INTERSTATE COMMERCE ACT 24 Stat. 379 (1887)

This act, which initiated federal authority in economic regulation, created an administrative commission to wield federal power. Congress's approach, in Isaiah Sharfman's words, was "tentative and experimental" because doubts existed whether the government could so act. The legislation nevertheless marked a first attempt to organize an increasingly chaotic field.

Until the 1870s railroads had been free to expand and operate, essentially unregulated, yet encouraged by land grants and public subsidies. As speculation, rate discrimination, and other abuses increased, popular opinion grew correspondingly negative. State legislatures, especially in the Midwest, began setting maximum rail rates and establishing commissions to maintain their reasonableness. Although the Supreme Court sustained such regulation in the granger cases (1877), it soon retrenched and, in Wabash, St. Louis & Pacific Railway v. Illinois, (1886) the Court asserted the states' inability to regulate rates even partly interstate. The Court thus created a vacuum—the states could not regulate and Congress had not regulated.

Compromise legislation finally passed Congress in 1887, the outcome of over 150 bills in nearly twenty years. The act applied to "any common carrier or carriers engaged in the [interstate or foreign] transportation of passengers or property," and specifically exempted intrastate commerce. Reiterating the common law, the act ordered all charges to be "reasonable and just." The act created the interstate commerce commission (ICC), empowered it to set aside unjust rates, but neglected to give it the power to replace them with new ones. The ICC also had authority to investigate complaints; significantly, an individual need not demonstrate direct damage to file a complaint. Several sections forbade devices such as rebates, pooling, and long haul-short haul discrimination. The act also required publication of rate schedules, rendering the carriers liable for injuries sustained as a result of any violations. Courts were to consider ICC findings prima facieevidence but commission orders became effective immediately only if voluntarily obeyed. Carriers took advantage of this loophole to appeal virtually every order, leaving them free to disregard the ICC until a court sustained it. Demanding to hear cases de novo, the courts implicitly invited the carriers to withhold evidence from the ICC; courts reversed ICC orders regularly on both legal and policy grounds. As Sharfman noted, the commission's powers were thus "restricted in scope and feeble in effect." In 1897 the Supreme Court dealt the ICC two stunning blows. Even though the act had not expressly granted the ICC rate-setting authority, the commission had assumed the power. In interstate commerce commission v. cincinnati, new orleans & texas pacific railway, the Court denied the commission this power. ICC v. Alabama Midland Railway Co. (1897) rendered the long haul-short haul clause a dead letter.

In part because of the judicial evisceration of the act, Congress amended it nearly a dozen times by 1925. Among the most important supplementary legislation were the elkins act, the hepburn act, and the mann-elkins act. The Supreme Court endorsed Congress's efforts in several cases, culminating in interstate commerce commission v. illinois central railroad (1910).

David Gordon
(1986)

Bibliography

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

Sharfman, Isaiah L. 1931 The Interstate Commerce Commission. Vol. I. New York: Commonwealth Fund.