This Day In Market History: Congress Intervenes In The Markets With The Interstate Commerce Act

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened

On Feb. 4, 1887, President Grover Cleveland signed the Interstate Commerce Act, which empowered Congress to regulate railroad rates.

Where The Market Was

The S&P 500 traded around $5.54, and the Dow Jones wouldn’t be founded for another decade.

What Else Was Going On In The World

Punxsutawney Phil celebrated his first Groundhog Day that week, and Congress had just established the Electoral Count Act to prevent national election disputes.

Congress Controls Commerce

Anchored in the Constitution’s “Commerce Clause,” which enabled Congress to regulate business between states and with foreign countries, the Interstate Commerce Act was the federal government’s first flex in private markets.

Through it, Congress required railroads to charge “reasonable and just” rates, outlawed higher rates for shorter trips, and prohibited rebates for high-volume shippers. The Act essentially protected small business owners and farmers from discriminatory rates favoring larger corporations.

The legislation established the Interstate Commerce Commission — the first federal independent regulatory commission — to hear complaints and rule on cases. Although it was disbanded in 1995 and replaced by the Surface Transportation Board, the commission served as a model for many regulatory boards today, including the Federal Trade Commission, the Securities and Exchange Commission and the Consumer Product Safety Commission.

Since the Interstate Commerce Act, legislators have more frequently referred to the Commerce Clause to intervene in private business.

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