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Interstate Commerce Act of 1887

The Interstate Commerce Commission (ICC) was a former independent agency of the US Government, created by the Interstate Commerce Act of 1887 and existing until 1995. It was the first independent agency. Its mission was to regulate common carriers such as railroads and trucking.

Derived From: Interstate Commerce Act (1887), OurDocuments.Gov

In 1887 Congress passed the Interstate Commerce Act, making the railroads the first industry subject to Federal regulation. Congress passed the law largely in response to public demand that railroad operations be regulated. The act also established a five-member enforcement board known as the Interstate Commerce Commission. In the years following the Civil War, railroads were privately owned and entirely unregulated. The railroad companies held a natural monopoly in the areas that only they serviced.

Monopolies are generally viewed as harmful because they obstruct the free competition that determines the price and quality of products and services offered to the public. The railroad monopolies had the power to set prices, exclude competitors, and control the market in several geographic areas. Although there was competition among railroads for long-haul routes, there was none for short-haul runs. Railroads discriminated in the prices they charged to passengers and shippers in different localities by providing rebates to large shippers or buyers. These practices were especially harmful to American farmers, who lacked the shipment volume necessary to obtain more favorable rates.

Early political action against these railroad monopolies came in the 1870s from “Granger” controlled state legislatures in the West and South. The Granger Movement had started in the 1860s providing various benefits to isolated rural communities. State controls of railroad monopolies were upheld by the Supreme Court in Munn v. Illinois (1877). State regulations and commissions, however, proved to be ineffective, incompetent, and even corrupt. In the 1886 Wabash case, the Supreme Court struck down an Illinois law outlawing long-and-short haul discrimination. Nevertheless, an important result of Wabash was that the Court clearly established the exclusive power of Congress to regulate interstate commerce. (See Gibbons v. Ogden.)

The Interstate Commerce Act addressed the problem of railroad monopolies by setting guidelines for how the railroads could do business. The act became law with the support of both major political parties and pressure groups from all regions of the country. Applying only to railroads, the law required "just and reasonable" rate changes; prohibited special rates or rebates for individual shippers; prohibited "preference" in rates for any particular localities, shippers, or products; forbade long-haul/short-haul discrimination; prohibited pooling of traffic or markets; and most important, established a five-member Interstate Commerce Commission (ICC).

Years later the ICC would become the model for many other regulatory agencies, but in 1887 it was unique. The Interstate Commerce Act challenged the philosophy of laissez-faire economics by clearly providing the right of Congress to regulate private corporations engaged in interstate commerce. The act, with its provision for the ICC, remains one of America’s most important documents serving as a model for future government regulation of private business.


Pres. Taft signing law. Source: Senate

Mann-Elkins Act of 1910

"In the Mann-Elkins Act of 1910 [enacted June 18, signed by Pres. William Taft], Congress classified interstate telephone and telegraph operations as common carrier activities and empowered the ICC to regulate their rates [i.e., receive complaints and determine whether rates were "unjust" and "unreasonable."]. The basis for the legislation, clearly reflected in the legislation history, was Congressional concern about the monopoly characteristics of these telecommunications industries. The advocates of the legislation states:"

Now the telegraph line and the telephone line are becoming rapidly as much a part of the instruments of commerce and as much a necessity of commercial life as the railroad. One of the greatest monopolies in this country today is a system of telephone and telegraph lines; and if it is right and proper to regulate the great railroad systems of this country in the interest of commerce, it is equally right to limit the telegraph and telephone companies.

Why should not these necessary instrumentalities which the citizens have to use, which are monopolies in their particular lines of business, be required to make reasonable charges; and if they are [Jones A-78] unreasonable, why should not the citizen be permitted to appeal to the Interstate Commerce Commission to have it determined whether the charges are or are not reasonable?

William Jones, The Common Carrier Concept as Applied to Telecommunications. See also [Cherry p 18] [Iardella p 11] [Kende p. 10] [Iardella 9]

Text of Mann-Elkins Act

Sec. 7, Par. 1. Interstate Commerce Act made applicable to telegraph, telephone, and cable companies. - Sec. 7. That section one of the Act entitled "An Act to Regulate Commerce," approved February fourth, eighteen hundred and eighty-seven, as heretofore amended, is hereby now amended so as to read as follows:

"Section 1. That the provisions of this Act shall apply to any corporation or any person or persons engaged in the transportation of oil or other commodity, except water and except natural or artificial gas, by means of pipe lines, or partly by pipe lines and partly by railroad, or partly by pipe lines and partly by water, and to telegraph, telephone and cable companies (whether wire or wireless) engaged in sending messages from one State, Territory, or District of the United States, to any other State, Territory or District of the United States, or to any foreign country, who shall be considered to held to be common carriers within the meaning and purpose of this Act, and to any common carrier or carriers engaged in the transportation of passengers or property wholly by railroad (or partly by railroad and partly by water when both are used under a common control, management, or arrangement for a continuous carriage or shipment), from one State or Territory of the United States or District of Columbia, to any other State or Territory of the United States or the District of Columbia, or from one place in a Territory to another place in same Territory, or from any place in the United States to an adjacent foreign country, or from any place in the United States through a foreign country to another place in the United States, and also to the transportation in like manner of property shipped from any place in the United States to a foreign country and carried from such place to a port of transshipment, or shipped from a foreign country to any place in the United States carried to such place from a port of entry either in the United States or an adjacent country: Provided, however, That the provisions of this Act shall not apply to the transportation of passengers or property, or to the receiving, delivery, storage, or handling of property wholly within one State and not shipped to or from a foreign country from or to any State or Territory as aforesaid, nor shall apply to the transmission of messages by telephone, telegraph or cable wholly within one State and not transmitted to or from a foreign country from or to any State or territory as aforesaid.  

Papers

Telephone Companies Consolidation Act of 1921

"The Telephone Companies Consolidation Act of 1921 permitted the merger of telephone companies following ICC approval. The statute was premised on the conviction that the telephone industry was a 'natural monopoly.'" [Jones A-78]

Communications Act of 1934

In 1934 the ICC's jurisdiction over communications carriers was transferred to the newly created Federal Communications Commission. - the recommendation to transfer jurisdiction from the ICC to the FCC was based in part on the ICC's preoccupation with regulating railroads, the need for a specialized agency to deal with communications, and the growing power and skill of AT&T to influence governments.

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