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Re: Is RR antitrust exemption near the end of the line?
Author: Little Lake Listener
Date: 05-07-2008 - 23:05
And your point is ...?
Irrespective of who wrote it, Congress passed the legislation and the Interstate Commerce Act (the “ICA”) was signed into law in 1887 by President Grover Cleveland. The ICA Act was intended to replace the so-called “Granger” laws enacted by many Granger-controlled states in the 1870s which had been found to be ineffective, incompetent, and even corrupt. In 1886, the U.S. Supreme Court struck down an Illinois law outlawing long-and-short haul discrimination and clearly established the exclusive power of Congress to regulate interstate commerce.
As originally enacted on February 4, 1887, the ICA applied only to railroads. The Act required railroad rates be "reasonable and just" and railroads were compelled to make those rates public. Price discrimination against small markets was made illegal; special rates or rebates for individual shippers were prohibited; "preference" in rates for particular localities, shippers, or products was outlawed; long-haul/short-haul discrimination was prohibited; and traffic or market pooling (monopoly) agreements were barred. This legislation also created the Interstate Commerce Commission (ICC), which had the authority to investigate and prosecute companies who violated the law. The ICA granted the ICC the authority and power to investigate pricing abuses and summon witnesses; however, in the early years the ICC lacked the resources to accomplish its goals. Moreover, later presidents often appointed pro-railroad commissioners who made sure the ICC wouldn’t “go too far.”
The ICA was first amended in 1891, again in 1906, then again in 1910, to give the ICC the missing resources and authority to subpoena witnesses, issue injunctions, seek imprisonment (in addition to financial penalties), and, most importantly to suspend and impose rates which the ICC, in its sole discretion, deemed to be “just and reasonable.” ICC authority was later extended to household goods movers, motor carriers and pipelines. From thereon – interrupted only by two World Wars and a “Police Action” in Korea – until repealed by the Staggers Act of 1980, railroads began an inexorable spiral into ruin and collapse that nearly destroyed the industry and everyone who depended on rail transportation.
The phrase “just and reasonable” was interpreted to mean “protection of the weakest,” and railroads were barred from lowering rates lest there be “unfair competition” between the efficient railroads and trucks or inefficient railroads. So shippers were forced to either pay higher rail rates or take their business away from the railroads and give it to the lower-priced trucks and barges – which they did. Additionally, railroads were compelled by “public interest” to offer services few if anybody wanted (such as passenger and branchline services). The final whammy came in the form of the ICC’s refusal to allow differential pricing, i.e., railroads were barred from raising rates on so-called captive commodities, such as coal, grain, iron ores, and the like, that couldn’t switch to trucks even if they wanted to.
So, where could the railroads go to find the money to stay in business? Answer: Nowhere. By the 1960s the railroads, particularly in the Northeast, couldn’t earn enough money to maintain their properties or offer essential, much less reliable and competitive, services at any price.
By every measure, since the Staggers Act and until only recently, railroad rates have fallen in both constant and current dollar measures. Recently, there has been some small upturn in revenue as the railroads neared full capacity. Moreover, as a result of billions of dollars of new private investment during this same period, railroad efficiency and productivity have climbed steadily. After nearly 100 years, the railroad industry has finally re-established the financial capacity to grow to meet the needs of our nation’s future.
All of which is not to say the present regulatory environment is “perfect.” It isn’t. The “open access” issue is thorny, to say the least. But if you have raised the money to build a better plant to manufacture the ever-popular widgets, then why should you be compelled to let some interloper use your widget plant just because they don’t have such a good widget plant? “Rent,” as that term is usually defined, offers insufficient and inadequate compensation. When is it equitable to allow some gatecrasher use your hard-earned resources to take away your customers? Theoretically, if the concept of “rent” includes the cost of “lost opportunities,” then there may be some way to compensate the owner, but how do you measure the cost of “lost opportunity” – the cost of something that no longer exists?
But, even with the unresolved issues, why would anyone want to return to the “really bad old days?”
Irrespective of who wrote it, Congress passed the legislation and the Interstate Commerce Act (the “ICA”) was signed into law in 1887 by President Grover Cleveland. The ICA Act was intended to replace the so-called “Granger” laws enacted by many Granger-controlled states in the 1870s which had been found to be ineffective, incompetent, and even corrupt. In 1886, the U.S. Supreme Court struck down an Illinois law outlawing long-and-short haul discrimination and clearly established the exclusive power of Congress to regulate interstate commerce.
As originally enacted on February 4, 1887, the ICA applied only to railroads. The Act required railroad rates be "reasonable and just" and railroads were compelled to make those rates public. Price discrimination against small markets was made illegal; special rates or rebates for individual shippers were prohibited; "preference" in rates for particular localities, shippers, or products was outlawed; long-haul/short-haul discrimination was prohibited; and traffic or market pooling (monopoly) agreements were barred. This legislation also created the Interstate Commerce Commission (ICC), which had the authority to investigate and prosecute companies who violated the law. The ICA granted the ICC the authority and power to investigate pricing abuses and summon witnesses; however, in the early years the ICC lacked the resources to accomplish its goals. Moreover, later presidents often appointed pro-railroad commissioners who made sure the ICC wouldn’t “go too far.”
The ICA was first amended in 1891, again in 1906, then again in 1910, to give the ICC the missing resources and authority to subpoena witnesses, issue injunctions, seek imprisonment (in addition to financial penalties), and, most importantly to suspend and impose rates which the ICC, in its sole discretion, deemed to be “just and reasonable.” ICC authority was later extended to household goods movers, motor carriers and pipelines. From thereon – interrupted only by two World Wars and a “Police Action” in Korea – until repealed by the Staggers Act of 1980, railroads began an inexorable spiral into ruin and collapse that nearly destroyed the industry and everyone who depended on rail transportation.
The phrase “just and reasonable” was interpreted to mean “protection of the weakest,” and railroads were barred from lowering rates lest there be “unfair competition” between the efficient railroads and trucks or inefficient railroads. So shippers were forced to either pay higher rail rates or take their business away from the railroads and give it to the lower-priced trucks and barges – which they did. Additionally, railroads were compelled by “public interest” to offer services few if anybody wanted (such as passenger and branchline services). The final whammy came in the form of the ICC’s refusal to allow differential pricing, i.e., railroads were barred from raising rates on so-called captive commodities, such as coal, grain, iron ores, and the like, that couldn’t switch to trucks even if they wanted to.
So, where could the railroads go to find the money to stay in business? Answer: Nowhere. By the 1960s the railroads, particularly in the Northeast, couldn’t earn enough money to maintain their properties or offer essential, much less reliable and competitive, services at any price.
By every measure, since the Staggers Act and until only recently, railroad rates have fallen in both constant and current dollar measures. Recently, there has been some small upturn in revenue as the railroads neared full capacity. Moreover, as a result of billions of dollars of new private investment during this same period, railroad efficiency and productivity have climbed steadily. After nearly 100 years, the railroad industry has finally re-established the financial capacity to grow to meet the needs of our nation’s future.
All of which is not to say the present regulatory environment is “perfect.” It isn’t. The “open access” issue is thorny, to say the least. But if you have raised the money to build a better plant to manufacture the ever-popular widgets, then why should you be compelled to let some interloper use your widget plant just because they don’t have such a good widget plant? “Rent,” as that term is usually defined, offers insufficient and inadequate compensation. When is it equitable to allow some gatecrasher use your hard-earned resources to take away your customers? Theoretically, if the concept of “rent” includes the cost of “lost opportunities,” then there may be some way to compensate the owner, but how do you measure the cost of “lost opportunity” – the cost of something that no longer exists?
But, even with the unresolved issues, why would anyone want to return to the “really bad old days?”
