Skip to main content
Select Source:

Interstate Commerce Commission

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 .

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Interstate Commerce Commission." Dictionary of American History. . Encyclopedia.com. 17 Sep. 2018 <http://www.encyclopedia.com>.

"Interstate Commerce Commission." Dictionary of American History. . Encyclopedia.com. (September 17, 2018). http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/interstate-commerce-commission

"Interstate Commerce Commission." Dictionary of American History. . Retrieved September 17, 2018 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/interstate-commerce-commission

Learn more about citation styles

Citation styles

Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

http://www.mla.org/style

The Chicago Manual of Style

http://www.chicagomanualofstyle.org/tools_citationguide.html

American Psychological Association

http://apastyle.apa.org/

Notes:
  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.

Interstate Commerce Commission

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.

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Interstate Commerce Commission." West's Encyclopedia of American Law. . Encyclopedia.com. 17 Sep. 2018 <http://www.encyclopedia.com>.

"Interstate Commerce Commission." West's Encyclopedia of American Law. . Encyclopedia.com. (September 17, 2018). http://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/interstate-commerce-commission

"Interstate Commerce Commission." West's Encyclopedia of American Law. . Retrieved September 17, 2018 from Encyclopedia.com: http://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/interstate-commerce-commission

Learn more about citation styles

Citation styles

Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

http://www.mla.org/style

The Chicago Manual of Style

http://www.chicagomanualofstyle.org/tools_citationguide.html

American Psychological Association

http://apastyle.apa.org/

Notes:
  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.

Interstate Commerce Commission

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 criticismthat regulation created artificially high ratesled 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. (19951996). Congress and the Nation, 9, 381383.

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

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Interstate Commerce Commission." Encyclopedia of Business and Finance, 2nd ed.. . Encyclopedia.com. 17 Sep. 2018 <http://www.encyclopedia.com>.

"Interstate Commerce Commission." Encyclopedia of Business and Finance, 2nd ed.. . Encyclopedia.com. (September 17, 2018). http://www.encyclopedia.com/finance/finance-and-accounting-magazines/interstate-commerce-commission

"Interstate Commerce Commission." Encyclopedia of Business and Finance, 2nd ed.. . Retrieved September 17, 2018 from Encyclopedia.com: http://www.encyclopedia.com/finance/finance-and-accounting-magazines/interstate-commerce-commission

Learn more about citation styles

Citation styles

Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

http://www.mla.org/style

The Chicago Manual of Style

http://www.chicagomanualofstyle.org/tools_citationguide.html

American Psychological Association

http://apastyle.apa.org/

Notes:
  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.

Interstate Commerce Commission

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.

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Interstate Commerce Commission." The Columbia Encyclopedia, 6th ed.. . Encyclopedia.com. 17 Sep. 2018 <http://www.encyclopedia.com>.

"Interstate Commerce Commission." The Columbia Encyclopedia, 6th ed.. . Encyclopedia.com. (September 17, 2018). http://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/interstate-commerce-commission

"Interstate Commerce Commission." The Columbia Encyclopedia, 6th ed.. . Retrieved September 17, 2018 from Encyclopedia.com: http://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/interstate-commerce-commission

Learn more about citation styles

Citation styles

Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

http://www.mla.org/style

The Chicago Manual of Style

http://www.chicagomanualofstyle.org/tools_citationguide.html

American Psychological Association

http://apastyle.apa.org/

Notes:
  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.

Interstate Commerce Commission

Interstate Commerce Commission

United States 1887

Synopsis

The U.S. Congress created the Interstate Commerce Commission (ICC) in 1887 as the first independent regulatory agency of the federal government. The ICC was a response to mounting public protests over perceived malpractices and abuses of the railroad industry. The Interstate Commerce Commission Act, which stated that it would promote interstate commerce within the United States, drafted the organization's charter. The commission would use the rules and regulations of the act to assure fair interactions between the various transportation carriers and the public, apply impartial technical expertise to the regulation of commerce situations, and discourage monopolies. The ICC's first cases involved the railroad industry and were specifically concerned with preventing the railroads from charging excessive rates and engaging in discriminatory practices.

Timeline

  • 1867: United States purchases Alaska from Russia for $7.2 million.
  • 1872: The title of Claude Monet's painting Impression: Sunrise gives a name to a new movement in art.
  • 1877: Peter Ilych Tchaikovsky's ballet Swan Lake debuts.
  • 1880: Completed Cologne Cathedral, begun 634 years earlier, with twin spires 515 feet (157 m) high, is the tallest structure in the world, and will remain so until 1889, when it is surpassed by the Eiffel Tower. (The previous record for the world's tallest structure lasted much longer—for about 4,430 years following the building of Cheops's Great Pyramid in c. 2550 B.C.)
  • 1883: Brooklyn Bridge is completed.
  • 1885: German engineer Karl Friedrich Benz builds the first true automobile.
  • 1887: Heinrich Hertz proves the existence of electromagnetic waves, which are propagated at the speed of light.
  • 1887: Thomas Edison invents the first motor-driven phonograph.
  • 1887: John Emerich Edward Dalbert-Acton, a leader of the opposition to the papal dogma of infallibility, observes, in a letter to Cambridge University professor Mandell Creighton, that "Power tends to corrupt, and absolute power corrupts absolutely."
  • 1889: The 986-foot (300.5-m) Eiffel Tower, part of the Paris exposition, becomes the tallest structure in the world. It will remain so until the Chrysler Building surpasses it in 1930.
  • 1893: Henry Ford builds his first automobile.
  • 1897: In the midst of a nationwide depression, Mrs. Bradley Martin, daughter of Carnegie Steel magnate Henry Phipps, throws a lavish party at New York's recently opened Waldorf-Astoria Hotel, where she has a suite decorated to look like Versailles. Her 900 guests, dressed in Louis XV period costumes, consume sixty cases of champagne.

Event and Its Context

The first railroad company in the United States was the Baltimore and Ohio, which operated a 13-mile (21-km) rail in Maryland beginning in 1830. By 1850, 9,000 miles (14,500 km) of tracks were crisscrossing a country that was quickly being settled. At a time when the Industrial Revolution was taking hold, railroads provided a fast, convenient way to send and receive raw and finished materials such as timber and furniture, as well as to transport people and livestock. Railroads revolutionized the transportation system and had a significant impact on both the economy and society. With this enormous change, however, came problems with respect to the way that railroads operated their businesses.

The Golden Age

In the nineteenth century, the U.S. railroad industry developed at an unheard of pace. Initially, each privately owned railroad company held a monopoly in the market that it served. Eventually, as the railroad companies expanded into each other's markets, strong competition resulted. After the Civil War (1861-1865), railroads developed networks on lands that were often given to them by state or territorial governments. Towns competed against each other to attract railroads. Historians call the years around 1865 the "golden age" of railroads because the network grew from 30,000 miles (48,380 km) in 1860 to a peak of 254,000 miles (409,650 km) in 1916. On 10 May 1869 at Promontory Point in the Utah Territory, the "Golden Spike" joined the Union Pacific and Central Pacific railroads, signifying completion of the first transcontinental railroad.

To that time the rail system had been constructed with little regard to standards of operation. Railroad owners belatedly realized that efficient conduct of the national freight routes required standardization. Executives standardized the important aspects of their business; for example, the rail gauge was set at 4 feet, 8.5 inches, and the industry agreed to implement four time zones (instead of 54) to improve the scheduling of arrivals and departures.

The railroads did not, however, apply standardization to rates, a task seen as nearly impossible because rates reflected the cargo's weight and distance traveled. The handling of heavy products such as lumber required more expenditure than lighter products such as cotton, but rates for heavy items were set low because of their relatively low worth. In addition, expenses for loading and unloading were the same for short-haul and long-haul shipments, which made it more difficult to set equitable rates. Areas with less demand, such as the still-developing western lands, had the same fixed costs as did high-demand areas, such as the eastern seaboard. The railroads also set low rates for areas where they hoped for economic growth, but set rates high in areas where businesses could afford to pay such prices.

Further, railroads might have no competition in certain areas (resulting in a monopoly) whereas in other areas there might be competition from several companies. For instance, in the 1880s the Trunk Line faced no competition between Chicago and St. Louis, while in the northeast it competed with the New York Central, Erie, Pennsylvania, Grand Trunk, and Baltimore and Ohio lines. Railroads often based rates on the "value" of traffic, rather than on its "cost." Such "value-pricing" was logical for the railroads, but shippers, who were most concerned with rates and service, viewed it as economically illogical. Neither approach was applied on a consistent basis, and this greatly frustrated shippers.

To maintain rates when competition was strong, companies formed agreements, commonly called "pools," in which rails were assigned to member railroads. For example, from 1870 to 1885 an Iowa Pool between the Chicago, the North Western, Burlington & Quincy, and the Rock Island railroads gave each member a 45 percent stake in passenger and a 50 percent stake in freight income for their particular section of track, with the remaining monies equally divided. Railroads liked pools but preferred acquisitions to reduce competition. For example, the Pennsylvania railroad grew by buying 600 different railroads and leasing out the remaining lines. Railroad consolidation peaked around the beginning of the twentieth century when one-sixth of total rails were acquired. As a result, the danger of monopolies from these growing corporations became apparent.

Railroad owners realized their dominance in transportation. They sometimes raised freight rates beyond what the market would bear. Executives argued that they were exempt from state regulation because they moved goods across state lines in interstate commerce. Railroad executives stated, therefore, that individual states could not legally act against their industry.

Protesters

The American consumer called for action to correct injustices emanating from the railroads, such as unfair political influence, unreasonable rates, and illegal stock manipulation. Farmers and merchants protested to their elected representatives that they were treated unfairly by the railroads. These protests accomplished little. The railroads already had agreements with friendly politicians or ignored and sometimes replaced politicians who opposed them. One grassroots organization that challenged the power of the railroads was "The Grange." Oliver Kelley and six associates founded the National Grange of the Patrons of Husbandry in 1867 for social and educational purposes, not to deal with railroads. Supported by farmers and merchants, however, the Grange rapidly grew in importance in its new fight against railroad abuses. The Grange employed tactics such as holding back crops from the market until railroads agreed to lower freight rates.

Farmers, merchants, and consumers could not agree on how to eliminate the unfair practices that were commonly used. Railroads were spread across the country so investigations of abuses were difficult to conduct. Individual railroads had monopolies in parts of the country but faced intense competition in others. This added to the problem of determining equitable railroad charges, costs, and profits.

Government Regulation

Many of the protesters wanted public ownership of railroads; others demanded stabilizing pools or increased competition. Many thought that government regulation would force railroads to compete fairly and eliminate abuses. Without any clear solution, regulation became the popular way to establish fair railroad practices.

Four states had established railroad commissions prior to 1860, and more were formed over the next two decades. The New England states created the first commissions, but midwestern states later created stronger commissions to battle railroad overdevelopment and consumer discontent. The state of Illinois, beginning around 1869, set the model for surrounding states and eventually set the standard nationwide by establishing maximum rates.

The efforts of the Grange were well coordinated, and, with the help of newspapers, its efforts began to succeed. The movement helped to strengthen the political position of farmers, who now formed a cohesive group that effectively communicated its demands. The Grange elected members to several midwestern legislatures during the mid-1870s, and these leaders passed uniform "Granger" laws to manage railroad regulations and set maximum railroad rates. The railroads countered by raising rates in areas in which there was no commission. For the most part, the state laws that were enacted to regulate the railroad industry (and to protect its customers) were largely ineffectual.

The railroads soon challenged state regulations. In 1876 the Supreme Court case of Munn v. Illinois questioned the validity of an Illinois law that set maximum rates for grain storage when the Chicago warehouse of Munn and Scott was found guilty of violating the law. The company protested the ruling, saying its property was being taken without due process of law. The Court upheld the Granger law, and ruled that the warehouse business in general operated in such a way as to justify public control and that any private utility devoted to public use could be publicly regulated. The railroads thus learned that they affected the public interest and, as a result, could only charge reasonable amounts for their services. The consequence of this case was the setting of a precedent that states have the right to regulate interstate commerce.

In 1886 a Supreme Court decision on Wabash, St. Louis, and Pacific Railway Company v. Illinois declared that states are not legally able to control any commerce that crosses state boundaries. This Court ruling reversed previous legislation when it denied the right of Illinois to regulate interstate rates between itself and New York. It concluded that only the commerce clause of the U.S. Constitution could regulate interstate commerce. This ruling, plus the inadequacy of state regulation and the weakening of the Munn ruling, led the public to demand federal regulation. The primary effect of the Wabash decision was the creation of the Interstate Commerce Commission.

Farmers, merchants, manufacturers, and producers were in favor of federal regulation of the railroads. Farmers worked through the Grange to secure state laws regulating rates and create commissions to enforce them. Most laws were eventually repealed but were important precedents for future federal legislation. Merchants spoke through pressure groups to demand railroad regulation. In 1873 New York merchants established the New York Cheap Transportation Association, which identified over 6,000 discriminatory contracts within the New York Central railroad. Manufacturers and producers also called for federal regulation. Independent oil producers, for example, were often left out of the rebates offered to their giant competitors such as Standard Oil. The independents tried repeatedly to pass legislation to outlaw pooling, rebates, and discrimination.

Interstate Commerce Act

Federal regulation officially began on 4 February 1887, when President Cleveland signed the Interstate Commerce Act into law. This created the first independent regulatory commission, the Interstate Commerce Commission (ICC). It had several functions:

  • Ban "special rates" that the railroads arranged among themselves
  • Outlaw discriminatory rate setting
  • Set guidelines for how railroads could do business
  • Prevent monopolies by promoting competition
  • Require railroads to submit annual reports to the ICC

The act itself, however, was imprecise in its wording. The act made pooling illegal but failed to mention other discriminatory practices. The act stated that rates were to be "reasonable and just," and the railroads took advantage of the vague phrasing by responding subjectively. The act also outlawed long-and short-haul abuse but only under certain circumstances, and thus it was ambiguous as to what constituted a short-or a long-haul. The act authorized the commission to investigate any railroad engaged in interstate commerce. If a railroad ignored the ICC, however, the commission had to petition the appropriate circuit court to rule on the matter.

Ultimately the ICC's power would depend on its commissioners and the court system. The commission was a five-person committee with all members nominated by the president. The first commission chairman was Thomas Cooley, a University of Michigan law professor and Michigan Supreme Court justice. Cooley rejected unlimited state interference with private property but accepted state regulation of profits where competition had been eliminated.

Cleveland's second appointee was William Morrison, a former Illinois congressman who was known for his attacks on protective tariffs. He was seen as honest but with little railroad knowledge. Augustus Schoonmaker, a New York lawyer, was the third appointee. Schoonmaker also had little railroad experience but was viewed as a man of character. The fourth appointee was Aldace Walker, a railroad lawyer and Vermont senator who opposed railroads. The fifth appointee was Walter Bragg, who had helped to develop the concept of the ICC while he was president of the Alabama railroad commission.

The effectiveness of the fledgling ICC was limited by a lack of enforcement power, by the Supreme Court's interpretation of its power, and by the vague language of the original act. As the country's first regulatory agency, the ICC staff also lacked the necessary experience to set effective interstate standards. Historians generally agree that in the beginning years of the ICC, it failed to maintain a proper balance between the powerful railroads and the public so as to ensure moderate profits and adequate service at a reasonable cost. Many experts agree that the ICC was contaminated both internally and externally by the people it was trying to regulate: the railroad executives.

Though the ICC was not particularly effective in curbing the unfair practices of the railroads, the precedent for federal regulation had been set. Later legislation such as the Sherman and Clayton Antitrust Acts had more of an effect on large businesses. The latter bill created the Federal Trade Commission, which is the major regulatory body of monopolies today.

Key Players

Cooley, Thomas McIntyre (1824-1898): Cooley turned to the practice of law after a successful career as a city clerk, newspaper editor, and circuit court commissioner. He was appointed in 1857 to compile the original statutes of the state of Michigan and in 1864 to the Michigan Supreme Court. At the same time Cooley was also a professor and the first dean of the University of Michigan's fledgling law department (now the University of Michigan Law School). Cooley authored numerous articles on legal subjects and wrote several full-length works on constitutional limitations. He also wrote a benchmark opinion that is still quoted today with regard to the separation of powers among the three branches of government.

Kelley, Oliver Hudson (1826-1913): Kelley, along with William Saunders, Aaron B. Grosh, William M. Ireland, John R. Thompson, Francis McDowell, and John Trimble (assisted by Caroline Hall), founded the National Grange of the Patrons of Husbandry. Today, they are called the "Seven Founders of the Order of the Patrons of Husbandry." After the Civil War, when farmers suffered a lack of organization, Kelley contacted President Andrew Johnson with a proposal to organize farmers into what he called a "Secret Society of Agriculturists." Kelley was later appointed as an agent of the Department of Agriculture. As part of Reconstruction, Kelley proceeded in the South to form farmers into the Grange, a name that borrowed from large English farms. The seven founders determined that the organization must serve both the political and social needs of farm families. Women could join on an equal basis because the founders felt that their participation was important to the success of their organization. Their organizing tactics were successful, and the Grange movement spread rapidly across the country.

See also: Clayton Antitrust Act.

Bibliography

Books

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

Kirkland, Edward C. Industry Comes of Age: Business,Labor, and Public Policy, 1860-1897. New York: Holt, Rhinehart, and Winston 1962.

Stone, Richard D. The Interstate Commerce Commission and the Railroad Industry: A History of Regulatory Policy.New York: Praeger, 1991.

Stover, John F. American Railroads. Chicago: University of Chicago Press, 1997.

Other

"1880 Train." Black Hills Central Railroad [cited 11 August,2002]. <http://www.1880train.com>.

"A Trip through Railroad History." Tomorrows Railroads.org.[cited 11 August, 2002]. <http://www.tomorrowsrailroads.org/index.asp>.

—William Arthur Atkins

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Interstate Commerce Commission." St. James Encyclopedia of Labor History Worldwide: Major Events in Labor History and Their Impact. . Encyclopedia.com. 17 Sep. 2018 <http://www.encyclopedia.com>.

"Interstate Commerce Commission." St. James Encyclopedia of Labor History Worldwide: Major Events in Labor History and Their Impact. . Encyclopedia.com. (September 17, 2018). http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/interstate-commerce-commission

"Interstate Commerce Commission." St. James Encyclopedia of Labor History Worldwide: Major Events in Labor History and Their Impact. . Retrieved September 17, 2018 from Encyclopedia.com: http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/interstate-commerce-commission

Learn more about citation styles

Citation styles

Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

http://www.mla.org/style

The Chicago Manual of Style

http://www.chicagomanualofstyle.org/tools_citationguide.html

American Psychological Association

http://apastyle.apa.org/

Notes:
  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.