ployment, the business affected by it and the work done under it, is so clearly the product of a naked, arbitrary exercise of power that it cannot be allowed to stand under the Constitution of the United States. . . .

To sustain the individual freedom of action contemplated by the Constitution, is not to strike down the common good but to exalt it; for surely the good of society as a whole cannot be better served than by this preservation from arbitrary restraint of the liberties of its constituent members.

It follows . . . that the act in question passes the limit prescribed by the Constitution.

CHAPTER VIII

THE POWER TO REGULATE COMMERCE

Commerce Laws.

The States and the United States have made extensive use of their commerce powers in order to promote the general welfare of society. The State legislatures have enacted statutes fixing the charges for carrying passengers and goods and the service to be rendered by railroads operating wholly within their limits, regulating gas and electric light service and charges, supervising and controlling banking and insurance, and otherwise controlling businesses affected by a public interest. The Congress has made many statutes regulating interstate and foreign commerce, such as the Interstate Commerce Commission Act, the Sherman Anti-Trust and AntiMonopoly Act, the Hepburn Railroad Rate Law, the Clayton Fair Trade Commission Law, the Meat Inspection and Pure Food and Drug Law, the White Slave Act, the Lottery Law, and the acts to prevent the use of the post office for immoral and fraudulent purposes.

These statutes have from time to time been challenged in the courts on allegations that they operate to deprive citizens of the United States of the benefit of the constitutional rights of liberty and property. In all

CIBRAR.

cases so arising, the courts have held that, as the purpose of the guaranties is to secure the welfare of society, they are to be applied according to the social conditions which existed when the statutes were made, not according to the social conditions that existed when the guaranties were created.

State and Federal Railroad Commission Acts.

During the period of expansion that followed the Civil War, the railroad systems of the United States increased their mileage by almost one half, and their competition for freight shipments became ruinous to themselves and in the end disastrous to the shippers. The railroads underbid each other on through shipments and made good their losses by overcharges on local traffic. In order to avoid this unreasonable competition, the railroads began to make pooling agreements by which they fixed passenger and freight rates and divided their total receipts in proportionate shares agreed upon among themselves. But they did this with an eye to their own profits only and without regard to the interests of passengers and shippers. They charged "what the traffic would bear," granted rebates to favored shippers, and as a means of getting contracts sometimes divided with the big shippers the profits they made on freights of smaller shippers in the same lines of business. Where there were no competing lines, the railroads sometimes charged higher rates for hauling freight short distances than long distances. The big shippers, like the Standard Oil Company, drove their competitors out of business. Local industries were often paralyzed.

The first result of these impossible business conditions was the enactment by State legislatures of statutes

establishing railroad commissions which were authorized to regulate the rates to be charged and prescribed the service to be rendered by railroads operating within State boundaries. The second result was the passage by Congress in 1887 of the Interstate Commerce Commission Act, which prohibited discriminatory rates, 'made unlawful the charging of higher rates for short than for long hauls, and required railroads and other carriers to publish rate schedules and file them with the commission.

The United States Supreme Court has repeatedly held that State statutes establishing railroad commissions with authority to fix railroad rates and train service do not deprive the railroad companies of their property rights without due process of law, provided the authority is not so exercised as to amount to a confiscation of property.1

The United States Supreme Court has also ruled that the Interstate Commerce Commission Act, which undoubtedly deals with property rights after a fashion which the makers of the Constitution of the United States could not have understood, is a valid exercise of the commerce powers of the nation.

The Granger Cases, decided in 1876 by the United States Supreme Court created a sensation that is not easily understood at the present time. The people as a rule had taken it for granted that a railroad, like an individual, could charge for the service it rendered

1 Railroad Commission Cases, 116 U. S. Rep., 307; Minneapolis etc. R. Co. v. Minnesota, 186 U. S. Rep., 257; Smith v. Alabama, 124 U. S. Rep., 465.

2 C. B. & Q. R. R. Co. v. Iowa, 94 U. S. Rep., 155; Peik v. C. & N. W. R. R. Co., 94 U. S. Rep., 164; C. M. & St. Paul R. R. Co., v. Ackley, 94 U. S. Rep., 179; Winona & St. Peter R. R. Co. v. Blake, 94 U. S. Rep., 180; Stone v. Wiseman, 94 U. S. Rep., 180.

whatever rate it chose to fix; that if those who travelled in its cars or shipped merchandise over its lines did not like to pay what it demanded, there was no way to compel it to make reasonable rates. There seemed to be something revolutionary in judicial decisions which held that the States which had given the railroads their charters could tell the companies they were charging more than the service was worth and that their rates must be lowered. Such decisions rendered by the highest courts of Iowa, Minnesota, and Wisconsin were sustained by the United States Supreme Court in a series of cases which created much alarm at the time, but now would not excite surprise.

I

These decisions have been qualified to some extent by subsequent cases, which hold that the charges fixed by the authorities of the States must be reasonable, but the principle remains unchanged.

2

The case of Interstate Commerce Commission v. Baltimore and Ohio Railroad Company, decided in 1892 by the U. S. Supreme Court, was a proceeding to compel the Baltimore and Ohio Railroad Company to withdraw from its lines upon which business competition existed with the Pittsburgh, Cincinnati and St. Louis Railroad Company certain so-called "party rates" and excursion tickets, without posting those rates in its offices as required by the law. The Commission after hearing the parties decided that the "party rates" constituted an unjust discrimination under the act and ordered the Baltimore and Ohio Company to cease giving them. The Baltimore & Ohio Company refused to obey the order and the Commission filed a petition for an

C. M. & St. Paul R. R. Co. v. Minnesota, 134 U. S. Rep., 418; Budd v. New York, 143 U. S. Rep., 517.