Interstate Commerce Act

• Author: Jeffrey Lehman, Shirelle Phelps

Page 463

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...