Elkins Act: Difference between revisions
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{{More citations needed|date=October 2010}} |
{{More citations needed|date=October 2010}} |
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The '''Elkins Act''' is a 1903 [[United States federal law]] that amended the [[Interstate Commerce Act of 1887]]. The Act authorized the [[Interstate Commerce Commission]] (ICC) to impose heavy fines on [[Rail transport|railroads]] that offered [[rebate (marketing)|rebates]], and upon the shippers that accepted these rebates. The railroad companies were not permitted to offer rebates. Railroad corporations, their officers, and their employees, were all made liable for discriminatory practices.<ref name=sharf>{{cite book |title=Railway Regulation |chapter=The Elkins Act |last=Sharfman |first=I. Leo |
The '''Elkins Act''' is a 1903 [[United States federal law]] that amended the [[Interstate Commerce Act of 1887]]. The Act authorized the [[Interstate Commerce Commission]] (ICC) to impose heavy fines on [[Rail transport|railroads]] that offered [[rebate (marketing)|rebates]], and upon the shippers that accepted these rebates. The railroad companies were not permitted to offer rebates. Railroad corporations, their officers, and their employees, were all made liable for discriminatory practices.<ref name=sharf>{{cite book |title=Railway Regulation |chapter=The Elkins Act |last=Sharfman |first=I. Leo |year=1915 |publisher=LaSalle Extension University |location=Chicago |pages=[https://archive.org/details/railwayregulati00unkngoog/page/n213 201]–202 |url=https://archive.org/details/railwayregulati00unkngoog |quote=roosevelt. }}</ref> |
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Prior to the Elkins Act, the [[livestock]] and [[Petroleum industry|petroleum]] industries paid standard rail shipping rates, but then would demand that the railroad company give them rebates. The railroad companies resented being [[extortion|extorted]] by the railroad [[Trust (monopoly)|trusts]] and therefore welcomed passage of the Elkins Act. The law was sponsored by [[United States President|President]] [[Theodore Roosevelt]] as a part of his "[[Square Deal]]" domestic program, and greatly boosted his popularity.{{citation needed|date=October 2010}} |
Prior to the Elkins Act, the [[livestock]] and [[Petroleum industry|petroleum]] industries paid standard rail shipping rates, but then would demand that the railroad company give them rebates. The railroad companies resented being [[extortion|extorted]] by the railroad [[Trust (monopoly)|trusts]] and therefore welcomed passage of the Elkins Act. The law was sponsored by [[United States President|President]] [[Theodore Roosevelt]] as a part of his "[[Square Deal]]" domestic program, and greatly boosted his popularity.{{citation needed|date=October 2010}} |
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The ICC had been unable to protect competition and fair pricing. Section 2 of the Interstate Commerce Act prohibits a carrier from offering preferential prices or rebates; however, enforcement of this section was ineffective. Powerful trusts would pay the standard shipping price, but demand a rebate from the carrier. Court cases brought before the commission generally did not result in punitive action, as the ICC was composed primarily of railroad interests.<ref>Scribner, Marc. "Slow Train Coming? Misguided Economic Regulation of U.S. Railroads, Then and Now." Competitive Enterprise Institute. 2013.</ref> Carriers found guilty of price discrimination, moreover, could appeal the ICC decision to federal courts, delaying punishment for years.<ref>Jones, Eliot. Principles of Railway Transportation (New York: Macmillan, 1924), p. 234.</ref> |
The ICC had been unable to protect competition and fair pricing. Section 2 of the Interstate Commerce Act prohibits a carrier from offering preferential prices or rebates; however, enforcement of this section was ineffective. Powerful trusts would pay the standard shipping price, but demand a rebate from the carrier. Court cases brought before the commission generally did not result in punitive action, as the ICC was composed primarily of railroad interests.<ref>Scribner, Marc. "Slow Train Coming? Misguided Economic Regulation of U.S. Railroads, Then and Now." Competitive Enterprise Institute. 2013.</ref> Carriers found guilty of price discrimination, moreover, could appeal the ICC decision to federal courts, delaying punishment for years.<ref>Jones, Eliot. Principles of Railway Transportation (New York: Macmillan, 1924), p. 234.</ref> |
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The Elkins Act was named for its sponsor, Senator [[Stephen B. Elkins]] of [[West Virginia]], who introduced a bill in 1902 at the behest of the [[Pennsylvania Railroad]].<ref>{{cite web |url=http://www.theodorerooseveltcenter.org/en/Learn-About-TR/TR-Encyclopedia/Capitalism-and-Labor/The-Elkins-Act.aspx |title=Elkins Act |author=<!--Staff writer(s); no by-line.--> |
The Elkins Act was named for its sponsor, Senator [[Stephen B. Elkins]] of [[West Virginia]], who introduced a bill in 1902 at the behest of the [[Pennsylvania Railroad]].<ref>{{cite web |url=http://www.theodorerooseveltcenter.org/en/Learn-About-TR/TR-Encyclopedia/Capitalism-and-Labor/The-Elkins-Act.aspx |title=Elkins Act |author=<!--Staff writer(s); no by-line.--> |website=TR Encyclopedia |publisher=Theodore Roosevelt Center, Dickinson State University |location=Dickinson, ND |access-date=2014-04-18 |archive-url=https://web.archive.org/web/20140419221733/http://www.theodorerooseveltcenter.org/en/Learn-About-TR/TR-Encyclopedia/Capitalism-and-Labor/The-Elkins-Act.aspx |archive-date=2014-04-19 |url-status=dead }}</ref> The law was passed by the [[57th United States Congress|57th Congress]] and signed by President Roosevelt on February 19, 1903. The Act made it a [[misdemeanor]] for a carrier to impose preferential rebates, and implicated both the carrier and the recipient of the low price. The Act also abolished imprisonment as a punishment for breaching the law, so a violator could only be fined.<ref>Elkins Act, "An Act to Further Regulate Commerce with Foreign Nations and Among the States." [[57th United States Congress|57th Congress]], Sess. 2, ch. 708, {{USStat|32|847}}; 1903-02-19.</ref> By reducing the severity of punishment, legislators hoped to encourage firms to testify against each other, and promote stricter enforcement of the law.<ref>Chicago, E. P. (1903 Mar 19). “The Elkins Act." ''The Washington Post'' (1877-1922).</ref> |
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==Impact== |
==Impact== |
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Following the passage of the Elkins Act, real freight rates decreased only slightly. In 1905, leaders in the regulation movement testified before Congress to identify the reduction in prices that resulted from the Act.<ref>Elkins Act Sufficient." (1905, Jan 17), ''The Washington Post'' (1877-1924).</ref> Yet, in the first months following the passage of the law, the most pronounced change in railroad pricing was the elimination of rebates. However, later analysis has found that decreases in carrier prices are better attributable to decreases in the costs of operation due to technology advances.<ref name=harbeson>Harbeson, Robert. "Railroads and Regulation, 1877-1916: Conspiracy or Public interest?" ''Journal of Economic History.'' Vol 27, No 2 (June, 1967), pp. 230-242.</ref> The elimination of rebates led the railroads to seek other methods to compete for business, leading [[United States Governor|Governor]] [[Albert B. Cummins]] of [[Iowa]] to declare, in 1905, that the elimination of rebates simply forces railroads to seek alternative noncompetitive means to secure business.<ref name=parsons>{{cite book |title=The Heart of the Railroad Problem |chapter=The Elkins Act and its Effects |last=Parsons |first=Frank |
Following the passage of the Elkins Act, real freight rates decreased only slightly. In 1905, leaders in the regulation movement testified before Congress to identify the reduction in prices that resulted from the Act.<ref>Elkins Act Sufficient." (1905, Jan 17), ''The Washington Post'' (1877-1924).</ref> Yet, in the first months following the passage of the law, the most pronounced change in railroad pricing was the elimination of rebates. However, later analysis has found that decreases in carrier prices are better attributable to decreases in the costs of operation due to technology advances.<ref name=harbeson>Harbeson, Robert. "Railroads and Regulation, 1877-1916: Conspiracy or Public interest?" ''Journal of Economic History.'' Vol 27, No 2 (June, 1967), pp. 230-242.</ref> The elimination of rebates led the railroads to seek other methods to compete for business, leading [[United States Governor|Governor]] [[Albert B. Cummins]] of [[Iowa]] to declare, in 1905, that the elimination of rebates simply forces railroads to seek alternative noncompetitive means to secure business.<ref name=parsons>{{cite book |title=The Heart of the Railroad Problem |chapter=The Elkins Act and its Effects |last=Parsons |first=Frank |year=1906 |publisher=Little, Brown |location=Boston |pages=[https://archive.org/details/heartrailroadpr00parsgoog/page/n124 110]–119 |url=https://archive.org/details/heartrailroadpr00parsgoog |quote=elkins act. }}</ref> The Elkins Act, thus, was more effective in stabilizing prices and entrenching price [[collusion]] than demonstrably lowering prices. |
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A diverse group of stakeholders publicly supported the Elkins Act. Citizens who supported the law hoped that reducing price discrimination would lower freight prices uniformly, and railroad interests lobbied for the passage of the Act as a means of enforcing collusive pricing.<ref name=sharf /> While the Act restricted preferential pricing, it did not specify what constituted a "reasonable" shipping rate; thus, railroads could use the law to entrench a system of collusive prices. [[Collusion]] is unsustainable in a market where it is easy to undercut competitors. However in industries that only have a small number of competitors (e.g. railroads, airlines, or transportation companies operating between two given cities) collusion is far more likely. The result of the Elkins Act was that railroads had a stronger mechanism to protect their collusive prices and corporate trusts were weakened in their ability to gain shipping discounts. Farmers and other railroad users, instead of benefiting from greater competition, were unaffected by the Act.{{Citation needed|date=April 2014}} |
A diverse group of stakeholders publicly supported the Elkins Act. Citizens who supported the law hoped that reducing price discrimination would lower freight prices uniformly, and railroad interests lobbied for the passage of the Act as a means of enforcing collusive pricing.<ref name=sharf /> While the Act restricted preferential pricing, it did not specify what constituted a "reasonable" shipping rate; thus, railroads could use the law to entrench a system of collusive prices. [[Collusion]] is unsustainable in a market where it is easy to undercut competitors. However in industries that only have a small number of competitors (e.g. railroads, airlines, or transportation companies operating between two given cities) collusion is far more likely. The result of the Elkins Act was that railroads had a stronger mechanism to protect their collusive prices and corporate trusts were weakened in their ability to gain shipping discounts. Farmers and other railroad users, instead of benefiting from greater competition, were unaffected by the Act.{{Citation needed|date=April 2014}} |
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==Contemporary criticism== |
==Contemporary criticism== |
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In reaction to the Elkins Act, it was argued that the law was drafted by Congress on behalf of the railroads, and that while some railroads curtailed rebates for some customers, for others the practice continued unabated.<ref name=parsons /> Congress was criticized for enacting only monetary fines for violations of the law and avoiding imposition of [[criminal law|criminal]] penalties.<ref>{{cite book |title=Present Day Problems: A Collection of Addresses Delivered on Various Occasions |publisher=Best Books |chapter=The Legislative Policies of the Present Administration |last=Taft |first=William H. |
In reaction to the Elkins Act, it was argued that the law was drafted by Congress on behalf of the railroads, and that while some railroads curtailed rebates for some customers, for others the practice continued unabated.<ref name=parsons /> Congress was criticized for enacting only monetary fines for violations of the law and avoiding imposition of [[criminal law|criminal]] penalties.<ref>{{cite book |title=Present Day Problems: A Collection of Addresses Delivered on Various Occasions |publisher=Best Books |chapter=The Legislative Policies of the Present Administration |last=Taft |first=William H. |year=1908|page=[https://archive.org/details/presentdayprobl00statgoog/page/n174 162] |url=https://archive.org/details/presentdayprobl00statgoog |quote=elkins act. }} Speech given at Columbus, Ohio, August 19, 1907.</ref> |
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==Subsequent legislation== |
==Subsequent legislation== |
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Latest revision as of 19:24, 11 December 2020
 | This article needs additional citations for verification. (October 2010) |
The Elkins Act is a 1903 United States federal law that amended the Interstate Commerce Act of 1887. The Act authorized the Interstate Commerce Commission (ICC) to impose heavy fines on railroads that offered rebates, and upon the shippers that accepted these rebates. The railroad companies were not permitted to offer rebates. Railroad corporations, their officers, and their employees, were all made liable for discriminatory practices.[1]
Prior to the Elkins Act, the livestock and petroleum industries paid standard rail shipping rates, but then would demand that the railroad company give them rebates. The railroad companies resented being extorted by the railroad trusts and therefore welcomed passage of the Elkins Act. The law was sponsored by President Theodore Roosevelt as a part of his "Square Deal" domestic program, and greatly boosted his popularity.[citation needed]
Background[edit]
Congress passed the Elkins Act as an amendment to the Interstate Commerce Act. Without restrictive legislation, large firms could demand rebates or prices below the collusive price from railroad companies as condition for their business. As a result, it was common practice for railroads to offer competitive lower rates for transport between the large cities with high density of firms than the monopolistic rates between less industrial cities, irrespective of length of travel.[2] Trusts constituted such a substantial portion of a carrier's revenue that the trusts could demand rebates as a condition for business, and the carrier would be forced to cooperate.
Purpose[edit]
The ICC had been unable to protect competition and fair pricing. Section 2 of the Interstate Commerce Act prohibits a carrier from offering preferential prices or rebates; however, enforcement of this section was ineffective. Powerful trusts would pay the standard shipping price, but demand a rebate from the carrier. Court cases brought before the commission generally did not result in punitive action, as the ICC was composed primarily of railroad interests.[3] Carriers found guilty of price discrimination, moreover, could appeal the ICC decision to federal courts, delaying punishment for years.[4]
The Elkins Act was named for its sponsor, Senator Stephen B. Elkins of West Virginia, who introduced a bill in 1902 at the behest of the Pennsylvania Railroad.[5] The law was passed by the 57th Congress and signed by President Roosevelt on February 19, 1903. The Act made it a misdemeanor for a carrier to impose preferential rebates, and implicated both the carrier and the recipient of the low price. The Act also abolished imprisonment as a punishment for breaching the law, so a violator could only be fined.[6] By reducing the severity of punishment, legislators hoped to encourage firms to testify against each other, and promote stricter enforcement of the law.[7]
Impact[edit]
Following the passage of the Elkins Act, real freight rates decreased only slightly. In 1905, leaders in the regulation movement testified before Congress to identify the reduction in prices that resulted from the Act.[8] Yet, in the first months following the passage of the law, the most pronounced change in railroad pricing was the elimination of rebates. However, later analysis has found that decreases in carrier prices are better attributable to decreases in the costs of operation due to technology advances.[9] The elimination of rebates led the railroads to seek other methods to compete for business, leading Governor Albert B. Cummins of Iowa to declare, in 1905, that the elimination of rebates simply forces railroads to seek alternative noncompetitive means to secure business.[10] The Elkins Act, thus, was more effective in stabilizing prices and entrenching price collusion than demonstrably lowering prices.
A diverse group of stakeholders publicly supported the Elkins Act. Citizens who supported the law hoped that reducing price discrimination would lower freight prices uniformly, and railroad interests lobbied for the passage of the Act as a means of enforcing collusive pricing.[1] While the Act restricted preferential pricing, it did not specify what constituted a "reasonable" shipping rate; thus, railroads could use the law to entrench a system of collusive prices. Collusion is unsustainable in a market where it is easy to undercut competitors. However in industries that only have a small number of competitors (e.g. railroads, airlines, or transportation companies operating between two given cities) collusion is far more likely. The result of the Elkins Act was that railroads had a stronger mechanism to protect their collusive prices and corporate trusts were weakened in their ability to gain shipping discounts. Farmers and other railroad users, instead of benefiting from greater competition, were unaffected by the Act.[citation needed]
While farmers may have benefited from the establishment of a price ceiling on freight rates, the nature of the railroad industry may have not have permitted perfect competition. Economist Robert Harbeson argues that the price wars prior to the Elkins Act suggest that the railroad industry was more oligopolistic. In an industry with decreasing marginal costs and high fixed costs, it would be futile to enforce a price cap. Moreover, he argues, stronger regulation would have prevented carriers from reaching economies of scale.[9]
Contemporary criticism[edit]
In reaction to the Elkins Act, it was argued that the law was drafted by Congress on behalf of the railroads, and that while some railroads curtailed rebates for some customers, for others the practice continued unabated.[10] Congress was criticized for enacting only monetary fines for violations of the law and avoiding imposition of criminal penalties.[11]
Subsequent legislation[edit]
Citing the shortcomings of the Elkins Act, Progressives began to call for greater regulation of railroad interests, and, in 1906, President Roosevelt signed the Hepburn Act to replace the Elkins Act. The Hepburn Act set maximum freight rates for railroads, representing the greater interests of Americans.[10] The regulations of the Hepburn Act strained railroads, which saw new competition from the rise of trucks and automobiles. The Panic of 1907 was, in part, a result of the turmoil of the railroad industry that resulted from the Hepburn Act.[12]
See also[edit]
References[edit]
- ^ a b Sharfman, I. Leo (1915). "The Elkins Act". Railway Regulation. Chicago: LaSalle Extension University. pp. 201–202.
roosevelt.
- ^ Hovenkamp, Herbert. "Regulatory Conflict in the Gilded Age: Federalism and the Railroad Problem." Yale Law Journal. Vol 97, No 6 (May, 1998), pp. 1027.
- ^ Scribner, Marc. "Slow Train Coming? Misguided Economic Regulation of U.S. Railroads, Then and Now." Competitive Enterprise Institute. 2013.
- ^ Jones, Eliot. Principles of Railway Transportation (New York: Macmillan, 1924), p. 234.
- ^ "Elkins Act". TR Encyclopedia. Dickinson, ND: Theodore Roosevelt Center, Dickinson State University. Archived from the original on 2014-04-19. Retrieved 2014-04-18.
- ^ Elkins Act, "An Act to Further Regulate Commerce with Foreign Nations and Among the States." 57th Congress, Sess. 2, ch. 708, 32 Stat. 847; 1903-02-19.
- ^ Chicago, E. P. (1903 Mar 19). “The Elkins Act." The Washington Post (1877-1922).
- ^ Elkins Act Sufficient." (1905, Jan 17), The Washington Post (1877-1924).
- ^ a b Harbeson, Robert. "Railroads and Regulation, 1877-1916: Conspiracy or Public interest?" Journal of Economic History. Vol 27, No 2 (June, 1967), pp. 230-242.
- ^ a b c Parsons, Frank (1906). "The Elkins Act and its Effects". The Heart of the Railroad Problem. Boston: Little, Brown. pp. 110–119.
elkins act.
- ^ Taft, William H. (1908). "The Legislative Policies of the Present Administration". Present Day Problems: A Collection of Addresses Delivered on Various Occasions. Best Books. p. 162.
elkins act.
Speech given at Columbus, Ohio, August 19, 1907. - ^ Martin, Albro (1971). Enterprise Denied: Origins of the Decline of American Railroads, 1897-1917. New York: Columbia University Press.
