Early in 1887, Congress passed and President Grover Cleveland signed the Act to Regulate Commerce. Its chief purpose was to bring all railroads engaged in interstate commerce under federal regulation. The Interstate Commerce Commission (ICC), consisting of five members to be appointed by the president with the advice and consent of the Senate, was created, and its duties were set forth. First, the commission was required to examine the business of the railroads; to this end, it could subpoena witnesses and ask them to produce books, contracts, and other documents. Second, the commission was charged with hearing complaints that arose from possible violations of the act and was empowered to issue cease-and-desist orders if unlawful practices were discovered. The third duty of the commission was to require railroads to submit annual reports based on a uniform system of accounts. Finally, the commission was required to submit to Congress annual reports of its own operations.
The Act to Regulate Commerce seemingly prohibited all possible unethical practices. Section 1 stated that railroad rates must be “just and reasonable.” Section 2 prohibited personal discrimination; a lower charge could no longer be made in the form of a “special rate, rebate, drawback, or other device.” Section 3 provided that no undue preference of any kind should be accorded by any railroad to any shipper, any place, or any special kind of traffic. Section 4 enacted, in less drastic form, the pro rata clauses of the Granger legislation by prohibiting greater charges “for the transportation of passengers or of like kind of property, under substantially similar circumstances and conditions, for a shorter than for a longer distance, over the same line, in the same direction, the shorter being included in the longer distance.” Pooling was also prohibited.
The ICC was the first permanent independent federal regulatory agency. Its formation represented the beginning of direct government intervention in the economy on an expanding scale. The first decade and a half of the ICC, however, was filled with court challenges by the railroads. To clarify certain powers delegated by Congress, both the ICC and the railroads sought new legislation, especially regarding issues of price discrimination.
The Elkins Act of 1903 dealt solely with personal discrimination. The act made any departure from a published rate (giving a special rate to a favored customer) a misdemeanor. Until this time, the courts had overruled the commission in the enforcement of published rates by requiring that discrimination against or injury to other shippers of similar goods had to be proved. Convincing evidence suggests that the Elkins Act represented the wishes of a large majority of the railroad companies because it protected them from demands for rebates by powerful shippers and brought the government to their aid in enforcing the cartel prices set by the trunk line associates. The act stated that railroad corporations should be liable for any unlawful violation of the discrimination provisions. Up to this time, only officials and employees of a company had been liable for discriminatory actions; henceforth, the corporation itself would also be responsible.
To close remaining loopholes, Congress passed the Hepburn Act of 1906. This act extended the jurisdiction of the ICC to private-car companies that operated joint express, tank, and sleeping cars. Services such as storage, refrigeration, and ventilation were also made subject to the control of the commission. This was necessary because the management of the railroads could use such services to discriminate among shippers. For example, railroads normally charged for storage; if any shippers were not charged for this service, discrimination resulted. Perhaps most important was the change in the procedures for enforcement of the ICC’s orders. Until 1906, the ICC had to prove before the court the case it had adjudicated. The Hepburn Act put the burden of proof on the carriers. The right of judicial review was recognized, but the railroads—not the commission—had to appeal, and the presumption was for—not against—the Commission.
World History
