Railroad Regulation: A Century Of ICC Control
Advocacy Sneak Peek
In the 1860s and ’70s, to limit the power the railroads had, farmers with the assistance of local merchants and consumers, formed Granger or anti-monopoly parties that successfully campaigned for laws establishing state commissions to regulate both railroads and warehouses. And, laws were passed and in 1876, upheld by the U.S. Supreme Court, was the enacted regulatory laws’ constitutionality. By 1887, Congress approved the Interstate Commerce Act, thereby creating the Interstate Commerce Commission (ICC). Government intervention in the form of regulation, was “designed to foster competition among railroads and to protect the shipping public from unreasonable, discriminatory, and preferential rates and practices.”[1]
Since said legislative remedy was passed initially, conditions, which had given rise to the Interstate Commerce Act, have changed considerably. In 1929, intercity tonnage handled by the nation’s railroads was a whopping 75 percent. That percentage had fallen to 36 percent in 50 years’ time. What the railroads were losing, the motor, water and air carriers were picking up. Whereas motor and water carriers, which, at the time, were 60 and 92 percent exempt from economic regulation, respectively, the railroads were nearly 100 percent regulated, or, in other words, essentially 0 percent non-regulated.
Regulatory reform was absolute. It was either “do, or die!” From 1955 up to the passage of Staggers in 1980, not one U.S. railroad had enjoyed a rate of return in excess of its cost of capital. This meant that railroads were paying more in interest charges on money borrowed, than were earning from money they were investing in equipment and in improving physical plants.[2].
At the same time the rail industry was seeking sweeping reform with regard to government regulatory control, the railroads staunchly supported Interstate Commerce Commission authority overseeing mergers and consolidations. Early on, the railroads recognized the importance of mergers as a means to improve existing levels of service while oftentimes, their belief, that the likelihood of their benefiting financially from such combinations, was strong. Meanwhile, as far as railroad abandonments were concerned, according to ICC doctrine, railroads were not allowed to abandon sections of track or discontinue service outright without first being granted ICC authority to do so, a process which could take up to two years or longer, and a process which the railroads vehemently opposed.
In 1979, under the then proposed Senate Bill 796 (S.796, the then current administration’s Rail Deregulation Act of 1979), the Association of American Railroads offered numerous counterproposals to the existing bill before both houses of Congress. One of those counterproposals even recommended by 1985, the then existing regulatory regime termination and supplanting that with a new, more limited one. “The AAR does not necessarily suggest elimination of the ICC, but seeks a sunset provision which will force careful evaluation of the existing ICC, following experimentation under a less regulated environment.”[3]
Hindsight Is 2020?
As it happened, on Jan. 1, 1996, the powers of regulation with regard to interstate commerce were duly transferred to the Surface Transportation Board or STB and, the following four words, “the rest is history,” could never ring more true!
Notes
Trains, “Is deregulation really reregulation?”, Jan. 1980, p. 22
Ibid., p. 25
Ibid.
Updated: Jun. 27, 2025 at 5:35 p.m. PDT.
All material copyrighted 2025, Alan Kandel. All Rights Reserved.