission (ICC) closed its doors in compliance with the ICC Termination Act of 1995 (P.L.104-88).This archetypal American independent regulatory commission, once feared by the transportation industry, saw the functions it still performed diminish until, at the end, they were assumed by offices in the Federal Highway Administration and the newly-created Surface Transportation Board, both elements of the U.S. Department of Transportation.

Those with the greatest stake in the ICC, which was created in 1887, were midwestern farmers and the owners and operators of the newly emergent railroad transportation systems. The railroads opened midwestern markets to those in the East, but charged what the market would bear, which was significantly less between two cities connected by more than one carrier than between towns that did not have the benefit of such competition. "Long haul" rates were more beneficial than "short haul" rates, leading farmers and merchants (members of the Grange) to redress their grievances through politics.

This post–Civil War reform movement helped initiate state regulation of railroads and grain elevators. In 1877 the Supreme Court, in Munn v. Illinois, ruled that the states could indeed regulate those properties vested with a public interest. However, in 1886 the Court reversed itself in Wabash, St. Louis and Pacific Railway v. Illinois, saying that only Congress could regulate interstate commerce. In 1887 Congress passed an Act to Regulate Commerce, known thereafter as the Interstate Commerce Act, which President Grover Cleveland signed into law on 4 February 1887. The law established a five-person commission to be appointed by the president and con-firmed by the Senate.

From its inception until the end of the century, the ICC, seeking to negotiate "reasonable and just" rates, was hobbled by the vagueness of its enabling act, the failure of Congress to give it enforcement power, and the Supreme Court's strict interpretation of the Commerce Clause of the Constitution, which emasculated the commission's power. During its first eighteen years, the ICC brought sixteen cases before the Court, fifteen of which were decided in favor of the railroads.

Nevertheless, the ICC would become the model for effective regulation later on. Responding to President Theodore Roosevelt and the Progressive movement, Congress passed the Hepburn Act (1906) and the Mann-Elkins Act (1910), which gave the commission wider authority to set aside rates charged by railroads, set profit levels, and organize mergers. The Hepburn Act extended the ICC's jurisdiction to include sleeping car companies, oil pipelines, ferries, terminals, and bridges. Through a broader interpretation of the Commerce Clause, the Court accepted a more muscular role for the ICC. This allowed for passage of the Esch-Cummins Transportation Act of 1920 and the commission's gradual assumption of regulatory jurisdiction over all other common carriers by 1940 (the Motor Carrier Act of 1935 regulated trucks; the Transportation Act of 1940, water carriers), except the airlines. In addition, the ICC had regulated telephone, telegraph, wireless, and cable services from 1910 until the Federal Communications Commission was established in 1934.

Congress, in the 1940 Transportation Act—and again in the Transportation Act of 1958—attempted to persuade the ICC to prepare a national transportation policy that would impartially regulate all modes of transportation and preserve the advantages of each. In 1966, this mission was shifted to the newly established Department of Transportation, as were the ICC's safety functions, which traced back to the Railroad Safety Appliance Act of 1893.

If the transfer of functions set a new tone for the ICC, the move to deregulate the transportation industry rendered it increasingly irrelevant. Passage of the Motor Carrier Regulatory Reform and Modernization Act of 1980 and the Staggers Rail Act of 1980 deregulated the trucking and rail industries, respectively. In 1982, Congress pared the membership of the ICC—which had grown to eleven—back to five. Staff dwindled from 2,000 to around 200. And on 29 December 1995, President William Clinton signed the ICC Termination Act into law.

BIBLIOGRAPHY

Hoogenboom, Ari. "Interstate Commerce Commission." In A Historical Guide to the U.S. Government. Edited by George Thomas Kurian. New York: Oxford University Press, 1998.

———, and Olive Hoogenboom. A History of the ICC: From Panacea to Palliative. New York: Norton, 1976.

R. DaleGrinder

See alsoFederal Agencies ; Granger Cases ; Granger Movement ; Interstate Commerce Laws ; Interstate Trade Barriers ; Restraint of Trade ; Transportation Act of 1920 .

Interstate Commerce Commission Although the Constitution (Art. I, sec. 8) gave Congress the power to regulate interstate commerce, Congress neglected to regulate railroads until 1887, when it passed the Interstate Commerce Act (ICA) establishing the Interstate Commerce Commission (ICC). Prior to this federal action, individual states established railroad commissions, some of which regulated railroad rates to eliminate rampant discrimination. The Supreme Court declared state rate regulation constitutional in Munn v. Illinois (1877), when it ruled that in the absence of federal legislation state legislatures could regulate interstate railroads. State regulation, however, made rates even more chaotic, and the Court in Wabash, St. Louis & Pacific Railway Co. v. Illinois (1886) concluded that interstate transportation charges could be regulated only by Congress.

Although the Supreme Court in effect forced the creation of the ICC, the Court retained the authority to oversee rail rates. In 1890 it declared that due process demanded that rates set by a state commission be subject to judicial review; in Smyth v. Ames (1898), the Court decided that railroads were constitutionally entitled to a fair return on their property (see Due Process, Substantive). The Court also denied that the ICC had implicit rate‐making authority. Even when agreeing with the ICC, the Court often restricted the powers of the agency. In U.S. v. Trans‐Missouri Freight Association (1897), the Court decided that rate and tonnage agreements among railroads restrained trade and violated the Sherman Antitrust Act rather than the anti‐pooling section of the ICA. The Court also destroyed the ICC's power to prevent the long‐short‐haul abuse in ICC v. Alabama Midland Railway (1897).

During the Progressive Era the Supreme Court responded to the temper of the times and helped make the ICC a powerful regulatory agency (see Progressivism). After the Hepburn Act (1906) gave the ICC power to set rates, opponents of regulation were disappointed when the Court refused to exercise a broad judicial review of rates. Regarding rate setting as an administrative function, the Court determined only that the ICC had power to set rates, not whether it exercised that power with wisdom. The Court also, in the Minnesota Rate Cases (1913), allowed the ICC to regulate intrastate rates that discriminated against interstate commerce, elevating the ICC over the conflicting laws and regulations of state legislatures and commissions. Still reflecting a Progressive spirit, the Court in Dayton‐Goose Creek Railway v. U.S. (1924) urged the ICC to play a positive, creative role in building an adequate rail system and agreed that the railroads should be put “more completely than ever under the fostering guardianship and control” of the ICC (p. 478).

However, when the ICC refused to lead, the Court did not appear dismayed. It even objected to occasional attempts by the ICC to take the initiative. In 1931 the Court blocked a rare effort by the ICC to prevent the cheating of bondholders in a railroad reorganization scheme, and in 1933 it reversed the ICC's only order to a railroad to build an extension line. Since the ICC failed to coordinate transportation in the 1920s, the agency was largely bypassed during the crises of the Great Depression and war during the 1930s and 1940s.

In the post–World War II years the ICC failed to cope with the nation's transportation problems. By the 1960s the Court tried to clarify the ICC's hazy but crucial minimum‐rate policy, which determined whether railroads, trucks, or barges would carry freight between competing points. The ICC tended to preserve existing relationships and avoid destructive intermodal competition. The Court, however, forced the ICC to allow more competition even when rates failed to cover fully distributed costs but at least covered out‐of‐pocket costs. Subsequently, the Court protected a low‐cost mode of transportation by insisting that a rate be based on fully distributed costs. Having moved the ICC to foster intermodal competition as long as it was not predatory and having nudged it in the direction of a more rational rate system, the Supreme Court remained aloof in the 1970s and 1980s while the nation allowed the ICC to atrophy and turned to the panaceas of mergers and deregulation to cure its transportation malaise. Although in 1985 the Office of Management and Budget proposed that Congress abolish the ICC, it lingered on until the last day of 1995, when it finally succumbed.

See also Administrative State; Commerce Power.

Bibliography

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

Ari Hoogenboom

INTERSTATE COMMERCE COMMISSION

The first independent regulatory agency created by the federal government, the Interstate Commerce Commission (ICC) regulated interstate surface transportation between 1887 and 1995. Over its 108-year history, the agency regulated and certified trains, trucks, buses, water carriers, freight forwarders, pipelines, and many other elements of interstate transportation.

The ICC was created by the interstate commerce act of 1887 (24 Stat. 379 [49 U.S.C.A. § 1 et seq.]). The act created a five-person commission—later expanded to seven and then to 11—to be appointed by the president and confirmed by the Senate. Among the commission's first actions was the election of its first president, thomas mcintyre cooley, a noted legal scholar who had been nominated by President grover cleveland.

Congress established the ICC to control the powerful railroad industry, then plagued by monopolistic and unfair pricing practices that often discriminated against smaller railroads and businesses as well as individual consumers. In its early years, the agency's regulatory effectiveness was severely limited by the courts, which in many cases retained the ability to review ICC rate rulings. The agency lost 15 of its first 16 lawsuits against the railroads, and the Supreme Court issued several decisions that hampered its regulatory powers.

Later laws gave the agency's rulings more teeth. The Elkins Act of 1903 (32 Stat. 847) allowed the ICC to punish shippers who practiced unfair competitive methods. The Hepburn Act of 1906 (34 Stat. 584) gave the agency wider powers to regulate railroad rates, making its rulings binding without a court order. The act also assigned to the ICC the oversight of all pipelines other than gas and water.

Over the years, Congress changed the focus and tasks of the ICC, gradually expanding its regulatory powers. In 1893, it entrusted the agency with the regulation of railroad safety. Later, the Motor Carrier Act of 1935 (49 Stat. 543) gave the ICC authority to regulate interstate trucking and other highway transportation. The agency even regulated telephone and telegraph communication from 1888 until 1934, when this task was transferred to the federal communications commission.

Other tasks performed by the ICC included conducting hearings to examine alleged abuses; authorizing mergers in the transportation industry; overseeing the movement of railroad traffic in certain areas; granting the right to operate railroads, trucking companies, bus lines, and water carriers; and maintaining consumer protection programs that ensured fair, nondiscriminatory rates and services. At times, the agency participated in important social and political changes, as when it desegregated interstate buses and trains in the 1960s.

By the 1960s, the ICC had reached a peak size of 2,400 employees, with field offices in 48 states. Its growth made it a target for those who sought to reduce the power and size of federal regulatory agencies. Critics claimed that ICC regulation created artificially high rates for many forms of transportation. Some charged the agency with corruption.

In 1976, the Railroad Revitalization and Regulatory Reform Act (90 Stat. 31 [45 U.S.C.A. § 801]) reduced the commission's powers to regulate carrier rates and practices except in a few areas where a single railroad or trucking firm monopolized a transportation route. This trend toward the deregulation of interstate commerce caused the ICC to gradually get smaller until December 29, 1995, when President bill clinton signed The ICC Termination Act, Pub. L.No. 104-88, 109 Stat. 803 (1995), dissolving the ICC.

In its final year, the ICC employed 300 people and had a budget of $40 million. The legislation ending its existence moved 200 former ICC employees to the transportation department, which assumed authority over former ICC functions deemed essential by Congress. These essential functions included approving railroad and bus mergers and handling railroad disputes. The new three-person Intermodal Surface Transportation Board within the Department of Transportation oversees many of the functions formerly conducted by the ICC.

further readings

American Association of State Highway and Transportation Officials. Available online at <www.transportation1.org/aashtonew/> (accessed July 28, 2003).

"Commerce: ICC Elimination." 1996. Congressional Quarterly's News (January 8).

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

U.S. Government Manual Web site. Available online at <www.gpoaccess.gov/gmanual> (accessed November 10, 2003).

cross-references

Carriers; Highway; Railroad; Shipping Law.

INTERSTATE COMMERCE COMMISSION

President Grover Cleveland signed the Interstate Commerce Act of 1887 and created the Interstate Commerce Commission (ICC), the U.S. government's first regulatory agency. The initial purpose of the ICC was to control railroads and their unfair business practices. The U.S. government's assumption of the role of regulator resulted from the U.S. Supreme Court's 1886 ruling in the case of Wabash Railroad v. Illinois, which prohibited states from controlling interstate commerce.

Railroads presented some special problems because they were capital-intensive, had high maintenance costs, and had two types of rail lines. This situation led to unfair pricing practices. For major trunk lines, where there was competition, the railroads charged lower rates and even gave rebates. For spur lines, where there was a monopoly, the railroad charged higher rates for the same type of cargo.

Even with the federal government taking charge of regulating railroads, the ICC still began with a rocky start. In its first sixteen court actions, the ICC won only one case; and the Supreme Court made several power-limiting judgments against the ICC. Later legislation, however, provided strength for ICC rulings. The 1903 Elkins Act addressed unfair competitive methods. The 1906 Hepburn Act eliminated the mandated court order to make ICC rulings binding and gave the ICC control of gas and water pipelines. The milestone Transportation Act of 1920 resulted in the ICC's moving from approving to actually setting railroad rates, being empowered to organize mergers, and to determining appropriate profit levels.

The Motor Carrier Act of 1935 placed the emerging trucking industry under ICC jurisdiction. Typical ICC duties included holding hearings to investigate complaints, approving transportation mergers, and overseeing consumer-protection programs.

By the 1960s the ICC had grown into a massive bureaucracy, peaking at 2,400 employees. Shortly thereafter, the agency came under severe criticism. Some groups argued that, because of regulation, the country's transportation was inefficient and perhaps corrupt. The major criticism—that regulation created artificially high rates—led to pressure for deregulation and signaled the beginning of the demise of the ICC. First, the Railroad Revitalization and Regulatory Reform Act of 1976 curtailed the ICC power to regulate rates unless the railroad had a monopoly on certain routes. In 1977 air cargo deregulation and the reforms taking place in the trucking industry further eroded the power of the ICC. After the early rocky years of deregulation, the transportation industry had become more efficient thanks to innovative technology, thereby reducing costs. The final act of deregulation came in 1994, when the ICC lost most of its control over the trucking industry.

By this time the number of ICC employees had dropped to 300 and the ICC constrained by a severely reduced budget. The Republicans, who had wanted to eliminate the ICC for a number of years, took control of Congress in 1995. As a first step, the fiscal 1996 spending bill gave the ICC no budget. Then the House Transportation and Infrastructure Committee approved a bill to dismantle the ICC, and the debate began. The major objection from the Democratic side was centered on protection for railroad workers who might lose their jobs because of mergers. After ironing out their differences, Congress sent President Bill Clinton legislation to terminate the ICC. On December 29, 1995, the 108-year-old ICC was disbanded.

see also Interstate Commerce

bibliography

End of the line for ICC. (1996). Nation's Business, 84 (3), 32.

ICC elimination. (1995–1996). Congress and the Nation, 9, 381–383.

President signs bill terminating ICC. (1996, January 6). Congressional Quarterly Weekly Report, 54 (1), 58.

R.I.P., ICC. (1996, May/June). American Heritage, 47 (3), 22.

Stone, R. D. (1991). Interstate Commerce Commission and the railroad industry: A history of regulatory policy. New York: Praeger.

Mary Jean Lush

Val Hinton

Interstate Commerce Commission (ICC), former independent agency of the U.S. government, established in 1887; it was charged with regulating the economics and services of specified carriers engaged in transportation between states. Surface transportation under the ICC's jurisdiction included railroads, trucking companies, bus lines, freight forwarders, water carriers, oil pipelines, transportation brokers, and express agencies.

The ICC, the first regulatory commission in U.S. history, was established as a result of mounting public indignation in the 1880s against railroad malpractices and abuses (see Granger movement ), but until President Theodore Roosevelt , the ICC's effectiveness was limited by the failure of Congress to give it enforcement power, by the Supreme Court's interpretation of its powers, and by the vague language of its enabling act. Beginning with the Hepburn Act (1906), the ICC's jurisdiction was gradually extended beyond railroads to all common carriers except airplanes by 1940. Its enforcement powers to set rates were also progressively extended, through statute and broadened Supreme Court interpretations of the commerce clause of the Constitution, as were its investigative powers for determining fair rates of return on which to base rates. In addition, the ICC was given the task of consolidating railroad systems and managing labor disputes in interstate transport. In the 1950s and 60s the ICC enforced U.S. Supreme Court rulings that required the desegregation of passenger terminal facilities.

The ICC's safety functions were transferred to the Dept. of Transportation when that department was created in 1966; the ICC retained its rate-making and regulatory functions. However, in consonance with the deregulatory movement, the ICC's powers over rates and routes in rails and trucking were curtailed in 1980 by the Staggers Rail Act and Motor Carriers Act. Most ICC control over interstate trucking was abandoned in 1994, and the agency was terminated at the end of 1995. Many of its remaining functions were transferred to the new National Surface Transportation Board.

Interstate Commerce Commission. See Economic Regulation; Interstate Commerce Act.