Interstate Commerce Commission

The United States Interstate Commerce Act of 1887, signed into law by President Grover Cleveland, created the Interstate Commerce Commission. The Commission's seven members were appointed by the President with the consent of the Senate. This was the first of the independent commissions or so-called Fourth Branch agencies. It regulated railroads (and later trucking) to ensure fair rates, to eliminate rate discrimination, and to regulate other aspects of common carriers. The Commission had a troubled start because Congress gave it a mandate without authorizing it to enforce the law--in other words, Congress had created a regulatory body without the power to regulate. Its powers were later expanded. Subsequent legislation permitted the ICC to set maximum as well as minimum rates, and, later, removed railroad safety from the purview of the Commission. A long-standing controversy was how to interpret language in the Act that banned railroads from charging more for a shorter "haul" than a longer one. Enforced in a literal manner, this clause could have driven many railroads out of business.

The creation of the ICC was the culmination of widespread and longstanding anti-railroad agitation. Western farmers were the dominant force behind the anti-railroad movement, but Westerners generally--especially those living in small towns--believed that the railroads possessed economic power that they systematically abused. A central issue was rate discrimination between similarly situated customers and similarly situated communities. Other potent issues included alleged attempts by railroads to obtain influence over city and state governments and the widespread practice of granting free transportation in the form of yearly passes to opinion leaders (elected officials, newspaper editors, ministers, and so on) so as to dampen any opposition to railroad practices. Some practices were presumably less common; the muckraker Charles Edward Russell claimed that the railroad that served his home-town had refused to ship newsprint to a newspaper editor because the editor had attacked the railroad in print.

Various sections of the Interstate Commerce Act banned "personal discrimination" and gave the Commission the power to determine "reasonable" rates. Equally significant, the Act required that rates be published.

Between 1910 and 1934, the ICC had the authority to regulate interstate telephone services. (The very name of the agency suggests that lawmakers may have planned for it to become the "single roof" over many disparate regulatory efforts.) Under the Communications Act of 1934, this authority was transferred to the new Federal Communications Commission.

Historians, political scientists, and economists have used the Interstate Commerce Commission as a classic example of regulatory capture. They accused the Commission of acting in the interests of railroads and trucking companies. The ICC, they, set rates at artificially high levels and kept our new competitors through a restrictive permitting process. Other critics concede that given the monopolistic nature of the railroad industry in 1887, something like the Interstate Commerce Commission may have been necessary. These critics charge that the ICC's "regulated monopoly" model was largely obsolete by the 1920s, when trucks had emerged to compete with railroads--and air-freight was on the horizon. Hence the ICC's powers should have been drastically curtailed sometime before World War II. For these critics, the ICC serves as an example of the federal government's failure to abandon projects that no longer serve the public interest. By 1970, expert support for the traditional forms of regulation had reached such a low point that The Interstate Commerce Omission, an expose written under the auspices of consumer advocate Ralph Nader, failed to call for more zealous regulators or better regulation. The solution, the report concluded, was deregulation, i.e., permitting free entry into trucking and railroads.

The Commission's friendly relationship with the industries it regulated is evident in several early civil rights cases. Throughout the South, the railroads had established segregated facilities for sleeping cars, coaches, and dining cars. At the same time, the plain language of Interstate Commerce Act (forbidding "undue or unreasonable preference" as well as "personal discrimination") could be reasonably seen as an invitation for activist regulators to chip away at racial discrimination. In at least two landmark cases, however, the Commission sided with the railroads rather than with the African-American passengers who had complained to the Commission. In both Mitchell v. U.S. (1941) and Henderson v. U.S. (1950), the U.S. Supreme Court took a more expansive view of the Act than the Commission. It was not until several months after a Supreme Court decision Boynton v. United States and the Freedom Rides of 1962 (in which activists engaged in direct action to desegregate interstate buses) did the ICC ban discrimination in buses and bus stations.

Congress passed several deregulation measures in the 1970s and 1980s. In 1995, when most of the ICC's powers had been eliminated, the remaining functions of the Commission were transferred to the Surface Transportation Board.

The ICC served as a model for future regulatory efforts at both the state and federal levels. Unlike, for example, state medical boards (historically administered by the doctors themselves), the ICC's commissioners were full-time regulators who could have no economic ties to the industry they regulated. Later state and federal agencies adopted this structure. And like the ICC, many of the new agencies were multi-headed independent commissions with staggered terms for the commissioners. At the federal level, agencies patterned after the ICC included the Federal Trade Commission (1914), the Civil Aeronautics Board (1940), the National Labor Relations Board (1935), the Federal Communications Commission (1933), the Securities and Exchange Commission (1933), and the Consumer Product Safety Commission (1975). In recent decades, this model of regulation has gone out of fashion; the newer agencies generally have single heads appointed by the President, and are housed inside executive Departments (e.g., the Occupational Safety and Health Administration(1970) and the Transportation Security Administration(2002) ).

International Influence

The Interstate Commerce Commission had a strong influence on the founders of Australia. The Constitution of Australia provides (ss. 101-104; also s. 73) for the establishment of an Inter-State Commission, modelled after the United States' Interstate Commerce Commission. However, these provisions have largely not been put into practice; the Commission existed between 1913-1920, and 1975-1989, but never assumed the role which Australia's founders had intended for it. (See discussion: Parliament of Victoria (Federal-State Relations Committee), AUSTRALIAN FEDERALISM: THE ROLE OF THE STATES, October 1998.)