Today, the federal government controls several aspects of private business. In most areas that involve the public interest, there is at least some specter of national regulation. The government has not always interfered with corporations, however. The first cases of regulation occurred around the late 1870s, with regard to the railroad industry.

Throughout the Nineteenth Century, the railroad industry developed at a furious pace. As corporations began to form, the danger of monopolies quickly became apparent. A group of organized farmers, known as the Grangers, lobbied for regulation of the industry, to save themselves from the unfair prices and practices of the railroad companies. In 1877, the Supreme Court case of Munn v. Illinois questioned the validity of an Illinois law fixing maximum rates for storage of grain. The Chicago warehouse of Munn and Scott protested, believing that they were being denied property without due process of law. The court ruled that the warehouse business was sufficiently "clothed with public interest" to justify public control. The consequence of this case was the setting of a precedent that states have the right to regulate interstate commerce. Furthermore, the court said that "until Congress makes use of its power, a state might act even if in so doing it may indirectly operate upon commerce outside its jurisdiction."

For a few years, the states controlled the railroad industry. However, the laws that were developed to protect the states' right to control businesses were largely ineffectual. The inability of a state government to hold companies to its regulations made the need for federal legislation painfully apparent. In the Supreme Court case of Wabash, St. Louis, and Pacific Railway Company v. Illinois, it was ruled that "no state can exercise any control over commerce which passes beyond its limits." This ruling completely reversed previously enacted legislation. To this day, regulation of interstate commerce falls in the hands of the federal government.

Federal regulation of businesses officially began in 1887, with the passing of the Interstate Commerce Act. This created the first independent regulatory commission. It was originally "devised to apply technical expertise and a semijudicial and less partisan approach to the regulation of complex affairs." At first, it was a five person committee; all members were nominated by the president. Today it has eleven members with a chairperson. The Interstate Commerce Commission's first act was to ensure "just and reasonable" rates from businesses and to prevent the formation of monopolies. Since its inception, the responsibilities of the commission have broadened to many fields, such as worker safety and anti-discrimination (Elkins Act of 1903 and Mann-Elkins Act of 1920).

On July 2, 1890, the first federal law directed against industrial combination and monopoly was enacted. Known as the Sherman Anti-Trust Act, it began to reverse the trend toward unchecked consolidation that began after the panic of 1873. This legislation stated that "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared illegal." Though the issues of what is considered combination or a trust or what should be done with intrastate monopolies were still uncertain, this act set a strong precedent for future legislation. During the presidency of Theodore Roosevelt, the act was strengthened, revised, and put to thorough use.

Throughout the end of the 19th century and the beginning of the next, legislation regarding federal regulation was debated. Some of the most important acts were adopted during the presidency of Woodrow Wilson, who called for "regulated competition," not "regulated monopoly." Furthermore, he demanded a "body of laws which will look after the men╔who are sweating blood to get their foothold in the world of endeavor." In 1914, the Clayton Anti-Trust Act was passed to prohibit discrimination in prices among purchasers, exclusive deals tying a purchaser to a single supplier, and any action that "substantially lessens competition or tends to create a monopoly." At this time, the Federal Trade Commission was created to "prevent the unlawful suppression of competition."

Since it was created, the Federal Trade Commission has been altered several times. In one instance, the Robinson Patman Act of 1936 gave the commission the power to control prices of interstate commerce. In another case, the Celler-Kefauver Act of 1950 was enacted to prevent corporate merges that stifle competition and promote monopolies. These acts, though similar in nature to the original form of the FTC, served to strengthen it. In addition to the trade commission, throughout the decades, dozens of other laws have been enacted to regulate business. The Meat Inspection Act of 1906, the Securities and Exchange Act of 1934, the Truth In Packaging Act of 1966, and the Consumer Credit Protection Act of 1969, all serve to protect individuals from unfair practices perpetrated by business greed. Overwhelmingly, the precedent for controlling any business which stifles competition or acts unfairly toward individuals has been set.


Back to Government Regulation of Monopolies Main Page

Back to Danger of Corporate Monopolies Main Page