What is the Hepburn Act 1906?
The Hepburn Act 1906 is a United States federal law that formally gave the Interstate Commerce Commission the authority to establish maximum railroad rates. This power enabled the government to discontinue free passes to loyal shippers. Furthermore, the Interstate Commerce Commission was able to view all financial documents and records associated with the national railroad system. If any railroad system resisted these provisions, the Interstate Commerce Commission’s rules of procedure would remain intact until the Hepburn Act 1906 or other associated legislation dictated otherwise.
Through the passing of the Hepburn Act, the Interstate Commerce Commission’s authority extended to cover ferries, railroad sleeping cars, express companies, oil pipelines and national bridges. The Hepburn Act 1906 was passed to transfer power from the private sector to the federal government—through the bolstering of the Interstate Commerce Commission the government was able to regulate railroad shipping rates. The Hepburn Act 1906 was strongly endorsed by President Teddy Roosevelt, who adamantly believed that the government should increase regulation and supervision of all railways engaged in interstate commerce.
The Heburn Act was passed in response to the Standard Oil Company’s monopolization of the oil market, and hence its control of oil prices. To curb the effects of monopolization, the United States Congress passed the Hepburn Act 1906 to prohibit national railroads from hauling commodities that they mined or produced, except for those supplies that were deemed necessary for their own use. This portion of the Hepburn Act is regarded as the Commodities Clause.
History of the Hepburn Act 1906:
In 1887, the United States Congress passed the Interstate Commerce Act, which made railroads the first industry explicitly subject to federal regulations. The government designed the legislation, which formally established a five-person enforcement agency (Interstate Commerce Commission), in response to public outcries regarding the predatory prices the railroads charged as a result of monopolization.
Following the U.S. Civil War, the railroad industry was privately owned and completely unregulated. Although each railroad company maintained a natural monopoly, the railroads became competitive once they began expanding into their competitor’s markets. The industry quickly became distrusted by the public, who believed they would form monopolies and abuse their political influence to regulate interstate commerce. The public accused the railroad industry—and rightfully so—of manipulating their stock prices and engaging in rate wars, which ultimately led to egregious charges and low wages for workers. While this perception was mounting, the railroad industry was aggressively expanding throughout the United States.
The first attempt to regulate the railway industry came in 1871, at the local level. Illinois passed legislation to curb the effects of the railroad monopoly. Individual states; however, were fruitless in their efforts to regulate interstate commerce, as the railway industry was exponentially expanding their reach and influence.
The Interstate Commerce Act aimed to address the unregulated market by establishing guidelines for how the railroad companies could conduct business. However, the task of creating specific measures was exceedingly complex and the government lacked a clear mission to enforce such rules.
The government wanted the Interstate Commerce Act to prevent monopolies from forming. The law sought to promote competition and outlaw discriminatory price-setting. The most successful provisions of the Interstate Commerce Act required all railroads to submit annual reports to the Interstate Commerce Commission and a concise regulation on the special rates the industry would arrange among themselves. That being said, the government needed to determine which rates were discriminatory before regulations could be imposed. This task was arduous due to an assortment of political and technical ambiguities.
How did the Hepburn Act strengthen National Railroad Regulations?
The Hepburn Act 1906 strengthened National Railroad Regulations in the following ways:
• The Hepburn Act 1906 increased the size of the Interstate Commerce Commission and its attached powers—the Act tangibly increased the commission in regards to the agency’s operating budget and number of employees.
• The Hepburn Act provided the Interstate Commerce Commission with the power to establish maximum railway rates.
• The Hepburn Act required the adoption of formalized and uniform accounting procedures for all railroad companies and carriers
• The Hepburn Act 1906 brought other common carriers, including all businesses that transported information or goods for a fee (such as storage facilities, terminals, ferries and pipelines) under the jurisdiction of the Interstate Commerce Commission
• In any situation where a carrier objected to the sanctions handed down by the Interstate Commerce Commission, a burden of proof was placed on the shipper and not the ICC. This shift in appeals situations represented a major change from the previous policy, where railroads worked under reduced regulations and lengthy appeals.
Further Regulation of the Railroad Industry:
The Hepburn Act and the Mann-Elkins Act strengthened the Interstate Commerce Commission and made the government’s regulatory power more absolute. The Hepburn Act bolstered the Interstate Commerce Commission by changing railroad rates to one the government viewed as reasonable. The Mann-Elkins Act shifted the burden of proof on the railway companies; the railroad industry was now responsible to demonstrate that rates were fair and just. With these new regulatory powers, the Interstate Commerce Commission gained authority over rail rates and the railroad market.
In the following years, the United States Federal Government continued to diminish the railroad industry’s power. For example, the Adamson Act of 1916 enacted an 8-hour workday for all railroad workers; this maximum work day disallowed railway companies from exploiting their workforce.