How the Interstate Commerce Act of 1887 Structured Federal Regulation of Railroads
The Interstate Commerce Act of 1887 established the Interstate Commerce Commission and made railroads the first industry subject to federal regulation.
The Interstate Commerce Act of 1887 was the federal government's first attempt to regulate a private industry, and its text — still readable on archives.gov — shows exactly how lawmakers tried to do it: by creating an agency, giving it investigative powers, and writing a single flexible standard into the law that railroads had to meet. This piece walks through the structure of the Act itself, section by section, so you can see how the pieces fit together.
Why Congress stepped in
Railroad regulation didn't start at the federal level. The Supreme Court had upheld state regulation of railroad monopolies in *Munn v. Illinois* in 1877, but state commissions turned out to be weak, inconsistent, and sometimes corrupt in practice. The turning point came in 1886, when the Court's *Wabash* decision struck down an Illinois law aimed at long-and-short-haul discrimination, while also making clear that only Congress — not individual states — had authority over interstate commerce. That left a regulatory vacuum that only federal legislation could fill, and it's the direct reason the Interstate Commerce Act was drafted the way it was. Congress responded within months, approving the Act on February 4, 1887, and in doing so made railroads the first industry in the country ever placed under federal regulation.
Anatomy of the Act's regulatory structure
The Act isn't one single rule — it's a set of interlocking parts: an agency, a conduct standard, a complaint process, and a funding mechanism.
Section 2 barred unjust discrimination between shippers, Section 13 gave complainants a path to the Commission, Section 18 funded the Commissioners and secretary, and Section 23 funded the Commission's operations overall.
The Commission itself
At the center of the Act is the Interstate Commerce Commission, the body created to oversee the conduct of the railroad industry. The Smithsonian's own description of the agency frames its job simply: regulating the economics and services of specified carriers engaged in transportation between states. To make that oversight workable, the Act set salaries for the people running it — each Commissioner was to earn $7,500 a year, paid the same way federal judges' salaries were paid, and the Commission's secretary was set at $3,500 a year. Congress also had to fund the whole operation, and it did so with a $100,000 appropriation covering the Commission's work through the fiscal year ending June 30, 1888. None of this tells you what counted as a violation, though — that's where the Act's substantive rule comes in.
Worked example: what the Act's own numbers add up to
The Act's text is specific about dollar figures, and lining them up shows the scale of what Congress was funding. One Commissioner's salary of $7,500 plus the secretary's salary of $3,500 comes to $11,000 a year for just those two roles. Set against that, the Act appropriated $100,000 total for the use and purposes of the Act for the Commission's first partial fiscal year, through June 30, 1888, without itemizing how that sum was to be split among commissioners, staff, or investigations.
- commissioner salary: 7500
- secretary salary: 3500
- Formula: commissioner salary + secretary salary
- Result: 11000
The 'reasonable and just' standard, and what counted as discrimination
Rather than fixing specific rates, the Act set a conduct standard and let the Commission apply it. Section 2 made it illegal for a railroad to use a special rate, rebate, drawback, or similar device to charge one shipper more or less than another shipper for the same kind of service performed under similar circumstances, a rule that took effect April 5, 1887, sixty days after the Act's approval — the Act called this 'unjust discrimination' and declared it unlawful outright. That's a narrower, more testable rule than it might first appear: it applies specifically to a 'like and contemporaneous service' under substantially similar circumstances, which is exactly the kind of comparison the Commission and courts had to work out case by case. In practice, the National Archives' own account notes that figuring out which rates actually were discriminatory was technically and politically difficult, and that the overall law was not especially effective at achieving its aims. What did work, according to that same account, were two narrower, more mechanical provisions: the requirement that railroads file annual reports with the Commission, and the ban on railroads privately arranging special rates among themselves. That's a useful distinction for understanding the Act's structure — broad standards proved hard to enforce, while specific, checkable requirements held up.
How a complaint actually moved through the system
The Act also built in a path for individuals and organizations to act when they believed a railroad had broken the rules. Section 13 allowed any person, firm, corporation, or association — including agricultural, mercantile, or manufacturing groups, or even municipal bodies — to file a petition with the Commission over conduct that violated the Act. The carrier first got a chance to resolve the complaint or answer in writing; if that didn't settle things, the Commission would investigate, and complaints couldn't be thrown out just because the complainant hadn't suffered direct personal harm. That last detail matters: it meant the Commission's authority to investigate wasn't limited to parties who could prove they'd personally lost money, which widened who could trigger oversight.
Comparing the Act's enforcement mechanisms
| Mechanism | What it required | How well it worked in practice |
|---|---|---|
| Section 2 — unjust discrimination rule | Barred special rates, rebates, or drawbacks that gave one shipper better terms than another for a like service under similar circumstances | Difficult to apply — determining which rates were actually discriminatory was technically and politically hard |
| Annual reporting requirement | Railroads had to submit annual reports to the ICC | Cited as one of the law's most successful provisions |
| Ban on inter-railroad rate arrangements | Prohibited railroads from privately arranging special rates among themselves | Also cited as one of the law's most successful provisions |
| Section 13 complaint process | Let aggrieved persons or organizations petition the Commission for investigation | Gave the Commission a documented entry point for cases, though overall effectiveness of the law was limited |
Comparing the Act's main enforcement tools.
What happened to the ICC later
The Commission the Act created didn't last forever. As trucking and other transportation industries were deregulated through the 1970s and 1980s, the case for a dedicated railroad-era commission weakened, and the ICC was formally eliminated in 1996, with many of its remaining duties transferred to the Department of Transportation. Its elimination doesn't undo the structural precedent it set, though: with the 1887 Act, railroads became the first industry subject to federal regulation, and the Commission it created was charged with regulating the economics and services of specified carriers engaged in transportation between states.
Key takeaways
- The Act was approved on February 4, 1887, creating the Interstate Commerce Commission and making railroads the first industry subject to federal regulation
- Section 2 banned unjust discrimination — different rates for the same kind of like and contemporaneous service under similar circumstances — carried out through special rates, rebates, or drawbacks, a prohibition that took effect April 5, 1887, sixty days after the Act's approval
- Section 13 let individuals and organizations petition the Commission, which investigated if the carrier did not resolve the complaint or answer it in writing, and complaints could not be dismissed merely for lack of direct personal harm
- The Act's broad discrimination standard proved hard to enforce in practice; its narrower reporting and anti-rebate rules worked better
- The Act followed directly from the 1886 *Wabash* ruling, which confirmed that only Congress could regulate interstate commerce
- The ICC itself was eliminated in 1996 amid broader transportation deregulation, with many of its remaining duties shifting to the Department of Transportation
Frequently asked questions
Did the Interstate Commerce Act set specific railroad rates?
No — the Act's structure relied on a standard rather than fixed numbers. Section 2 made it unlawful to charge different shippers different amounts for a like and contemporaneous service under similar circumstances, which the Commission and courts then had to interpret case by case.
The National Archives' account notes this kind of discrimination was technically and politically difficult to pin down in practice.
Who could actually file a complaint under the Act?
The Act defined this broadly. Section 13 allowed any person, firm, corporation, or association — plus agricultural, mercantile, or manufacturing societies and municipal organizations — to petition the Commission over a carrier's alleged violation, but only after the carrier had been given a chance to satisfy the complaint or answer it in writing.
If the carrier didn't resolve things, the Commission would investigate, and complaints couldn't be dismissed simply because the complainant hadn't suffered direct damage themselves.
Why did Congress act in 1887 specifically?
Because the Supreme Court had just closed off the state-level path. The 1886 *Wabash* decision struck down an Illinois law targeting long-and-short-haul discrimination and established that only Congress could regulate interstate commerce, leaving federal legislation as the only remaining option.
How much did the federal government spend running the Commission at first?
Section 23 of the Act appropriated $100,000 to fund the Commission's operations through the fiscal year ending June 30, 1888. Separately, the Act set each Commissioner's salary at $7,500 a year and the Commission secretary's at $3,500 a year.
Was the Interstate Commerce Act considered a success?
It's mixed. The National Archives' account says the overall law wasn't very effective and that identifying discriminatory rates was hard, but it singles out the annual-reporting requirement and the ban on railroads arranging special rates among themselves as the law's most successful provisions in practice.
Does the Interstate Commerce Commission still exist?
No. The ICC was eliminated in 1996 as part of broader deregulation of trucking and other transportation industries that had unfolded through the 1970s and 1980s, and many of its remaining responsibilities moved to the Department of Transportation.
Sources
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