When the U.S. Congress passed the Interstate Commerce Act, it made the railroad industry the first industry to be subject to federal regulation in the United States. The act created the Interstate Commerce Commission to enforce its regulations.
By the 1880’s, the United States had experienced more than fifty years of railroad expansion. Transcontinental railroad lines tied the nation together, while spurring the growth of industry and agriculture through the rapid transportation of both raw materials and finished goods. During much of this time, government had served as a willing partner to the rapid growth of the railroads. Both national and state governments had provided land for the railroad right-of-way, as well as other subsidies to underwrite the cost of this vital form of transportation. By the end of the Civil War (1861-1865), however, many people in the United States had begun to have second thoughts about the railroads.
Although almost no one doubted the need for railroads, many criticized the business practices of the railroad companies. Consumers suffered when railroad companies experienced either too much or too little competition. In regions where one company dominated, that company often took advantage of its monopoly of the market and charged its customers exorbitant fees for necessary services. Where competition was intense, the railroads too often resorted to unfair practices in order to attract and retain the business of large-volume shippers. They reduced rates in some areas to meet competition and raised rates in noncompetitive areas to compensate. They also engaged in such practices as offering rebates or kickbacks to large-volume shippers at the expense of the average consumer. The railroads entered into agreements, often referred to as “pools,” among themselves to fix rates at a level higher than the free market permitted. They charged more for a short haul in order to offer special long-haul rates to large shippers.
The railroads also were guilty of watering their stock, or overcapitalizing issues, to bilk investors. These and other practices worked to the advantage of the railroads and a few favored customers. As a result of railroad manipulation of freight charges, it often cost small farmers more to ship their grain than they would receive in payment for it, while large mill owners would receive a discount on the shipment of the finished flour. The unethical business practices thus worked to the detriment of the ordinary shippers, farmers, and the public.
The states responded first to the demands for railroad reform. Many states passed laws that compelled railroads to offer standard rates for all, and many states set up regulatory boards to supervise the practices of the railroad companies. The states, however, could not supervise interstate operations. Farmers shipping grain from the Dakotas to Minnesota mills or cattle from Texas to Chicago slaughterhouses were not protected by individual state regulations. In addition, the state regulatory laws and boards often created more problems than they solved. Finally, the railroads resisted attempts at state regulation and fought enforcement in the courts. In October, 1886, the Supreme Court in Wabash, St. Louis, and Pacific Railway v. Illinois
Numerous groups and individuals had long pressed for national legislation to reform the railroads. Organizations of producers, shippers, and merchants demanded an end to practices by which railroad companies took advantage of the need for rail transportation. F. B. Thurber
John Henninger Reagan, a congressman from Texas and the chairman of the House Committee on Commerce, during the 1870’s and early 1880’s introduced many bills in Congress that would outlaw specific practices, such as pools, rebates, and price discrimination between long and short hauls. Reagan’s approach to the problem was an attempt to clean up the competition among the railroads on the assumption that fair competition was economically healthy for the entire nation. The proposed bills described what would constitute illegal practices but contained no provisions for investigation or regulation. Reagan’s attempts to regulate the railroads met with little success until the first administration of President Grover Cleveland
Cleveland, a Democrat, strongly opposed the growth of government but opposed the idea of government favors to business even more. Following the Supreme Court decision in Wabash, St. Louis, and Pacific Railway v. Illinois, Cleveland urged Congress to take action to regulate the railroads. This time, Congress seemed ready to pass regulatory legislation. Reagan once again introduced a bill in the House of Representatives, while in the Senate, Shelby Moore Cullom
Cullom’s approach, which emerged from extensive committee hearings, embodied a regulatory commission with broad powers to investigate and to bring into court railroad companies whose rates or practices were unfair. Cullom proposed that the federal government take positive action in laying down precisely what constituted unfair tactics and rates. The Reagan and Cullom bills went to a joint committee of the House and the Senate. President Cleveland
The act followed Reagan’s suggestions and prohibited specific abuses, such as long- and short-haul discrimination. It also created the Interstate Commerce Commission
The jubilation of railroad reformers in the wake of the Interstate Commerce Act’s passage was short-lived. The courts and the ICC itself seemed determined to frustrate substantive reform. The commission, whose first chairman was Thomas M.
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Cullom, Shelby Moore. Fifty Years of Public Service: Personal Recollections of Shelby M. Cullom. New York: Da Capo Press, 1969. A memoir by a politician who lived through some of the most volatile times in U.S. history. -
Jeffers, H. Paul. An Honest President: The Life and Presidencies of Grover Cleveland. New York: William Morrow, 2000. Jeffers portrays Cleveland as a staunch reformer, a man of high moral character and courage who restored dignity to the presidency. -
Jones, Alan R. The Constitutional Conservatism of Thomas McIntyre Cooley: A Study in the History of Ideas. New York: Garland, 1987. An intellectual history that helps clarify why the ICC accomplished little of substance with Cooley as its chairman. -
Neilson, James W. Shelby M. Cullom: Prairie State Republican. Urbana: University of Illinois Press, 1962. Biography of one of the prime movers behind the Interstate Commerce Act and its regulatory features. -
Reagan, John H. Memoirs, with Special Reference to Secession and the Civil War. Edited by Walter Flavius McCaleb. New York: AMS Press, 1978. Originally published in 1906, Reagan’s memoirs provide fascinating glimpses into the history of the Confederacy and Gilded Age politics in the United States. -
Stone, Richard D. The Interstate Commerce Commission and the Railroad Industry: A History of Regulatory Policy. New York: Praeger, 1991. Good, detailed history of the ICC and the growth of both railroads and regulations. -
Welch, Richard E. The Presidencies of Grover Cleveland. Lawrence: University Press of Kansas, 1988. A thorough examination of the Cleveland presidencies.
Congress Passes the National Bank Acts
National Grange Is Formed
Standard Oil Company Is Incorporated
Pendleton Act Reforms the Federal Civil Service
Harrison Signs the Sherman Antitrust Act
Birth of the People’s Party
Pullman Strike
Congress Passes Dingley Tariff Act
Grover Cleveland.