Interstate Commerce Commission.

Although the Constitution (Art. I, sec. 8) gave Congress the power to regulate interstate commerce, Congress neglected to regulate railroads until 1887, when it passed the Interstate Commerce Act (ICA) establishing the Interstate Commerce Commission (ICC). Prior to this federal action, individual states established railroad commissions, some of which regulated railroad rates to eliminate rampant discrimination. The Supreme Court declared state rate regulation constitutional in *Munn v. Illinois (1877), when it ruled that in the absence of federal legislation state legislatures could regulate interstate railroads. State regulation, however, made rates even more chaotic, and the Court in *Wabash, St. Louis & Pacific Railway Co. v. Illinois (1886) concluded that interstate transportation charges could be regulated only by Congress.

Although the Supreme Court in effect forced the creation of the ICC, the Court retained the authority to oversee rail rates. In 1890 it declared that due process demanded that rates set by a state commission be subject to judicial review; in *Smyth v. Ames (1898), the Court decided that railroads were constitutionally entitled to a fair return on their property (see due process, substantive). The Court also denied that the ICC had implicit rate-making authority. Even when agreeing with the ICC, the Court often restricted the powers of the agency. In U.S. v. Trans-Missouri Freight Association (1897), the Court decided that rate and tonnage agreements among railroads restrained trade and violated the *Sherman Antitrust Act rather than the anti-pooling section of the ICA. The Court also destroyed the ICC’s power to prevent the long-short-haul abuse in ICC v. Alabama Midland Railway (1897).

During the Progressive Era the Supreme Court responded to the temper of the times and helped (p. 505) make the ICC a powerful regulatory agency (see progressivism). After the Hepburn Act (1906) gave the ICC power to set rates, opponents of regulation were disappointed when the Court refused to exercise a broad *judicial review of rates. Regarding rate setting as an administrative function, the Court determined only that the ICC had power to set rates, not whether it exercised that power with wisdom. The Court also, in the *Minnesota Rate Cases (1913), allowed the ICC to regulate intrastate rates that discriminated against interstate commerce, elevating the ICC over the conflicting laws and regulations of state legislatures and commissions. Still reflecting a Progressive spirit, the Court in Dayton-Goose Creek Railway v. U.S. (1924) urged the ICC to play a positive, creative role in building an adequate rail system and agreed that the railroads should be put “more completely than ever under the fostering guardianship and control” of the ICC (p. 478).

However, when the ICC refused to lead, the Court did not appear dismayed. It even objected to occasional attempts by the ICC to take the initiative. In 1931 the Court blocked a rare effort by the ICC to prevent the cheating of bondholders in a railroad reorganization scheme, and in 1933 it reversed the ICC’s only order to a railroad to build an extension line. Since the ICC failed to coordinate transportation in the 1920s, the agency was largely bypassed during the crises of the *Great Depression and war during the 1930s and 1940s.

In the post–World War II years the ICC failed to cope with the nation’s transportation problems. By the 1960s the Court tried to clarify the ICC’s hazy but crucial minimum-rate policy, which determined whether railroads, trucks, or barges would carry freight between competing points. The ICC tended to preserve existing relationships and avoid destructive intermodal competition. The Court, however, forced the ICC to allow more competition even when rates failed to cover fully distributed costs but at least covered out-of-pocket costs. Subsequently, the Court protected a low-cost mode of transportation by insisting that a rate be based on fully distributed costs. Having moved the ICC to foster intermodal competition as long as it was not predatory and having nudged it in the direction of a more rational rate system, the Supreme Court remained aloof in the 1970s and 1980s while the nation allowed the ICC to atrophy and turned to the panaceas of mergers and deregulation to cure its transportation malaise. Although in 1985 the Office of Management and Budget proposed that Congress abolish the ICC, it lingered on until the last day of 1995, when it finally succumbed.

See also administrative state; commerce power.

Ari Hoogenboom and Olive Hoogenboom, A History of the ICC: From Panacea to Palliative (1976).

Ari Hoogenboom