On April 5, 1887, the Interstate Commerce Act became law. Its purpose was to stop unfair railroad practices carried out by monopolies. From the 1870’s to the 1880’s, momentum built to regulate the industry as the public, farm groups, business, and some railroad managers asked Congress to control the flow of commerce that crossed state lines.
Congress enacted the law after the U.S. Supreme Court reversed itself in Wabash, St.Louis & Pacific Railroad Company v. Illinois (1886). The court denied states the right to control interstate railroad rates and declared an Illinois law invalid since it breached congressional power found in the Commerce Clause of the U.S. Constitution. Adoption of the Interstate Commerce Act was one of the goals pursued by the Farmer’s Alliance/Populists in the 1880’s. It signaled a power shift away from laissez-faire policies that dominated the time and lifted the Populist cause by proving that political action led to policy change.
In 1885, the Select Committee to Investigate Commerce was established to hold hearings on transportation by rail and water between the several states. In 1886, it released the “Cullom Report,” which swayed Congress to pass the act; although uncertain about its impact, Congress yielded to public sentiment, group pressure, and a need to make railroad activity uniform.
The Interstate Commerce Act prohibited rebates, drawbacks, pooling, and rate discrimination by monopolies. It mandated “reasonable and just” rates and forbade long- and short-haul clauses unless an exemption was granted. But its creation of the first regulatory agency to enforce the act was historic.
The Interstate Commerce Commission (ICC), a five-member agency appointed by the president for six-year terms and empowered to investigate complaints, call witnesses, obtain documents, and inquire into the business of all common carriers, was charged with the enforcement role.
When it was first applied, it met resistance by rail barons who used the courts, commission appointees, and political pressure to reduce the law’s impact and limit the commission’s authority. In the Maximum Freight Rate Case (1897), the Supreme Court held that the ICC did not have the power to propose detailed rate schedules. Similarly, the court ruled in the Alabama Midland Case (1897), that the commission’s power was limited with respect to long- and short-haul discrimination. By the end of the 1890’s, the ICC only monitored railroad statistics and required fee notices by companies.
However, by the turn of the century, Congress gave the ICC more power over the monopolies. The Elkins Act of 1903 ended the practice of rebates. The Hepburn Act of 1906 increased the commission size, improved rate enforcement, and expanded the jurisdiction of the agency. The Mann-Elkins Act of 1910 amended long- and short-haul language and extended the agency’s bailiwick over communications.
The act changed the dynamics of American federalism. State and local governments lost some of their lawmaking authority over the railroad monopolies. The federal government exercised its “commerce power” to centralize regulation and bring consistency to a hodgepodge of state laws that slowed the flow of goods and passengers who counted on efficient rail transportation to sustain their business, employment, and safe movement from place to place.
SEE ALSO: Commerce among the States; Interstate Commerce; Transportation Policy
Bibliography
Marvin L. Fair, Economic Considerations in the Administration of the Interstate Commerce Act (Cambridge, MD: Cornell Maritime Press, 1972); Henry S. Haines, Problems in Railway Regulation (New York: Macmillan Company, 1911); Lewis H. Haney, Congressional History of Railways in the United States: 1850–1887, Bulletin of the University of Wisconsin no. 342 (Madison: University of Wisconsin, 1910); and Donald V. Harper, Transportation in America: Users, Carriers, Government (Englewood Cliffs, NJ: Prentice Hall, 1978).
