Interstate Commerce Act of 1887

Interstate Commerce Act of 1887

The Interstate Commerce Act of 1887 is a United States federal law that was designed to regulate the railroad industry, particularly its monopolistic practices.[1] The Act required that railroad rates be "reasonable and just," but did not empower the government to fix specific rates. It also required that railroads publicize shipping rates and prohibited short haul/long haul fare discrimination, a form of price discrimination against smaller markets, particularly farmers. The Act created a federal regulatory agency, the Interstate Commerce Commission (ICC), which it charged with monitoring railroads to ensure that they complied with the new regulations.

The Act was the first federal law to regulate private industry in the United States.[2] It was later amended to regulate other modes of transportation and commerce.

Contents

Background of the Act

The Act was passed in response to rising public concern with the growing power and wealth of corporations, particularly railroads, during the late 19th century. Railroads had become the principal form of transportation for both people and goods, and the prices they charged and the practices they adopted greatly influenced individuals and businesses. In some cases, the railroads were perceived to have abused their power as a result of too little competition. Railroads also banded together to form pools and trusts that fixed rates at higher levels than they could otherwise command.[3]

Larger railroads alarmed populist activists by attempting to engage in predatory pricing. In spite of its broad appeal as a means of drumming up support for price regulation, predatory pricing is not a sustainable practice. Even if a competitor is forced out of business, that firm's capital remains intact and may be purchased by a new entrepreneur. The so-called predator cannot engage in such pricing indefinitely.[citation needed]

Railroads often charged more for short hauls than for long hauls. The practice was decried as one that discriminated against smaller businesses, when it was in fact a practice based on scale economies.

Responding to a widespread public outcry, states passed numerous pieces of legislation. Through the 1870s various constituencies, notably the Grange movement representing farmers, lobbied Congress to regulate railroads, but Congress declined to step in. However, in a decision in 1886, Wabash, St. Louis & Pacific Railway Company v. Illinois,[4] the U.S. Supreme Court ruled that state laws regulating interstate railroads were unconstitutional because they violated the Commerce Clause of the Constitution, which gives Congress the exclusive power "to regulate Commerce with foreign nations, and among the several States, and with the Indian Tribes."[5] The following year, Congress passed the Interstate Commerce Act, which was signed into law by President Grover Cleveland on February 4, 1887.[6]:12

The act worked to keep rates and railroad revenue up on routes where competition existed.[7] It did this by attempting to force publicity about rates and make rebates and discrimination illegal. ('Discrimination' meant lower rates for certain customers, e.g. politicians, large customers, sharp bargainers, long haul shippers, shippers in competitive markets, low season travelers.)[7] Railroads saw that competition made it hard to pay their stockholders and bondholders the amount of money promised them, and competition was therefore "bad." [8]

Jurisdiction of the Act

The act also created the Interstate Commerce Commission (ICC), the first independent regulatory agency of the U.S. government. As part of its mission, the ICC heard complaints against the railroads and issued cease and desist orders to combat unfair practices. While the ICC was empowered to investigate and prosecute railroads and other transportation companies that were alleged to have violated the Act, its jurisdiction was limited to companies that operated across state lines. The courts further narrowed the agency's authority. By 1906, the U.S. Supreme Court had ruled in favor of a railroad company in fifteen out of the sixteen cases over which it presided.[citation needed]

The commission later regulated many other forms of surface transportation, including trucking and bus transportation. Congress abolished the ICC in 1995 (see Interstate Commerce Commission Termination Act) and many of its remaining functions were transferred to a new agency, the Surface Transportation Board.[9]

Amendments

Early 20th century

Congress passed a minor amendment to the Act in 1903, the Elkins Act.[10] Major amendments were enacted in 1906 and 1910. The Hepburn Act of 1906 authorized the ICC to set maximum railroad rates, and extended the agency's authority to cover bridges, terminals, ferries, sleeping cars, express companies and oil pipelines.[11] The Mann-Elkins Act of 1910 strengthened ICC authority over railroad rates and expanded its jurisdiction to include regulation of telephone, telegraph, and cable companies.[12]

Motor Carrier Act of 1935

In 1935, Congress passed the Motor Carrier Act, which amended the Interstate Commerce Act to regulate bus lines and trucking as common carriers.[13]

Later amendments

Congress enacted simplifying and reorganizing amendments in 1978, 1983 and 1994.[14]

Deregulation

Congress passed various railroad deregulation measures in the 1970s and 1980s. The Railroad Revitalization and Regulatory Reform Act of 1976 (often called the "4R Act") gave railroads more flexibility in pricing and service arrangements. The 4R Act also transferred some powers from the ICC to the newly-formed United States Railway Association, a government corporation, regarding the disposition of bankrupt railroads.[15] The Staggers Rail Act of 1980 further reduced ICC authority by allowing railroads to set rates more freely and become more competitive with the trucking industry.[16]

The Motor Carrier Act of 1980 deregulated the trucking industry.[17]

See also

  • History of rail transport in the United States

References

  1. ^ Interstate Commerce Act of 1887, ch. 104, 24 Stat. 379, approved 1887-02-04.
  2. ^ U.S. National Archives and Records Administration. Washington, D.C. "Our Documents: Interstate Commerce Act (1887)." Accessed 2010-10-19.
  3. ^ Johnson, Emory R.; Van Metre, Thurman W. (1918). "Chapter XVIII. Pools and Traffic Associations". Principles of Railroad Transportation. New York: D. Appleton. pp. 292–307. http://books.google.com/books?id=zi4pAAAAYAAJ&dq=johnson%20principles%20of%20railroad%20transportation&pg=PA292#v=onepage&q&f=false. 
  4. ^ U.S. Supreme Court. Wabash, St. Louis & Pacific Railway Company v. Illinois, 118 U.S. 557 (1886), 7 S. Ct. 4, 30 L. Ed. 244
  5. ^ U.S. Constitution, Article I, Section 8, Clause 3.
  6. ^ Kohlmeier, Louis M., Jr. (1969). The Regulators: Watchdog Agencies and the Public Interest. New York: Harper & Row. ISBN 978-0060437473. 
  7. ^ a b Acworth, W.M. (1905-12-01). "The Recent History of Federal Control of Railroads in the United States". Railroad Gazette XXXIX (22): 170. http://books.google.com/books?id=yJxMAAAAYAAJ&pg=RA1-PA170&dq=railroad+gazette+1887&hl=en&ei=VtfxTKjWD4W0lQeks_D7DA&sa=X&oi=book_result&ct=result&resnum=3&ved=0CDYQ6AEwAg#v=onepage&q=railroad%20gazette%201887&f=false. 
  8. ^ White, Richard. "Kilkenny Cats: Transcontinental railroads, destructive competition, and the odd road to North American modernity." Stanford University.
  9. ^ Interstate Commerce Commission Termination Act, Pub.L. 104-88, 109 Stat. 803; 1995-12-29.
  10. ^ Elkins Act, 57th Congress, Sess. 2, ch. 708, 32 Stat. 847, approved 1903-02-19.
  11. ^ Hepburn Act of 1906, 59th Congress, Sess. 1, ch. 3591, 34 Stat. 584, approved 1906-06-29.
  12. ^ Mann-Elkins Act of 1910, 61st Congress, ch. 309, 36 Stat. 539, approved 1910-06-18.
  13. ^ Motor Carrier Act of 1935, 49 Stat. 543, ch. 498, approved 1935-08-09.
  14. ^ Revised Interstate Commerce Act of 1978, Pub.L. 95–473, 92 Stat. 1337, 49 U.S.C. § 10101, approved 1978-10-17. Pub.L. 97–449, 96 Stat. 2413, approved 1983-01-12. Pub.L. 103–272, approved 1994-07-05.
  15. ^ Railroad Revitalization and Regulatory Reform Act, Pub. L. 94-210, 90 Stat. 31, 45 U.S.C. § 801, approved 1976-02-05.
  16. ^ Staggers Rail Act of 1980, Pub. L. 96-448, 94 Stat. 1895, approved 1980-10-14.
  17. ^ Motor Carrier Act of 1980, Pub. L. No. 96-296, 94 Stat. 793, approved 1980-07-01.

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