State Regulation of Other Corporations

Although the most dramatic examples of state regulation applied to railroads, legislators also exercised their police powers on behalf of other regulatory causes. Economic expansion, for example, fostered a middle class anxious to obtain life and accident insurance. Insurance companies rushed to meet this new business with aggressive marketing and sales programs that often promised far more than they delivered. The states responded with a torrent of legislation that touched every aspect of the business, and, as with railroads, they frequently turned to commissions to regulate the insurance business, with about the same results. What both the companies and the policyholders wanted, however, was some uniformity in underwriting practices, but Congress refused to encroach on an area that the states had historically controlled. Only late in the

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nineteenth century did the movement toward uniformity receive support when the Wisconsin legislature, with the support of the American Bar Association, in 1895 enacted the Standard Fire Insurance Policy, a model statute widely copied by other states.

State legislatures also invoked the police power to regulate the activities of foreign corporations (corporations chartered outside the state). The United States was still a nation of states, and each state regarded itself as a community of interest operating in a hostile environment of rival states. State and local officials, under the prodding of their constituents, passed laws that discriminated against out-of-state corporations. These included measures prescribing marketing and sales practices, imposing discriminatory licensing and taxation policies, preventing the entry of certain articles of commerce, and setting inspection standards for goods shipped into and out of the state.

The meat-packing business is a case in point and a demonstration as well of the way in which technological advances in the late nineteenth century reformulated traditional relationships within the federal system. Until the late 1870s, cattle were driven along major western trails to railheads in places such as Cheyenne, Wyoming and Ogallala, Nebraska. The live animals were then shipped by rail to the East, where they were slaughtered and sold. When fresh meat was available, consumers knew that it had been slaughtered nearby.

The introduction of refrigeration on railroad cars not only extended the potential market for dressed beef but, because unsalable parts of the animal could be disposed of before shipping, it also permitted the processor to save up to 35 percent on freight costs. By combining refrigeration with mass-processing technology and a strategic location amidst the Chicago stockyards, "the . . . packers were able to ship dressed beef thousands of miles and still undersell local butchers by a substantial margin." ¹⁸ Senate hearings in 1888 revealed unscrupulous practices by a few large meat packers to control the meat market, but these revelations produced few demands by local butchers for national regulation.

Instead, the Butcher's Protective Association in the following year successfully lobbied several state legislatures to pass acts that prohibited the sale of dressed beef, mutton, or pork unless it had been inspected by state officials twenty-four hours before slaughter. In many states these efforts failed, because the large packers threw all of their resources against the proposed legislation. Where lobbying proved ineffective, the companies broke the law, engaging corporate counsel to challenge these police- power measures in the federal courts as unconstitutional limitations on interstate commerce. The states eventually lost, overwhelmed by the dictates of an expanding national market.

The legislatures also undertook to regulate various occupations through licensing procedures. Between 1890 and 1910, occupational licensing first achieved a firm foothold in the statute books of most states, although lawyers, doctors, and school- teachers had been covered by statutes even earlier. The new laws extended to such diverse callings as plumbers, barbers, funeral directors, nurses, electricians, horse- shoers, and dentists. Frequently, the granting of the license was delegated to a commission or board that had to pass on the qualifications of the candidate. Moreover, much of this regulation was friendly. It was passed at the urging of the regulated occupational groups in order to "rationalize the trade and eliminate 'unfair competition." ¹⁹

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Date: 2015-01-29; view: 650