Interstate Commerce Commission

The rise of a national railway network linked geographic areas into a system of economic interdependence, exposing the inadequacies of the existing system of state regulation. The ICC became the instrument by which Congress attempted to rationalize national markets and the rail transportation system.

The political motivation behind the ICC is frequently told in terms of a struggle between radical western farmers and ruthless eastern railroad moguls. While dramatic,

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this interpretation seriously underestimates the variety of economic interests touched by the national rail network. Eastern merchants, midwestern wholesalers and merchants, and western farmers had an interest, though not necessarily the same interest, in having federal regulation of railroad freight rates. So too did the railroads. There was fierce competition on the trunk lines (lines connecting western agricultural regions, midwestem trade centers, and eastern manufacturing and port cities) at the same time that extensive monopolies existed in localities served by branch and feeder lines. The railroads attempted to deal with these problems through pooling arrangements, which were private agreements among carriers to serve particular areas and to charge fixed prices. The pooling agreements were constantly breaking down, and the companies could not seek judicial relief because the agreements lacked the force of law. The rail carriers also engaged in discriminatory pricing practices based on the length of haul, with shorter hauls, where local feeder lines were involved, often costing more than trips across several states on the more competitive trunk lines. To encourage some larger customers, railroads gave rebates while charging the posted rate to smaller customers.

Congress debated the creation of the ICC for a decade. It finally acted only after the Supreme Court, in Wabash, St. Louis & Pacific Railroad Company v. Illinois ( 1886), struck down an Illinois railroad regulation statute as an unconstitutional interference with the exclusive power of Congress to regulate interstate commerce. The Wabash case sounded the death knell for most state regulation of railroads moving in interstate commerce and invited congressional action.

The Interstate Commerce Act treated the major discriminatory practices undertaken by the railroads. The act provided that all customers had to be treated in a similar fashion. It declared rebates illegal, forbade pooling, and ended long-haul, short-haul discrimination by requiring that "all charges . . . be reasonable and just." ²⁹

Congress created a commission of five members to hear complaints about railroad practices and to undertake investigations on its own initiative. The president appointed the members of the commission with the advice and consent of the Senate, and they served staggered terms at the pleasure of the president for a maximum of six years. No more than three commissioners could come from the same political party, diminishing fears of partisan control of commission policy, but falling short of the reformers' demands for a body of apolitical experts. President Grover Cleveland appointed Thomas M. Cooley chairman of the the commission. Cooley was a former judge of the Michigan Supreme Court and one of the nation's most influential writers of legal treatises that advocated laissez-faire.

The law was a compromise among competing interests, and it languished for two decades. To some extent, Cooley's leadership, which was favorable to the railroads, worked against the commission's authority. The Supreme Court, furthermore, sliced away at the few initiatives that the commission did take. Even more important, however, was the measure itself, which put the commission in the untenable position of having to balance too many interests with too little authority to do so. Congress had been unable, in creating the commission, to transcend the pluralism of U.S. politics with the principle of independent regulation by experts, and the result was that the conflicting interests within society that had prompted passage of the legislation to begin with were translated into the commission itself.

The commission began to attain real significance during the Progressive era when

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Congress enhanced its enforcement and oversight functions. President Theodore Roosevelt had made greater authority for the ICC a major goal, and he obtained some of it from Congress in the Hepburn Railway Act of 1906. That measure gave the ICC the power to set and put into effect maximum rates upon complaint of a shipper and also the authority to examine railroad books and prescribe uniform bookkeeping. The need to mobilize the economic resources of the United States during World War I carried the regulatory impulse farthest. In December 1917 the Railroad War Board, which Congress had created to bring order to the nation's sprawling transportation system, nationalized the railroads.

Despite its shortcomings, the original ICC was an important event in the history of nineteenth-century law in the United States. It provided the building block upon which the administrative state of the twentieth century subsequently rose.

Date: 2015-01-29; view: 628