Interstate Commerce Act Of 1887

What People Get Wrong About Railroad Regulation in the Late 19th Century

The Interstate Commerce Act Of 1887 came out of nowhere for most people studying US regulatory history, but anyone who has actually dug into the shipping logs from that era knows it was the inevitable result of railroads price-gouging farmers in the Midwest to absurd levels. I spent a few years tracking down original ICC complaint files from the 1890s, and the sheer volume of small-town shippers filing grievances is staggering. These weren't abstract policy debates. A farmer in Indiana could be charged three times as much to ship grain 50 miles as a competitor 200 miles away, simply because the railroad had no competition on the shorter route. The Act did a few things at once, and they were all fairly specific. It prohibited rate discrimination between customers and between locations. It required railroads to publish their rates publicly, which sounds obvious now but was revolutionary at the time. It outlawed pooling agreements where competing railroads would divide up traffic and keep prices artificially high. And most importantly, it created the Interstate Commerce Commission as the first federal regulatory agency. Here is what nobody tells you: the ICC in its early years had almost no real enforcement power. It could investigate complaints and issue rulings, but it could not impose fines or stop railroads from continuing practices it found illegal. If a railroad ignored an ICC order, the government had to take them to court, which took years and cost a fortune. I found several cases in the archives where the ICC ruled in favor of a complainant, the railroad simply appealed into oblivion, and the complainant gave up before getting any actual relief.

Rate structure problems that still come up

The Act's language around "reasonable and just" rates was deliberately vague, and that vagueness became a massive problem in practice. Railroads argued that their rates were reasonable based on what the market would bear. Shippers argued that rates should reflect the actual cost of service plus a fair return. The ICC had to develop an entire framework for evaluating what constituted a reasonable rate, and they did it case by case through complaints. One thing that trips people up is that the Act didn't actually set maximum rates. It only prohibited unreasonable ones. There is a big difference. Setting maximum rates requires knowing what the cost structure looks like, which the railroads were not exactly eager to share. So the ICC spent decades trying to figure out railroad accounting just to evaluate whether a specific rate was fair. This delayed meaningful rate regulation for nearly twenty years. I encountered a specific problem when researching a case involving the Pennsylvania Railroad's freight rates for coal shipments in 1893. The railroad had classified its customers into different rate classes, and the classification system itself was the source of the discrimination. A shipper loading a full carload got a dramatically lower rate per ton than one shipping less than carload quantities. The Act technically addressed this, but the railroads found ways to adjust their classifications continuously. My workaround when analyzing these cases was to stop looking at individual rate disputes and instead map the entire classification system over time, which revealed the pattern of evasion much more clearly than any single complaint file ever could.

What the Act actually achieved versus what people claim

The Interstate Commerce Act Of 1887 is often credited with taming the railroads, and in a broad sense it started the process. But the real teeth came later with the Hepburn Act of 1906, which gave the ICC the power to set maximum rates and made its orders enforceable in court. The 1887 Act was the foundation, not the building. Some useful context that gets missed: the Act was a response to the Granger movement and the Supreme Court case Munn v. Illinois (1877), which had upheld state-level regulation of railroads. But the Wabash decision in 1886 struck down state regulation of interstate rates, creating a regulatory vacuum that only Congress could fill. So the Act was partly a patch job, not a carefully designed piece of legislation. That shows in the gaps and loopholes. The ICC itself operated until 1995, when its functions were largely transferred to the Surface Transportation Board. If you are looking for primary sources, the annual reports of the ICC from 1888 onward are extremely detailed and freely available through the Library of Congress digital collections. The original text of the Act is also straightforward to find in the Statutes at Large, Volume 24, starting at page 379.