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The Interstate Commerce Act of 1887 is a
United States federal law The law of the United States comprises many levels of codified and uncodified forms of law, of which the most important is the nation's Constitution, which prescribes the foundation of the federal government of the United States, as well as va ...
that was designed to regulate the railroad industry, particularly its
monopolistic A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
practices. 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 or long haul fare discrimination, a form of
price discrimination Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider in different markets. Price discrimination is distinguished from product different ...
against smaller markets, particularly farmers in Western or Southern Territory compared to the Official Eastern states. The Act created a federal
regulatory agency A regulatory agency (regulatory body, regulator) or independent agency (independent regulatory agency) is a government authority that is responsible for exercising autonomous dominion over some area of human activity in a licensing and regulati ...
, the
Interstate Commerce Commission The Interstate Commerce Commission (ICC) was a regulatory agency in the United States created by the Interstate Commerce Act of 1887. The agency's original purpose was to regulate railroads (and later trucking) to ensure fair rates, to eliminat ...
(ICC), which it charged with monitoring railroads to ensure that they complied with the new regulations. With the passage of the Act, the railroad industry became the first industry subject to federal regulation by a regulatory body. It was later amended to regulate other modes of transportation and commerce.


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 nineteenth 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 A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the " sett ...
that fixed rates at higher levels than they could otherwise command. Responding to a widespread public outcry, states passed numerous pieces of legislation. Through the 1870s various constituencies, notably the
Grange movement The Grange, officially named The National Grange of the Order of Patrons of Husbandry, is a social organization in the United States that encourages families to band together to promote the economic and political well-being of the community and ...
representing farmers, lobbied
Congress A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of ...
to regulate railroads. While the Senate would investigate and report its findings and recommendations in 1874, Congress declined to step in, mirroring the lack of consensus in approach. In the 1886 decision on '' Wabash, St. Louis & Pacific Railway Company v. Illinois'' however, the
U.S. Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
ruled that state laws regulating interstate railroads were
unconstitutional Constitutionality is said to be the condition of acting in accordance with an applicable constitution; "Webster On Line" the status of a law, a procedure, or an act's accordance with the laws or set forth in the applicable constitution. When l ...
because they violated the
Commerce Clause The Commerce Clause describes an enumerated power listed in the United States Constitution ( Article I, Section 8, Clause 3). The clause states that the United States Congress shall have power "to regulate Commerce with foreign Nations, and among ...
of the
Constitution A constitution is the aggregate of fundamental principles or established precedents that constitute the legal basis of a polity, organisation or other type of entity and commonly determine how that entity is to be governed. When these princi ...
, which gives Congress the exclusive power "to regulate Commerce with foreign nations, and among the several States, and with the Indian Tribes." With many of those questions of approach decided, Congress passed the Interstate Commerce Act the following year; it was signed into law by President
Grover Cleveland Stephen Grover Cleveland (March 18, 1837June 24, 1908) was an American lawyer and politician who served as the 22nd and 24th president of the United States from 1885 to 1889 and from 1893 to 1897. Cleveland is the only president in American ...
on February 4, 1887. The act worked to keep rates and railroad revenue up on routes where competition existed. 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.) Railroads saw that competition made it hard to pay their stockholders and bondholders the amount of money promised to them, and competition was therefore "bad."


Jurisdiction of the act

The act also created the
Interstate Commerce Commission The Interstate Commerce Commission (ICC) was a regulatory agency in the United States created by the Interstate Commerce Act of 1887. The agency's original purpose was to regulate railroads (and later trucking) to ensure fair rates, to eliminat ...
(ICC), the first
independent regulatory agency A regulatory agency (regulatory body, regulator) or independent agency (independent regulatory agency) is a government authority that is responsible for exercising autonomous dominion over some area of human activity in a licensing and regulati ...
of the US government. As part of its mission, the ICC heard complaints against the railroads and issued
cease and desist A cease and desist letter is a document sent to an individual or business to stop alleged illegal activity. The phrase "cease and desist" is a legal doublet, made up of two near-synonyms. The letter may warn that, if the recipient does not disc ...
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. Over time the courts would further narrow the agency's authority, and in 1903 Congress established the
Department of Commerce and Labor The United States Department of Commerce and Labor was a short-lived Cabinet department of the United States government, which was concerned with fostering and supervising big business. Origins and establishment Calls in the United States fo ...
and its
Bureau of Corporations The Bureau of Corporations, predecessor to the Federal Trade Commission, was created as an investigatory agency within the Department of Commerce and Labor in the United States. The Bureau and the Department were created by Congress on February 14 ...
to study and report on wider industries and their monopolistic practices. By 1906, the Supreme Court had ruled in favor of a railroad company in fifteen out of the sixteen cases over which it presided.


Amendments


Early twentieth century

Congress passed a minor amendment to the Act in 1903, the
Elkins Act The Elkins Act is a 1903 United States federal law that amended the Interstate Commerce Act of 1887. The Act authorized the Interstate Commerce Commission (ICC) to impose heavy fines on railroads that offered rebates, and upon the shippers that ac ...
. Major amendments were enacted in 1906 and 1910. The
Hepburn Act The Hepburn Act is a 1906 United States federal law that expanded the jurisdiction of the Interstate Commerce Commission (ICC) and gave it the power to set maximum railroad rates. This led to the discontinuation of free passes to loyal shippers. ...
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. 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. The
Valuation Act The Valuation Act is a 1913 United States federal law that required the Interstate Commerce Commission (ICC) to assess the value of railroad property. This information would be used to set rates for the transport of freight. Background The act was ...
of 1913 required the ICC to organize a Bureau of Valuation that would assess the value of railroad property. This information would be used to set freight shipping rates.


Motor Carrier Act of 1935

In 1935,
Congress A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of ...
passed the Motor Carrier Act, which amended the Interstate Commerce Act to regulate
bus A bus (contracted from omnibus, with variants multibus, motorbus, autobus, etc.) is a road vehicle that carries significantly more passengers than an average car or van. It is most commonly used in public transport, but is also in use for cha ...
lines and
trucking Road transport or road transportation is a type of transport using roads. Transport on roads can be roughly grouped into the transportation of goods and transportation of people. In many countries licensing requirements and safety regulations e ...
as
common carrier A common carrier in common law countries (corresponding to a public carrier in some civil law systems,Encyclopædia Britannica CD 2000 "Civil-law public carrier" from "carriage of goods" usually called simply a ''carrier'') is a person or compan ...
s.


Later amendments

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


Deregulation

Congress passed various railroad
deregulation Deregulation is the process of removing or reducing state regulations, typically in the economic sphere. It is the repeal of governmental regulation of the economy. It became common in advanced industrial economies in the 1970s and 1980s, as a ...
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 The United States Railway Association (USRA) was a government-owned corporation created by United States federal law that oversaw the creation of Conrail, a railroad corporation that would acquire and operate bankrupt and other failing freight rail ...
, a government corporation, regarding the disposition of bankrupt railroads. The
Staggers Rail Act The Staggers Rail Act of 1980 is a United States federal law that deregulated the American railroad industry to a significant extent, and it replaced the regulatory structure that had existed since the Interstate Commerce Act of 1887. Backgroun ...
of 1980 further reduced ICC authority by allowing railroads to set rates more freely and become more competitive with the trucking industry. The
Motor Carrier Act of 1980 The Motor Carrier Regulatory Reform and Modernization Act, more commonly known as the Motor Carrier Act of 1980 (MCA) is a United States federal law which deregulated the trucking industry. Background Motor carrier deregulation was a part of a s ...
deregulated the trucking industry.


Abolition

Congress abolished the ICC in 1995 (''see''
Interstate Commerce Commission Termination Act The ICC Termination Act of 1995 is a United States federal law enacted in 1995 that abolished the Interstate Commerce Commission and simultaneously created its successor agency, the Surface Transportation Board The Surface Transportation Board (STB ...
) and many of its remaining functions were transferred to a new agency, the
Surface Transportation Board The Surface Transportation Board (STB) of the United States is a federal, bipartisan, independent adjudicatory board. The STB was established on January 1, 1996, to assume some of the regulatory functions that had been administered by the Interstat ...
.Interstate Commerce Commission Termination Act, , ; 1995-12-29.


See also

*
History of rail transport in the United States History (derived ) is the systematic study and the documentation of the human activity. The time period of event before the invention of writing systems is considered prehistory. "History" is an umbrella term comprising past events as well ...


References


External links


"People & Events: Interstate Commerce Commission"
- PBS Online {{Grover Cleveland 1887 in American law history of rail transportation in the United States Interstate Commerce Commission United States federal transportation legislation United States railroad regulation