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The act purpose was to promote economic fairness and competitiveness and to regulate interstate commerce

congress consistently expanded the ICC's power such that despite it's intended purpose some believed that the ICC was often guilty of assisting companies it was token to regulate by favoring mergers that created unfair monopolies

one fact that i learn was that these companies want to restrictions of people's rights and give what the company only needs and not their benifical wealth.

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Instructions- Each of you will be assigned to one of the following. For your assigned number, create a post with 3 key facts about the assigned number. Also, add one comment on each of your classmates' posts.

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Instructions- Each of you will be assigned to one of the following. For your assigned number, create a post with 3 key facts about the assigned number. Also, add one comment on each of your classmates' posts.

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1)  Wabash, St. Louis & Pacific R.R. v. Illinois
2)  the Interstate Commerce Act
3)  Sherman Antitrust Act (1890),
4)  Northern Securities Co. v. United States (1904).

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1) A summary of what the law or court case was

2) One affect of the court case/law.

3) One other fact about it that you learned.

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1904
"The supremacy of the law is the foundation rock upon which our institutions rest."

In 1904 the U.S. Supreme Court ruled that the federal government had the right to break up a corporation called the Northern Securities Company. The company had been organized in November 1901 by Wall Street banker J. Pierpont Morgan (1837-1913) and railroad owner James J. Hill (1838-1916). The purpose of the new company was to acquire stock in two railroads, the Northern Pacific and the Great Northern. Both ran trains across the northern part of the United States, from the Great Lakes in the East to Puget Sound (near Seattle) in the West.

The government of President Theodore Roosevelt (1858-1919) filed suit to break up Northern Securities, on the grounds that such a company violated the 1890 Sherman Antitrust Act. The government argued that simply by forming a company that owned stock in two competing railroads (one of which, the Northern Pacific, was bankrupt), Morgan and Hill would be acting to discourage competition in the railroad business in the northern part of the country. The Sherman Antitrust Act was designed to prevent that very thing. (A trust was a corporation whose purpose was to own stock in other companies within the same industry; by owning many companies in the same industry, trusts were a way of controlling, or avoiding, competition.)

The owners of Northern Securities fought the government's lawsuit. They claimed that the federal government had no right under the U.S. Constitution to regulate the purchase of stocks in a company; instead, the companies told the Supreme Court, that right belonged to state governments. Since the Northern Securities Company had been formed under the laws of New Jersey, the federal government had no legal power to stop it. The company's lawyers also argued that there was a difference between conducting interstate commerce (business between states), which the federal government had the Constitutional power to regulate, and the act of buying or selling shares in a railroad company.

In effect, the legal argument that reached the Supreme Court in December 1903 was about the power of the federal government to regulate companies. President Roosevelt believed that the federal government should act forcefully to control companies that threatened to discourage competition and thereby drive up prices or force other companies to follow orders. President Roosevelt believed that only the federal government was large enough to exert control over giant firms that came into existence toward the end of the nineteenth century.

On the other side, Morgan and Hill argued that the powers of the federal government were limited by the Constitution, and that rules about interstate commerce could not be extended to the act of simply owning property (as opposed to operating a company). Viewed in this light, the Supreme Court case dealt with a basic issue: the rights of private property owners versus the rights of a democratically elected government.

The Supreme Court was divided, five to four, in its decision. The majority of the Court's nine justices ruled in favor of the government, saying in their opinion that the only reason for the existence of Northern Securities was to create a monopoly on railroad traffic across the northern part of the country. The court ordered the company to be disbanded by selling the railroads it had acquired.

The minority of four Supreme Court justices felt that the government had gone too far in arguing that there was no difference between owning stock in a company and acting in a way to interfere with interstate commerce. Taken to its extreme, wrote Justice Oliver Wendell Holmes (1841-1935), the federal government could conceivably argue that any ownership of property might result in discouraging competition (referred to as restraint of trade) and therefore was a proper subject for regulation by the federal government.

The arguments put forth by both sides have remained a hot topic of political debate. The question of how much federal regulation is proper and good for people, and for business, is still an issue in the twenty-first century.

Things to remember while reading the excerpt from Northern Securities Co. v. United States:

Supreme Court cases are often argued in terms that seem removed from the issue at hand. In the case of Northern Securities, one such argument was whether applying the Sherman Antitrust Act to a holding company (a company whose only purpose was to own stock, as opposed to operating a business) was something new, or just a continuation of well-established law. Both sides of the Supreme Court argued in their legal opinions that nothing new was (or should be) happening in this case. The majority argued that regulating Northern Securities by disallowing it was following well-established precedents (previous cases). The minority argued that regulating Northern Securities by disallowing it was violating well-established precedents. The argument was significant because the Supreme Court tries to determine, and follow, how similar disputes over the law have been decided in the past, since the court has no Constitutional power to create new laws.

The growth of American railroads had been accompanied by many consolidations and sales of smaller companies to larger ones. Typically, a company would lay railroad track only between two cities. In a region, there might be many companies controlling small railroads that could not make money on their own. Consequently, larger companies would buy up smaller railroads to create a network of railroads that connected towns throughout a region. This practice had long been recognized as the nature of the business; did the Northern Securities Company do something beyond this sort of consolidation? The owners said no; the government said yes.

The legal case of Northern Securities was also a political issue. President Roosevelt was labeled a progressive, a politician who believed the government needed to provide a counter-weight to the power of private businesses. Some of his political opponents argued that the government had no business interfering with business, and that in fact privately owned businesses were a necessary check on government power. This fundamental argument over the role of government and private property was carried out in the Northern Securities case in a slightly different form. The two sides argued over the relative powers of the federal government and the state governments (which were often sympathetic to big businesses to gain an advantage over other states in attracting jobs) to regulate corporations, and the issue of who owned stock in corporations.

The Supreme Court in this case was deciding on whether a lower court was right in upholding the federal govern-ment's suit challenging the formation of the Northern Securities Company. For that reason, the majority opinion sometimes refers to the court's "affirmance," or upholding, of "the case below," meaning the ruling of the lower court.

After the Supreme Court justices decided the case, they asked one justice, John Marshall Harlan (1833-1911), to write the Court's opinion, or finding. Occasionally, legal opinions use advanced vocabulary or refer to familiar things with unfamiliar words (or use familiar words to describe unfamiliar things). For example, this case uses the word "combinations" to refer to companies that own other companies.

Excerpt from NORTHERN SECURITIES COMPANY et al., Appts., v. UNITED STATES

Appts.:

Appellants; group appealing a previous court ruling.

Affirmance:

Agreement.

Decree:

Ruling.

Circuit court:

A Federal court below the Supreme Court, whose decisions can be appealed to the Supreme Court.
The Great Northern Railway Company and the Northern Pacific Railway Company owned, controlled, and operated separate lines of railway,-the former road [i.e., the Great Northern] extending from Superior, and from Duluth and St. Paul [Minnesota], to Everett, Seattle [Washington], and Portland [Oregon], with a branch line to Helena [Montana]; the latter [i.e., the Northern Pacific] extending from Ashland, and from Duluth and St. Paul [Minnesota], to Helena [Montana], Spokane, Seattle, Tacoma [Washington] and Portland [Oregon]. The two lines, main and branches, about 9,000 miles in length, were and are parallel and competing lines across the continent through the northern tier of states between the Great Lakes and the Pacific, and the two companies were engaged in active competition for freight and passenger traffic, each road connecting at its respective terminals with lines of railway, or with lake and river steamers, or with seagoing vessels.... Prior to November 13th, 1901, defendant [James J.] Hill and associate stockholders Early in 1901 the Great Northern and Northern Pacific Railway Companies, having in view the Prior to November 13th, 1901, defendant Hill and associate stockholders of the Great Northern Railway Company, and defendant Morgan and associate stockholders of the Northern Pacific Railway Company, entered into a combination to form, under the laws of New Jersey, a holding corporation, to be called the Northern Securities Company ... to which company, in exchange for its own capital stock upon a certain basis and at a certain rate, was to be turned over the capital stock, or a controlling interest in the In our judgment, the evidence fully sustains the It is That the act is not limited to restraints of interstate and international trade or commerce that are unreasonable in their nature, but embraces all direct restraints imposed by any combination, conspiracy, or monopoly upon such trade or commerce; That combinations, even among private manufacturers or dealers, whereby interstate or international commerce is restrained, are equally embraced by the act; That every combination or conspiracy which would extinguish competition between otherwise competing railroads engaged in interstate trade or commerce, and which would in that way restrain such trade or commerce, is made illegal by the act; That the natural effect of competition is to increase commerce, and an agreement whose direct effect is to prevent this play of competition restrains instead of promoting trade and commerce; That under its power to regulate commerce among the several states and with foreign nations, Congress had authority to enact the statute in question.... The means employed in respect of the combinations forbidden by the anti-trust act, and which Congress deemed No state can, by merely creating a corporation, or in any other mode, project its authority into other states, and across the continent, so as to prevent Congress from exerting the power it possesses under the Constitution over interstate and international commerce, or so as to exempt its corporation engaged in interstate commerce from obedience to any rule lawfully established by Congress for such commerce. It cannot be said that any state may give a corporation, created under its laws, authority to restrain interstate or international commerce against the will of the nation as lawfully expressed by Congress. Every corporation created by a state is necessarily subject to the supreme law of the land.... germane to the end to be accomplished, was to prescribe as a rule for interstate and international commerce (not for domestic commerce [within one state]) that it should not be vexed by combinations, conspiracies, or monopolies which restrain commerce by destroying or restricting competition. We say that Congress has prescribed such a rule, because, in all the prior cases in this court, the anti-trust act has been construed as forbidding any combination which, by its necessary operation, destroys or restricts free competition among those engaged in interstate commerce; in other words, that to destroy or restrict free competition in interstate commerce was to restrain such commerce. Now, can this court say that such a rule is prohibited by the Constitution or is not one that Congress could appropriately prescribe when exerting its power under the commerce clause of the Constitution [that gives the federal government the right to regulate business carried on between states]? Whether the free operation of the normal laws of competition is a wise and wholesome rule for trade and commerce is an economic question which this court need not consider or determine. Undoubtedly, there are those who think that the general business interests and prosperity of the country will be best promoted if the rule of competition is not applied. But there are others who believe that such a rule is more necessary in these days of enormous wealth than it ever was in any former period of our history. Be all this as it may, Congress has, in effect, recognized the rule of free competition by declaring illegal every combination or conspiracy in restraint of interstate and international commerce. As, in the judgment of Congress, the public convenience and the general welfare will be best subserved when the natural laws of competition are left undisturbed by those engaged in interstate commerce, and as Congress has embodied that rule in a statute, that must be, for all, the end of the matter, if this is to remain a government of laws, and not of men.... indisputable upon this record that under the leadership of the defendants Hill and Morgan the stockholders of the Great Northern and Northern Pacific Railway corporations, having competing and substantially parallel lines from the Great Lakes and the Mississippi river to the Pacific ocean at Puget Sound combined and conceived the scheme of organizing a corporation under the laws of New Jersey which should hold the shares of the stock of the constituent companies; such shareholders, in lieu of their shares in those companies, to receive, upon an agreed basis of value, shares in the holding corporation.... The stockholders of these two competing companies disappeared, as such, for the moment, but immediately reappeared as stockholders of the holding company, which was thereafter to guard the interests of both sets of stockholders as a unit, and to manage, or cause to be managed, both lines of railroad as if held in one ownership. Necessarily by this combination or arrangement the holding company in the fullest sense dominates the situation in the interest of those who were stockholders of the constituent companies; as much so, for every practical purpose, as if it had been itself a railroad corporation which had built, owned, and operated both lines for the exclusive benefit of its stockholders. Necessarily, also, the constituent companies ceased, under such a combination, to be in active competition for trade and commerce along their respective lines, and have become, practically, one powerful consolidated corporation, by the name of a holding corporation, the principal, if not the sole, object for the formation of which was to carry out the purpose of the original combination, under which competition between the constituent companies would cease. Those who were stockholders of the Great Northern and Northern Pacific and became stockholders in the holding company are now interested in preventing all competition between the two lines, and, as owners of stock or of certificates of stock in the holding company, they will see to it that no competition is tolerated.... No scheme or device could more certainly come within the words of the [Sherman Antitrust] act,-"combination in the form of a trust or otherwise ... in restraint of commerce among the several states or with foreign nations."... material allegations of the bill , and shows a violation of the act of Congress, in so far as it declares illegal every combination or conspiracy in restraint of commerce among the several states and with foreign nations, and forbids attempts to monopolize such commerce or any part of it.... capital stock, of each of the constituent railway companies, with power in the holding corporation to vote such stock and in all respects to act as the owner thereof, and to do whatever it might deem necessary in aid of such railway companies or to enhance the value of their stocks. In this manner the interests of individual stockholders in the property and franchises of the two independent and competing railway companies were to be converted into an interest in the property and franchises of the holding corporation. Thus, as stated in article 6 of the bill, "by making the stockholders of each system jointly interested in both systems, and by practically pooling the earnings of both for the benefit of the former stockholders of each, and by vesting the selection of the directors and officers of each system in a common body, to wit , the holding corporation, with not only the power, but the duty, to pursue a policy which would promote the interests, not of one system at the expense of the other, but of both at the expense of the public, all inducement for competition between the two systems was to be removed, a virtual consolidation effected, and a monopoly of the interstate and foreign commerce formerly carried on by the two systems as independent competitors established." ... ultimate placing of their two systems under a common control, united in the purchase of the capital stock of the Chicago, Burlington, & Quincy Railway Company, giving in payment, upon an agreed basis of exchange, the joint bonds of the Great Northern and Northern Pacific Railway Companies.... In this manner the two purchasing companies became the owners of ... the Chicago, Burlington, & Quincy Railway Company, whose lines aggregated about 8,000 miles, and extended from St. Paul [Minnesota] to Chicago, and from St. Paul and Chicago to Quincy, Burlington, Des Moines [Iowa], St. Louis, Kansas City, St. Joseph [Missouri], Omaha Lincoln [Nebraska], Denver [Colorado], Cheyenne [Wyoming], and Billings [Montana], where it connected with the Northern Pacific Railroad. By this purchase of stock the Great Northern and Northern Pacific acquired full control of the Chicago, Burlington, & Quincy main line and branches. of the Great Northern Railway Company, and defendant [J. Pierpont] Morgan and associate stockholders of the Northern Pacific Railway Company, entered into a combination to form, under the laws of New Jersey, a holding corporation , to be called the Northern Securities Company....

Stockholders:

Persons owning shares of public companies.

Combination:

Partnership.

Holding corporation:

A company whose only purpose is to own other companies.

What happened next ...

As a result of the Supreme Court decision, the Northern Securities Company was broken up. Hill and Morgan were not allowed to form a common company that owned two competing railroads.

In a much larger sense, the Northern Securities decision opened the way for greatly expanded regulation by the federal government of companies, most of which engage in interstate commerce. In effect, the court said that by granting the federal government the right to regulate interstate commerce, it also gave the federal government the right to regulate many other aspects of business that previously were state matters.

In a practical sense, this case (and others like it) defined the modern federal government, and its role in regulating many aspects of business, ranging from food safety to the operation of airlines and railroads.

The outcome of Northern Securities pleased President Theodore Roosevelt. But in 1912 Roosevelt became frustrated with the record of his successor, President William Howard Taft (1857-1930), partly on the grounds that Taft had not been as aggressive as Roosevelt would have liked in regulating corporate behavior. Consequently Roosevelt decided to challenge Taft for the Republican presidential nomination in 1912. Roosevelt lost and started his own party, the Progressive Party. But in the presidential election that year, the Republican vote was split between Taft and Roosevelt, and Democrat Woodrow Wilson (1856-1924) won the election. In some respects, the split of the Republicans was permanent, since in later years the Republican Party became associated with opposition to federal regulation and the Democrats were, more often than not, the champions of such regulation.

Did you know ...

Public sentiment against giant corporations that controlled whole industries started as early as 1880. It took over twenty years before the federal government, under President Theodore Roosevelt, got around to challenging the "trusts" in court. Seven years after the Northern Securities case, an even larger trust was "busted" by the Supreme Court. It was the oil trust known as Standard Oil, owned by John D. Rockefeller (1839-1937), who was by then the richest person in the country.

For more information

Books

Gellhorn, Ernest, and William E. Kovacic. Antitrust Law and Economics in a Nutshell. 4th ed. St. Paul, MN: West Publishing Co., 1994.

Kovaleff, Theodore P., ed. The Antitrust Impulse: An Economic, Historical, and Legal Analysis. Armonk, NY: M. E. Sharpe, 1994.

Letwin, William. Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act. New York: Random House, 1965.

Web Sites

"Northern Securities Co. v. United States, 193 U.S. 197 (1904). " Cornell Law School. http://www2.law.cornell.edu (accessed on April 11, 2003).

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northern securities co. v. united statesexcerpt from the united states supreme court decision 1904 "the supremacy of the law is the foundation rock upon which our institutions rest."

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Northern Securities Co. v. United States

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Northern Securities Co. v. United StatesExcerpt from the United States Supreme Court decision 1904 "The supremacy of the law is the foundation rock upon which our institutions rest." Source for information on Northern Securities Co. v. United States: Industrial Revolution Reference Library dictionary.

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What Is the Sherman Antitrust Act?

The Sherman Antitrust Act refers to a landmark U.S. law that banned businesses from colluding or merging to form a monopoly. Passed in 1890, the law prevented these groups from dictating, controlling, and manipulating prices in a particular market.

The act aimed to promote economic fairness and competitiveness while regulating interstate commerce. The Sherman Antitrust Act was the U.S. Congress' first attempt to address the use of trusts as a tool that enables a limited number of individuals to control certain key industries.

Key Takeaways

Understanding the Sherman Antitrust Act

Sen. John Sherman from Ohio proposed the Sherman Antitrust Act in 1890. It was the first measure the U.S. Congress passed to prohibit trusts, monopolies, and cartels from taking over the general market. It also outlawed contracts, conspiracies, and other business practices that restrained trade and created monopolies within industries.

At the time, public hostility was growing toward large corporations like Standard Oil and the American Railway Union, which were seen as unfairly monopolizing certain industries. Consumers felt they were hit with exorbitantly high prices on essential goods, while competitors found themselves shut out because of deliberate attempts by large corporations to keep other enterprises out of the market.

This signaled an important shift in the American regulatory strategy toward business and markets. After the 19th-century rise of big business, American lawmakers reacted with a drive to regulate business practices more strictly. The Sherman Antitrust Act paved the way for more specific laws like the Clayton Act. Measures like these had widespread popular support, but lawmakers genuinely wanted to keep the American market economy broadly competitive in the face of changing business practices.

Competing individuals or businesses are not permitted to fix prices, divide markets, or attempt to rig bids. It also lays out specific penalties and fines intended for businesses that violate these rules. The act can impose both civil and criminal penalties on companies that don't comply.

Special Considerations

Antitrust laws refer broadly to the group of state and federal laws designed to ensure that businesses are competing fairly. These laws exist to promote competition among sellers, limit monopolies, and give consumers options.

Supporters say these laws are necessary for an open marketplace to exist and thrive. Competition is considered healthy for the economy, giving consumers lower prices, higher-quality products and services, more choice, and greater innovation.

However, opponents argue that allowing businesses to compete as they see fit-instead of regulating competition-would ultimately give consumers the best prices.

Sections of the Sherman Antitrust Act

The Sherman Antitrust Act is divided into three key sections:

Section 1: This section defines and bans specific means of anti-competitive conduct.

Section 2: This section addresses end results that are by their nature anti-competitive.

Section 3: This section extends these guidelines and provisions to the District of Columbia and U.S. territories.

Early issues and amendments

The act received immediate public approval. But because the legislation's definition of concepts such as trusts, monopolies, and collusion was not clearly defined, few business entities were actually prosecuted under its measures.

The Sherman Antitrust Act was amended by the Clayton Antitrust Act in 1914, which addressed specific practices that the Sherman Act did not ban. It also closed loopholes that the Sherman Act established, including those that dealt specifically with anti-competitive mergers, monopolies, and price discrimination.

For example, the Clayton Act prohibits appointing the same person to make business decisions for competing companies.

Historical Context of the Sherman Antitrust Act

The Sherman Antitrust Act was born against a backdrop of increasing monopolies and abuses of power by large corporations and railroad conglomerates.

The Interstate Commerce Commission (ICC)

Congress passed the Interstate Commerce Act in 1887 in response to increasing public indignation about abuses of power and malpractices by railroad companies. This spawned the Interstate Commerce Commission (ICC). Its purpose was to regulate interstate transportation entities. The ICC had jurisdiction over U.S. railroads and all common carriers, requiring them to submit annual reports and prohibiting unfair practices such as discriminatory rates.

During the first half of the 20th century, Congress consistently expanded the ICC's power so much that, despite its intended purpose, some believed that the ICC was often guilty of assisting the very companies it was tasked to regulate by favoring mergers that created unfair monopolies.

The Gilded Age

Congress passed the Sherman Antitrust Act at the height of what Mark Twain called the Gilded Age of American history. The Gilded Age, which spanned from the 1870s to about 1900, was dominated by political scandal and robber barons, the growth of railroads, the expansion of oil and electricity, and the development of America's first giant (national and international) corporations.

The Gilded Age was an era of rapid economic growth. Corporations took off during this time, in part because they were easy to register and, unlike today, did not have to pay any incorporation fees.

Trusts in the 19th Century

Late-19th-century legislators' understanding of trusts is different from our current concept of the term. During that time, trusts became an umbrella term for any sort of collusive or conspiratorial behavior that was seen to render competition unfair. The term trust has evolved over the years, though. Today, it refers to a financial relationship in which one party gives another the right to hold property or assets for a third party.

Example of the Sherman Antitrust Act

On Oct. 20, 2020, the U.S. Department of Justice filed an antitrust lawsuit against Google, alleging that the online giant engaged in anti-competitive conduct to preserve monopolies in search and search advertising. Deputy Attorney General Jeffrey Rosen compared the complaint to past uses of the Sherman Act to stop monopolistic practices by corporations.

"As with its historic antitrust actions against AT&T in 1974 and Microsoft in 1998, the Department is again enforcing the Sherman Act to restore the role of competition and open the door to the next wave of innovation-this time in vital digital markets," Rosen said in a press release.

What Is the Sherman Antitrust Act in Simple Terms?

The Sherman Antitrust Act is a law passed by Congress to promote competition within the economy by prohibiting companies from colluding or merging to form a monopoly.

Why Was the Sherman Antitrust Act Passed?

The Sherman Antitrust Act was passed to address concerns by consumers who felt they were paying high prices on essential goods and by competing companies who believed they were being shut out of their industries by larger corporations.

What Are the Penalties for Violating the Sherman Act?

Those found guilty of violating the Sherman Act can face a hefty punishment. It is also a criminal law, and offenders may serve prison sentences of up to 10 years. Beyond that, there are also fines, which can be up to $1 million for an individual and up to $100 million for a corporation. In some cases, heftier fines could also be issued, worth twice the amount the conspirators gained from the illegal acts or twice the money lost by the victims.

Have Any of Today's Big-Name Companies Been Accused of Violating the Sherman Act?

Many household names have been hit with antitrust suits based in part on the Sherman Act. Other than Google, in recent years Microsoft and Apple have both faced complaints, with the former accused of seeking to create a monopoly in Internet browser software and the latter of unethically raising the price of its e-books and, in later years, exploiting the market power of its app store.

What Is the Difference Between the Sherman Act and the Clayton Act?

The Clayton Act was introduced later, in 1914, to address some of the specific practices that the Sherman Act did not clearly prohibit or failed to properly clarify. The Sherman Act, the first of its kind, was deemed too vague, allowing some companies to find ways to maneuver around it.

Essentially, the Clayton Act deals with similar topics, such as anti-competitive mergers, monopolies, and price discrimination but adds more detail and scope to eliminate some of the previous loopholes. Over the years, antitrust laws continue to be amended to reflect the current business environment and fresh observations.

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The Sherman Antitrust Act refers to a landmark U.S. law that banned businesses from colluding or merging to form a monopoly. Passed in 1890, the law prevented these groups from dictating, controlling, and manipulating prices in a particular market. The act aimed to promote economic fairness and competitiveness while regulating interstate commerce.

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Wabash St Louis

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In 1886 the U.S. Supreme Court decision in the case of Wabash, St. Louis and Pacific Railway Company v. Illinois declared that states could not regulate commerce that went beyond their boundaries. Instead, regulation had to come from the federal government. The decision provided the basis for the formation of the Interstate Commerce Commission in 1887.

With rail lines crisscrossing the nation, the question of who would control rail rates and monitor the practices of the railroads had become an increasingly difficult one to answer. Many states establish their own regulatory boards, but since the rail companies operated between states, enforcing state laws on them proved cumbersome and impractical. Meanwhile the railroads, operating without the oversight of any effective regulatory body, set their own standards and practices, which resulted in many abuses. When the Wabash, St. Louis and Pacific Railway Company challenged the intervention of the state of Illinois in its business, the case eventually went to the Supreme Court.

After the high court's ruling (1886), the federal government acted quickly to establish an independent U.S. government agency the following year, the Inter-state Commerce Commission (ICC). The ICC was the first regulatory commission in the country. Originally charged with supervising the country's interstate rail operations, its authority was eventually expanded to include all forms of interstate commerce, including trucking, shipping, and even oil pipelines. In addition to controlling rates, the agency also enforced laws against discrimination.

See also: Interstate Commerce Act, Interstate Commerce: Regulation and Deregulation, Munn vs. Illinois

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st. louis and pacific railway company vs. illinois (1886)
in 1886 the u.s. supreme court decision in the case of wabash

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st. louis and pacific railway company v. illinois declared that states could not regulate commerce that went beyond their boundaries.

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Wabash, St. Louis and Pacific Railway Company Vs. Illinois (1886)

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WABASH, ST. LOUIS AND PACIFIC RAILWAY COMPANY VS. ILLINOIS (1886) In 1886 the U.S. Supreme Court decision in the case of Wabash, St. Louis and Pacific Railway Company v. Illinois declared that states could not regulate commerce that went beyond their boundaries. Source for information on Wabash, St.

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Interstate Commerce

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In 1887, Congress passed the Interstate Commerce Act, making the railroads the first industry subject to federal regulation. Legislators designed the law, which established a five-member enforcement board known as the Interstate Commerce Commission, largely in response to public demand that the railroads' conduct should be constrained.

Railroad workers, Library of Congress

In the years following the Civil War, railroads were privately owned and entirely unregulated. Though each company held a natural monopoly as long as it serviced its own destinations, the railroads became fiercely competitive once they started expanding into each other's markets. They were regarded with distrust by much of the public, who charged them with anything from forming monopolies and wielding corrupt political influence to stock manipulations and rate discriminations. None of the accusations were unfounded.

The first attempt to regulate the railroad industry's practices came in 1871, at the state level. Illinois passed regulatory legislation first, and states across the South and Midwest quickly followed suit. The states, however, were powerless to regulate interstate commerce, and the railroads were expanding their operations across more state borders all the time.

The Interstate Commerce Act sought to address the problem by setting guidelines for how the railroads could do business. However, the task of establishing specific measures was complex, and regulators lacked a clear mission. The law sought to prevent monopoly by promoting competition, and also to outlaw discriminatory rate-setting. Its most successful provisions were a requirement that railroads submit annual reports to the ICC, and a ban on special rates the railroads would arrange among themselves. Determining which rates were discriminatory proved to be technically and politically difficult, though, and in practice the law was not highly effective.

The Hepburn Act of 1906 and the Mann-Elkins Act of 1910 strengthened the Interstate Commerce Commission, stating the government's regulatory power more definitively. The Hepburn Act empowered the ICC to change a railroad rate to one it considered "just and reasonable," after a full hearing of a complaint. The Mann-Elkins Act placed the burden of proof on the railroads; for the first time, they would have to actively demonstrate that a rate was reasonable. With these new powers, the ICC gained almost complete control over rail rates, and therefore much of rail competition.

In the following years, the government continued to strip the railroads of their power. One important piece of legislation, the Adamson Act of 1916, enacted an eight-hour workday for railroad workers. Government control culminated when President Woodrow Wilson seized American railroads in 1918; the once-private industry would now be a tool of the federal government in the war effort. Wilson promised to return the railroads to private ownership after a peace treaty was signed.

The Esch-Cummins Transportation Act of 1920, which returned the railroads to private hands, advocated a sharp reversal on past policies. The federal government, which had once been ardently anti-monopoly, now encouraged mergers, provided the mergers paired strong lines with weak ones. The ICC, in fact, dictated the merger combinations. In addition, Esch-Cummins empowered the ICC to fix minimum rates and dictate extensions and abandonments of routes. The railroad industry, which had long sought to eliminate unprofitable routes, was now saddled with them.

As devastating as the new legislation was, the railroads had a still greater enemy: increased competition from cars, buses, and trucks on an ever-growing network of roads. Passengers were electing more and more to travel by car or bus; freight shippers were increasingly choosing trucks for short- or long-haul jobs. Trucks, buses and cars could take flexible travel routes from point to point; railroads could not.

For 20 years the railroads' situation worsened. Although they were losing business to competing modes of transportation, they were still considered a threat. The Transportation Act of 1940 amended the Interstate Commerce Act to extend its reach to the other industries, but the fact remained that while regulations were not relaxed on railroads, private cars, trucks, and 90 percent of inland water carriers were exempt from government control.

It wasn't until 1958 that the government reversed its policy. Railroads, it was determined, no longer posed a monopoly threat; regulations could be loosened. By this time trucks had usurped much of the railroads' high-value freight traffic, and airplanes had taken the lion's share of long-haul passenger business, as well as the lucrative contract to carry the U.S. mail.

By the 1970s and 1980s, railroads were enjoying freedom they hadn't known since the Gilded Age of the 1870s. Unfortunately, business did not keep pace. In 1971, the government formed Amtrak, a federally-supported corporation, to operate intercity passenger train service. In 1980 the Staggers Act furthered railroad deregulation, but by then, many railroads were operating under greatly reduced circumstances, if they were operating at all.

By 1995, the Interstate Commerce Commission had lost most of its mandate. With deregulation complete, the ICC could no longer set rates, and the commission was dissolved in the ICC Sunset Act. The Surface Transportation Board, under the auspices of the U.S. Department of Transportation, now performs the few regulatory tasks that had remained with the ICC.

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Interstate Commerce Act | American Experience | PBS

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In 1887, Congress passed the Interstate Commerce Act, making the railroads the first industry subject to federal regulation. Legislators designed the law, which established a five-member enforcement board known as the Interstate Commerce Commission, largely in response to public demand that the railroads' conduct should be constrained.

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1. Legislators designed the law, which established a five-member enforcement board known as the Interstate Commerce Commission.
2.