The Robinson Library >> Economics >> Transportation and Communications >> Railroads and Rapid Transit Systems
Interstate Commerce Commission

an independent agency of the United States government responsible for enforcing federal laws concerned with the transportation of passengers and property by land and water across state lines

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The first U.S. railroads, built between 1830 and 1850, were short lines that competed with the canal, river, and highway transportation of the time. Railroad monopolies began developing in the 1850's, and the previously small, local railroads began to combine in order to provide services over increasingly longer distances. These combinations made railway travel more efficient than highway and water transportation. In many cases, the more powerful and efficient railway systems eliminated competition, and most cities and towns came to depend on a single railroad for commerce and transportation.

The railroads soon began to abuse their position. They often charged higher rates for short hauls than for long hauls over the same route. Some discriminated against farmers and other small shippers by charging higher rates for smaller shipments. Some railroads made agreements to carry one shipper's products to the exclusion of that shipper's competitors, and often two or more railroads would make agreements amongst themselves that resulted in higher prices for everyone.

In the 1860's, the public began to demand controls over the railroads. Attempts to control railroads by state laws were unsatisfactory. Because railroads operated under state charters that varied widely, the federal and state governments had no way of determining whether railroads were obeying the laws.

The Act to Regulate Commerce, passed on February 4, 1887, required that railroads charge fair rates to all of their customers and make those rates public; the railroads thus became the first industry subject to federal regulation. The act also established the Interstate Commerce Commission, the responsibility of which was to investigate and prosecute companies that violated the law. Determining which rates were discriminatory proved to be difficult, however, and the law was very ineffective. Early in its history, the commission found that the courts generally ruled in favor of the companies when cases were prosecuted; of the sixteen cases heard by the U.S. Supreme Court between 1887 and 1906, the commission's decision was only upheld once. The commission obtained powers to enforce its orders under the Hepburn Act of 1906, which empowered it to change a railroad rate to one it considered "just and reasonable," after a full hearing of complaint. This act also gave it authority over express companies and sleeping-car companies. The Mann-Elkins Act of 1910 placed the burden of proof on the railroads, meaning that, if challenged, a railroad would have to demonstrate that a rate was reasonable. The Panama Canal Act of 1912 gave the ICC the power to establish through routes and maximum joint rates for rail and water transportation; the Transportation Act of 1920 expanded this rate-making power. The Motor Carrier At of 1935 gave the commission authority over motor vehicles (trucks), the Transportation Act of 1940 expanded its authority to include water carriers, and the Interstate Commerce Act of 1942 provided jurisdiction over freight forwarders.

The federal government began loosening controls over the railroad industry in the late-1950's, but by this time the railroads were losing business to trucks and airplanes. By 1995, the ICC had lost most of its mandate, and it was dissolved by the ICC Sunset Act, which was signed by President Bill Clinton on December 29, 1995. The Surface Transportation Board, under the auspices of the U.S. Department of Transportation, now performs the few regulatory tasks that survived the ICC's dissolution.

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The Robinson Library >> Economics >> Transportation and Communications >> Railroads and Rapid Transit Systems

This page was last updated on April 13, 2017.