CHAPTER IV THE INTERSTATE COMMERCE ACT AND ITS INTERPRETATION BY THE COMMISSION AND BY THE COURTS THE Federal Government was slow to exercise its undoubted right to regulate interstate commerce. The early theory was that Congress and the states exercised concurrent jurisdiction over this subject, and that the states might therefore make whatever regulations they saw fit, provided that they did not discriminate against goods from other states. In the case of Livingston vs. Ingen, decided in 1812, it was held that in the absence of any Act of Congress to the contrary the State of New York lawfully granted a monopoly of steamboat transportation upon the Hudson River for a period of twenty years. In the subsequent case of Gibons vs. Ogden,' the Supreme Court of the United States held that the Act of the Legislature of New York was invalid, so far as it prohibited the navigation of steam vessels possessing a license to engage in the coasting trade, under a general Act of Congress. The court strongly asserted that the authority of Congress over interstate and foreign commerce was supreme. This right to regulate interstate commerce was held to include the right to regulate navigation, and the transportation of goods from one state to another, as well as the buying and selling of commodities. In spite of the broad grounds upon which this decision was based, and of its strong assertion that the power of Congress over interstate commerce was supreme, even to the exclusion of concurrent jurisdiction by the states, the theory still prevailed that wherever Congress had not 19 Wheaton, 1. acted, the states might make whatever regulations they saw fit. The result was that when railroads began to be built, and a large amount of through traffic was developed, it was believed that state regulation would be sufficient for any control which was then deemed necessary. In Reading Railway vs. Pennsylvania,' this theory, so far as it applied to the exercise of the power of taxation over interstate commerce on the part of the states, was exploded. The law of Pennsylvania which imposed a tax upon every ton of traffic carried within the state was declared to be null and void, in that it was an interference with interstate commerce which Congress had declared should be free. Nevertheless, the theory that the states had the right to impose maximum rates which might be charged on interstate traffic still remained unquestioned. In Baltimore and Ohio Railroad Company vs. Maryland, it was held that the power of the state to regulate the rates of railway corporations doing business within its limits was "unlimited and uncontrolled," as far as the regulations applied to traffic originating within the state, or coming into it from another state. The Supreme Court, therefore, upheld an Act of the Legislature of Maryland, which set a maximum passenger fare of $2.50 from Baltimore to Washington, and which also imposed a tax of 20 per cent upon every fare collected between those points. The only reservation which the court made as to the power of the states to regulate interstate commerce was as follows: Should any such system of exactions be established in these states as to materially impede the passage of produce from one part of the country to another, it is hardly to be supposed that it is a casus omissus of the Constitution. Thus in the opinion of the Supreme Court at that time, Congress possessed only a shadowy authority to regulate interstate rates, while the power of the states to make such regulations was "undoubted and unlimited." 1 15 Wallace, 232 (1872). 221 Wallace, 456 (1874). In 1876, in the case of Peik vs. The Chicago and Northwestern,' the Supreme Court reaffirmed the same doctrine. It was held in this case that the action of the Legislature of Illinois in.regulating the rates and fares from points within the state to points outside, and from points in other states to points within the state, was a valid exercise of the constitutional powers of a state. 2 It was not till the year 1885, in the case of the Wabash Railroad vs. Illinois, that this doctrine was clearly overruled, once and for all. It was then held that the power of Congress was exclusive, that in the very nature of the railroad industry, concurrent jurisdiction was an anomaly, and that the law of Illinois establishing maximum rates from Chicago to points outside the state was null and void. But even while it was believed that the states possessed concurrent jurisdiction over the subject of interstate commerce, state laws proved wholly inadequate to meet the abuses which arose in connection with a great and growing national transportation system. In fact, whatever action was taken by the various states was practically confined to the regulation of commerce wholly intrastate. On the other hand, since the Federal Government knows no common law, and, as Congress had so far passed no Act for the regulation of interstate railway transportation, the result was that interstate traffic was not regulated at all, and the carriers made whatever rates they saw fit. The testimony taken by the Hepburn Committee of Investigation, appointed by the Legislature of the State of New York, clearly showed that previous to the passage of the Interstate Commerce Act railway rates were in a thorough state of demoralization. Many traders testified that they never knew from one day to the next what rate they would be compelled to pay. Here is the evidence of one merchant: 194 U. S. 164. 2 118 U. S. 557. Q. In every instance when you ship from the west, do you make a special contract? A. Always. Q. You never confine yourself to schedule rates? A. We know nothing about them; I never saw a schedule rate; I know nothing about that. Q. How long have you been in business? A. Twenty years, more or less. Q. And during those twenty years, you have never known anything of schedule rates? A. I have been in this country since 1866, and have never known anything of schedule rates and never saw a schedule rate. The evidence before this Committee also showed that by far the larger proportion of the business of the State of New York was done at discriminatory rates. Five firms at Binghampton received special rates averaging less than half the rates paid by the rest of the public. At Utica three drapery firms obtained a rate of nine cents, while the rate on similar articles for all others was thirty-three cents. Five grocery firms at Syracuse received a special rate of ten cents, while the published charges ranged from eighteen to thirty-seven cents. In many cases it was proved that special rates had been accorded amounting to less than one fifth of the regular published charges. Mr. Goodman, Assistant General Freight Agent of the New York Central, testified that to his certain knowledge fifty per cent of the business from New York to other points and ninety per cent of the business at Syracuse was done at special rates. He stated further that there were no important points where some shippers were not accorded special rates far below the published charges. Under conditions such as these it is not to be wondered at that there soon arose a strong demand for public control of interstate rates through the agency of the Federal Government. In 1873 a select committee of the House was appointed to investigate the alleged abuses in connection with interstate transportation. This Committee, under the chairmanship of Mr. Windom, reported that there were three leading abuses which demanded a remedy through Federal legislation. These were, (1) the neglect of railways to furnish proper facilities and safety appliances, (2) unjust discriminations between localities and individuals, and (3) extortionate rates. The principal causes of the excessive charges of the railroads were alleged to be stock watering, the capitalization of surplus earnings, bogus construction rings, extravagance and corruption in management, and combinations between railroads. The Committee were of the opinion that competition would not correct the existing evils, and recommended: first, direct regulation of interstate commerce by Congress, secondly, a system of government roads to compete with the private lines, and finally, the improvement of the waterways. This report was adopted and discussed by the House, and an Act embodying some of its proposals was brought forward, but it failed to become a law. In 1878 another attempt was made to pass a law for the purpose of regulating interstate commerce. The Reagan Bill, which was proposed at that time, contained many of the features of the present Interstate Commerce Law, except that, instead of creating a special commission for the enforcement of the proposed law, it lodged this power with the courts. It was not till the year 1887, however, that a bill of this character finally passed both Houses and became a law. We shall not attempt to enter into a history of the passage of this law, nor shall we discuss the interesting report of the Senate Committee of 1886 out of which it sprang, but as the provisions of the Act itself and their subsequent interpretation are of vital interest to our subject, they will be briefly enumerated. Section 1. This section renders the Act applicable to all common carriers engaged in the transportation of property or persons for hire, either wholly or partly by |