​INTERSTATE COMMERCE. The phrase “interstatecommerce,” as used in the United States, denotes commerce betweenthe citizens of different states of the Union. The words “interstate”and “intrastate” are not found in the constitution nor,until comparatively recently, in decisions of the courts or inlegislative acts (probably being first used officially in 1887 in theInterstate Commerce Act). The constitution of 1789 uses thephrase “commerce among the states,” and the first officialdecision interpreting the phrase says that “it may very properlybe restricted to that commerce which concerns more states thanone” (Chief Justice Marshall inGibbons v.Ogden, 9Wheaton 194).Commerce among the states is there distinguished from“commerce which is completely internal, which is carried onbetween man and man in a state, or between parts of the samestate, and which does not extend to or affect other states.” Itwas declared (Lehigh case, 145U.S. 192) that commerce betweentwo persons in the same state is not interstate even when thereis a temporary deviation to the soil of another state; but later(Hanley case, 187U.S. 617, distinguishing theLehigh case) itwas declared that as to transportation, such commerce is interstate.The courts have interpreted commerce to denote notmerely a mutual selling or traffic, but as “a term of the largestimport,” including intercourse for the purposes of trade in anyand all its forms (Gibbons v.Ogden, 9Wheaton 194, andWelton v.Missouri, 91U.S. 280). Thus have been included not onlythe actions of trading, navigation, transportation, and communication,but also the instruments and agents employed, includingeven telegraph messages and, in the extremest cases, lotterytickets.^[1]

The decision of the question where federal control of interstatetraffic ends and state control begins has been one of great practicaldifficulty. In general it has been held that whenever acommodity begins to move as an article of trade from one state toanother, commerce in that commodity between the states hasbegun. Mere intention to ship goods does not make themsubjects of interstate commerce, but they must actually beput in motion or committed to the carrier for that purpose(Coe v.Errol, 116U.S. 517). As a practical guide in decidingwhen state control should be resumed, the court as early as 1827(Brown v.Maryland) laid down the “original package rule,”that the taxing power of the state should begin when the originalpackage in which the goods had been imported into the statehad been broken up or sold. The injustice of allowing goodsto be held thus, for long periods escaping local taxation, ledto a modification of the rule in 1868 (Woodruff v.Parkham, 8Wall. 123), and such goods after reaching their destinationmay be taxed as property in common with other property inthe state.^[2]

Reason for Federal Control of Interstate Commerce.—Immediatelyafter the close of the War of American Independencein 1783 appeared the separatist tendencies and local jealousiesusual in a confederation. The Congress of the Confederationhad no power to levy tariff duties or to regulate commercebetween the states, and the separate states freely and recklesslyexercised their rights in this matter. Though commerce at thattime was comparatively unimportant, the results of this restrictivepolicy were most unfortunate. The Annapolis Conventionof 1786 was called by the Virginia legislature to take intoconsideration the trade of the United States and to considerhow far a uniform system in their commercial relations might benecessary to the common interests and their permanent harmony.This conference resulted in the call of the Philadelphia Conventionof 1787, which framed the present Constitution. ChiefJustice Marshall, in one of the early cases on this subject (Brownv.Maryland, 12Wheaton 419, in 1827), said in words often sincequoted: “It may be doubted whether any of the evils proceedingfrom the feebleness of the federal government contributed moreto that great revolution which introduced the present systemthan the deep and general conviction that commerce ought tobe regulated by Congress.”

Every year has increased the importance of the congressionalpower of regulating commerce. At the time of the adoptionof the Constitution, each neighbourhood supplied nearly all itsneeds by its own industry, but improving means of transportationand communication have multiplied the commercial ties betweenthe citizens of the various states. This change went on slowlyuntil 1830, more rapidly between 1830 and 1860, and at anever-hastening pace after the Civil War. Until 1824 no caseinvolving directly the consideration of this power reached theUnited States Supreme Court. From 1824 to 1840 the SupremeCourt decided an average of one-third of a case a year; from1841 to 1860, an average of three-fourths of a case; from 1861to 1870, an average of one case; from 1871 to 1880, an averageof nearly six cases; from 1881 to 1890, an average of more thanseven cases; and from 1891 to 1900, an average of more thanten cases. The decisions have not been entirely uniform, andthere were some decisions too contradictory to be explained byany ingenuity. The Supreme Court itself has said (Fargo v.Michigan, 121U.S. 230) that “it may be admitted that thecourt has not always employed the same language, and thatall of the judges of the court who have written opinions for itmay not have meant precisely the same thing.” Though in theperiod just preceding the Civil War the doctrine of states’ rightstended to weaken somewhat the federal power, the broadoutlines of the interpretation by Chief Justice Marshall laid downin 1824 inGibbons v.Ogden remain to-day almost undimmed.

Interstate Commerce in the Federal Constitution.—Freedomof trade, without discrimination, between the citizens of all thestates was in the main ensured by one brief sentence, usuallycalled the “commerce clause” of the federal constitution:—“TheCongress shall have power. . . to regulate commercewith foreign nations, and among the several states, and withthe Indian tribes” (Art. 1, sec. 8, clause 3). Hardly less importantis the power “to make all laws which shall be necessary andproper for carrying into execution the foregoing powers, and allother powers vested by this Constitution in the governmentof the United States, or in any department or officer thereof”(Art. 1, sec. 8, clause 18). To the same end of freedom ofcommerce, Congress is limited in that “no tax or duty shall belaid on articles exported from any state,” and “no preferenceshall be given by any regulation of commerce or revenue to the ​ports of one state over those of another; nor shall vessels boundto or from one state be obliged to enter, clear, or pay duties inanother” (Art. 1, sec. 9, clauses 5 and 6). Directly and byimplication, Congress was granted a number of other powersover commerce, in that it may coin money, establish uniformlaws of bankruptcy, establish post-offices and post roads,regulate weights and measures, exercise admiralty jurisdiction(now interpreted to extend to all public waterways accessibleto the traffic of more than one state), grant patents andcopyrights, and use the power of taxation to protect, repress or evendestroy the agencies of commerce (e.g. state bank notes). Butthese powers can be exercised only in ways which favour andmake free the intercourse among all parts of the nation.

Even if the commerce clause had been omitted from theConstitution, a large part of its object would have been attainedby certain prohibitions upon the states as follows: “Thecitizens of each state shall be entitled to all privileges andimmunities of citizens in the several states” (Art. 4, sec. 2).“No state shall, without the consent of the Congress, lay anyimpost or duties on imports or exports, except what may beabsolutely necessary for executing its inspection laws; and thenet produce of all duties and impost, laid by any state on importsor exports, shall be for the use of the treasury of the UnitedStates, and all such laws shall be subject to the revision andcontrol of the Congress” (Art. 1, sec. 10, clause 2). “No stateshall, without the consent of Congress, lay any duty of tonnage”(Art. 1, sec. 10, clause 3). Thus by threefold measures ofprecaution was ensured domestic freedom of trade from everypoint in the land to its farthest frontiers.

Negative Working of the Commerce Provisions.—For nearly ahundred years these provisions were important only in theirnegative effects of preventing the states from granting specialprivileges to their citizens or taxing unequally the citizens ofother states. The decision in 1824 ofGibbons v.Ogden stoppedthe attempt of the state of New York to grant the monopoly ofsteamboat traffic on the waters of that state. Had the clearand unequivocal opinion in that case been different, localingenuity doubtless would have devised a multitude of discriminations.“The power to tax involves the power to destroy,” andever since the decision ofMcCulloch v.Maryland in 1819 ithas been held that no agencies created by the federal government,such as banks or legal tender notes, are subject to state taxation,and the rule has also been laid down repeatedly by the SupremeCourt (for the first time in 1886) that no burden can be laid uponthe act of taking goods into or out of the state, of soliciting sales,or of delivering goods even though the tax is without discriminationas between the state’s own citizens and others; that is,interstate commerce “cannot be taxed at all” (Robbins v.Shelby County Taxing District, 120U.S. 489).^[3]

Federal control of interstate commerce has been interpretedby the courts to be exclusive of any control by the states. Thisis not self-evident in the clause, “Congress shall have powerto regulate commerce among the several states.” Over someother subjects the power of the federal and state governmentsis concurrent, the state being able to act until Congress enactssome conflicting legislation. Although the early decisionssuggested that the power of Congress was exclusive, yet fornearly a century no positive decision was rendered and nopositive action was taken by Congress. Between 1870 and 1886the states made great progress in the regulation of railways onthe assumption that until Congress had acted the states werefree to act. The question was put beyond doubt in a seriesof decisions establishing the principle that the non-action ofCongress indicates its will that commerce shall be free anduntrammelled and that the states cannot interfere either throughtheir police power or their taxing power.^[4]

Positive Federal Regulation.—Though the regulation of interstatecommerce up to the Civil War was mainly negative, somepositive actions of the federal government had indirect effectson commerce, as, for example, the coinage of money, the establishmentof post-offices, the charter of the first and second UnitedStates banks, and the charter of the Pacific Railroad. Thepower to do these things was conferred by the Constitution insome cases directly, in other cases by implication in that anymeans appropriate to lawful ends might be employed (as in caseof charter of the United States Bank,McCulloch v.Maryland).From 1850 to 1862 the federal government had made numerousland grants in aid of railways, but always to the states, notdirectly to the corporations, and it had never until 1862 granteda charter to a railway, canal, turnpike or transportationcompany. In 1866 Congress passed an act authorizing railwaycompanies whose roads were operated by steam to carrypassengers, freight, &c., “on their way from any state to anotherstate and to receive compensation therefor and to connect withroads of other states so as to form continuous lines for thetransportation of the same to the place of destination.”^[5] Thisact, so vague and general in its terms, had very little effect,though it has been the occasion of considerable litigation todetermine its influence upon existing police laws of the states.In 1884 Congress established the Bureau of Animal Industryfor preventing the exportation of diseased cattle and for theextirpation of disease among domestic animals. This had littlesignificance at the time for interstate commerce, its purposebeing to meet the objections of foreign countries to the importationof American meat. In 1887 was passed the InterstateCommerce Act, providing a national commission to superviseinterstate railways. In 1888 was passed an Arbitration Act,replaced in 1898 by an act which provides that in case of disputesbetween common carriers subject to the Interstate CommerceAct and their employees, conciliation shall be tried, and, in casethis should fail, indicates the methods that may be used for thevoluntary submission of the dispute to a board of arbitration. ​In 1890 was passed the Sherman Anti-Trust Act, making illegalevery contract and combination in restraint of trade orcommerce among the several states or with foreign nations. In 1893a Safety Appliance Act, the administration of which was putinto the hands of the Interstate Commerce Commission,promoted the safety of employees and travellers, and required theroads engaged in interstate commerce to equip their cars andlocomotives with automatic couplers and brakes. In 1895 wasprohibited the interstate carriage of condemned carcasses ofanimals, and of lottery tickets (see above reference to theinterpretation of the Lottery Act), in 1897 of obscene literature, andin 1900 of game killed in violation of state laws. In 1901 carriersengaged in interstate commerce were required to make fullreports of all accidents to the Interstate Commerce Commission.In 1902 was prohibited the interstate carriage of dairy productsfalsely labelled or branded as to the state or territory in whichproduced, and in 1903 the Secretary of Agriculture wasempowered to establish rules concerning importation andtransportation of live stock. In 1903 the Bureau of Corporations wasestablished with power to investigate the conduct of corporationsengaged in interstate and foreign commerce, excepting commoncarriers subject to the Interstate Commerce Act. In 1903 theInterstate Commerce Act was amended by the Elkins Act,making much more difficult the granting of rebates. In 1905the President was authorized to grant medals of honour topersons who by their daring save life or prevent accident onrailways. In 1906 the Interstate Commerce Act was amended inimportant particulars (specified below). In 1906 were passedpure food laws, greatly enlarging the duties of the Departmentof Agriculture in reference to inspection of foods prepared forinterstate commerce.

The Interstate Commerce Act.—The period of positive actionby Congress in the regulating of interstate commerce practicallybegins, therefore, with the enactment of the Interstate CommerceAct of February 1887, the outcome of fully seventeen years ofagitation and discussion. The law was modelled in large partupon English acts. It applied to common carriers wholly byrailway, and partly by railway and partly by water when bothare used under a common arrangement for continuous shipment;forbade unjust discrimination and undue and unreasonablepreference; made it unlawful to charge more for a shorter than fora longer distance over the same line in the same direction, theshorter being included within the longer distance (though acarrier might be freed by the Commission from the working ofthis provision); and forbade pooling and division of earnings.The administration of the law was entrusted to a Commissionof five members, appointed by the President. From this actmuch was expected, but eighteen years of its operation gave asnet results little more than a greater uniformity of railwayaccounting and much better understanding by the public of thenature of the railway problem. Discrimination and secretrebates continued. The anti-pooling clause (pretty generallyrecognized by the well-informed to be a mistake) preventedopen but not secret agreements between carriers, and probablyhastened the movement toward consolidation. The long andshort haul clause was made meaningless by the judicialinterpretation that any competition, even that of other carrierssubject to the act, justified the railway in charging more for ashorter than for a longer haul. The effectiveness of theCommission was destroyed by the judicial decision that it had nopower to fix rates for the future. Until 1897, the Commission,when it adjudged a rate unreasonable, usually declared whatrate was reasonable, and directed the carrier to reduce the rateby a given date to the designated maximum. Of 135 ordersmade in decisions rendered in the first ten years of theCommission, 68 prescribed a maximum rate for the future. In 1897it was finally decided in theCincinnati Freight Bureau Case(167U.S. 479) that Congress had not conferred upon theCommission the power to prescribe any rate for the future. Thecourt said that Congress might fix the rate itself or authorizea sub-tribunal to do so, but that Congress had not yet given thatauthority.

The need of further legislation had been felt from the beginningby many, and after 1903 the agitation became very active. Theposition taken by President Roosevelt in his message to Congressin 1904 made the amendment of the Interstate Commerce Actthe principal political issue before Congress in the sessions of1905 and of 1906. After the most remarkable senatorial debatesheard at Washington in years, followed with close interest bythe country, a number of amendments became law on the 29thof June 1906. The act was strengthened to a degree hardlyexpected by the most earnest advocates of revision. A numberof minor changes made in the light of experience were: increasingthe number of commissioners to seven and their pay to $10,000;facilitating procedure and the taking of evidence; requiringthirty days notice of a change of rates; requiring appeal from theCommission’s decision to be taken within thirty days; empoweringthe Commission to establish joint rates and to order switchesto be built. The following are generally thought to be still moreimportant changes: (1) Including within the application ofthe act pipe lines (particularly for oil), express and sleeping carcompanies, and all the facilities and services in connexion withgoods transported; (2) giving publicity to railway businessby empowering the Commission to prescribe all forms of accountsand to examine the books at all times, and by forbidding anyother accounts or memoranda to be kept by the companies; and(3) empowering the Commission to prescribe reasonable maximumrates to take effect within not less than thirty days and tocontinue not over two years unless set aside by the courts.

The Anti-Trust Act of 1890.—The growth of large corporationswith some degree of monopoly power, the so-called trusts, hadcalled forth in a number of the states anti-trust laws before 1890.When it became evident that the states were not succeeding indealing with the problem, public sentiment found expression inthe Sherman Anti-Trust Act, approved on the 2nd of July 1890.This act declared illegal and criminal, punishable by fine orimprisonment or both, every contract in restraint of trade orcommerce among the several states or with foreign nations.The statute thus changed the common law wherein suchcontracts were merely unenforceable but not criminal. This act wasat first construed by the Supreme Court as applying to anycontract in restraint of interstate commerce, whether reasonableor unreasonable (Trans-Missouri Freight Association, 166U.S.331), but later, in 1905 (Stock Yards case, 25Supreme CourtReporter 276) it was held that the act did not apply to agreementsfor the better conduct of business which incidentally affectedinterstate commerce.^[6] The act has been interpreted to apply totransportation (Freight Association case, 166U.S. 290, andNorthern Securities case), with results felt even by some of theadvocates of railway regulation to be unfortunate. It appliesto unlawful combinations of manufacturers to divide the territoryand regulate the prices (Addyston Pipe Trust Case, 175U.S. 211).In the Sugar Trust case (1895U.S. v.Knight Co. 156U.S.) itwas declared that the statute did not apply to a manufacturingcompany which had acquired nearly complete control of themanufacture of refined sugar by means of the purchase of stockof other refining companies.

The Attorney-General submitted to the Senate, in June 1906,a statement of the results of all suits instituted by the Departmentof Justice under the anti-trust law, the Interstate CommerceAct and the Elkins Act, in the period from 1887 to June 1906inclusive. Thirty-six suits were still pending; of the 250 whichhad been disposed of in some manner 186 ended in dismissal,non-prosecution or acquittal, and 64 were successful in securingin whole or in large part the object of the suit (in 30 casesconviction, in 34 cases the granting of a petition or an injunction,&c.). In addition to these results of federal efforts to regulateindustry must be counted the cases in which carriers complied ​with the orders of the Interstate Commerce Commissionwithout suit; but even then the total by 1906 was somewhatmeagre.

The establishment of the Bureau of Corporations in 1903, andthe considerable extension of the powers of inspection of theDepartment of Agriculture are recent changes of which theresults cannot yet be fairly judged. The aim of the Bureau ofCorporations is to ensure publicity in the management of corporationsengaged in interstate and foreign commerce. The firstcommissioner, Mr James R. Garfield, showed much activityin pursuing the purposes of the act, and published informingreports upon the beef trust (1905) and upon the Standard OilCompany (1906). But the effect and possible extension of federalinterference became from this time burning political questionsof far-reaching importance of too recent a date to be dealt withhistorically in this article.