INTER-STATE COMMERCE includes the movement of passengers and freight from one State to another, and the agencies and facilities by which the transfer is accomplished ; it comprises the mechanism and services of trade, transport and communica tion between citizens of different States. Broadly defined, the term commerce applies to a wide range of economic services, to ex change or distribution in general, but as here used it is limited to the traffic and trade that crosses State boundaries in the internal or domestic commerce of the United States. Foreign trade is not included, nor are communication agencies and services.
Inter-State commerce may be carried on by an individual or a partnership but it is for the most part conducted by corporations, which, like those concerned with production, tend to become larger, their activities being increasingly subject to regulation by the States and particularly by the Federal Government. In the interest of public safety the facilities employed by rail, highway, ocean and air carriers must conform to standards fixed by State and national laws whose enforcement is furthered by Government inspection of equipment of many kinds. Corporations must compete in inter State commerce by methods that are "fair," and the accounts, finances, charges and services of carriers are comprehensively regulated by the national Government.
The principal agencies by which inter-State freight and pas senger movements, or trade and travel, are effected, are the steam and electric railways, the vessels operated coastwise and on the Great Lakes, the rivers and canals, the carriers operating motor trucks and buses, and the aeroplanes. Carriers other than rail roads subject to the Inter-State Commerce Act of 1887 as amended to date include pipe line companies (other than water companies), sleeping car, express, telegraph and telephone companies. Inter State motor carriers are regulated by the Motor Carriers Act of 1935. Inter-State carriers by water are regulated in part by the Inter-State Commerce Commission, but mainly by the United Shipping Board Bureau of the Department of Commerce whose powers are defined by the Shipping Act of 1916 as amended and extended by the Merchant Marine Acts of 192o and 1928. There is a Federal Trade Commission, created by the act of Sept. 26, 1914, to prevent unfair methods of competition in commerce. The Air Commerce Act of May 20, 1926, gives the secretary of commerce jurisdiction over inter-State air facilities and services.
Volume of Inter-State Commerce.—The volume of inter State as distinct from intra-State commerce is not stated in official records, but it is well known that most goods shipped between points within the United States or sent to or received from foreign countries pass State boundaries. By far the larger share of the traffic of rail, water, highway and airway carriers being goods carried from one State to another, reference to the tonnage trans ported by these several carriers will indicate the magnitude of inter-State commerce in the United States.
During the year 1934, the railroads in the United States trans ported 765,295,92o tons of revenue freight. This was the tonnage originating on their several lines. Some freight moved over more than one road. The total freight service was the equivalent of the movement of one ton nearly 269 billion miles, the number of tons and the ton miles having decreased largely as a result of the business depression of 1929. There were 20 tons and over 2,443 ton miles of railroad freight per inhabitant in and, as the average distance a ton was hauled was nearly 200 m., it is evident that most of the traffic must have been inter-State.
The domestic water-borne commerce of the United States in 1929 moved coastwise and on the Great Lakes and other inland waterways totalled 407,000,00o short tons. This total was tempo rarily cut nearly in half by the business depression. Since 1932 the tonnage has been increasing and will presumably regain its former volume. The number of tons moved on rivers and canals is greater than the tonnage of the Great Lakes ; but, as the aver age length of haul on the Great Lakes is much longer, the ton mileage for the Great Lakes (in 1933) was 45 billions as compared with 8 billions for the traffic of rivers and canals. The major por tion of this large traffic on the Great Lakes was contributed by coal, iron-ore, wheat and stone. Traffic on rivers and canals con sists largely of bulk shipments of minerals, steel, petroleum and rafted logs. There is a large volume of traffic carried coastwise, a part of which is intercoastal via the Panama Canal, through which, in 1934, 8,504,000 long tons of cargo moved, the average length of haul being 5,00o nautical miles.
In common carrier motor buses were registered, but there were in addition a large number of buses operated by contract carriers and by school authorities. On the same date the total mileage of surfaced highways, inter-State and intra-State, was over 270,000 miles. The number of motor trucks operated by contract, common and private carriers in intra-State and inter State operations, was 3,409,135 in 1934. In that year the total number of registered motor vehicles was nearly 25 million.
The bureau of public roads of the U.S. department of agricul ture has conducted surveys in several States to determine the nature and volume of motor passenger and freight traffic. In a small State like Connecticut, with its dense population and highly diversified industries, and with the city of greater New York close by, there would be a large use of the highways, and it was found that 27.5% of the motor freight tonnage on the Connecticut high ways was inter-State traffic. In the State of Texas, however, a much smaller share of the motor truck transportation is inter State. Inter-State motor traffic is a small share of the total be cause the motor hauls are of short average length. Air transport routes are characteristically long and most air services over regu lar routes are inter-State. Aeronautics is making rapid progress in the United States and greater development has been made than in any other country, and commercial air transport promises to be much larger in the near future. Its early development was slow because it did not receive Government subsidies, while European countries gave large aid to companies to enable them to maintain passenger and package air transport services.
In 1934 there were 27 companies engaged in scheduled air line operations; and in addition there was a large number of companies engaged in transporting passengers and freight for hire. The num ber of passengers carried by the scheduled air lines in 1934 was 561,37o, and the weight of express carried was Pounds. The number of miles flown by the scheduled air line planes was Air mail transport in the United States is well de veloped and is rapidly increasing. In 1928, aeroplanes were carry ing mail 20,000 m. daily. In 1935, the average was ioo,000 miles a day. It was on September 1, 1927, that the American Railway Express Company began accepting packages for transmission by the air mail carriers. Several large manufacturers are operating planes in connection with their business operations. Large pas senger planes are regularly operated in day and night service, in cluding an over-night service between the Atlantic and the Pa cific seaboards ; and there are regular common carrier services for the carriage of package freight of high value per bulk and weight. Such passenger and freight services, as well as those for mail and express, are mainly inter-State.
Freedom of Inter-State Commerce in the United States.— The commerce passing State boundaries in the United States has become of great volume because there are no legal barriers. The United States throughout its wide territory is a single commercial unit with full freedom of internal trade. In this regard the United States is in marked contrast with Europe, where racial and his torical causes have brought about the existence of many nations each concerned with safeguarding its own internal trade against the undue encroachment of the commerce of other countries.
Freedom of inter-State commerce has been as great an aid to political success as to economic welfare. The commerce clause of the Constitution made a united country possible ; in spite of sec tional divergencies and a civil war, the nation has been held to gether and the States have grown into an indissoluble union be cause industry, trade, transport and communication have known nothing of State boundaries or of political differences.
Power of the United States Government over Inter-State Commerce.—The power "to regulate commerce with foreign na tions, and among the several States" is vested in Congress by the Constitution which also stipulates that "No State shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws"; also that "No State shall, without the con sent of the Congress, lay any duty on tonnage." The Constitution provides that Congress shall levy no tax or duty "on articles ex ported from any State," and that "No preference shall be given by any regulation of commerce or revenue to the ports of one State over those of another. Nor shall vessels bound to or from one State be obliged to enter, clear, or pay duties in another." These prohibitions in the Constitution prevent restrictive regula tion of commerce while the positive power granted to Congress is comprehensive and has been so interpreted by Congress and the Supreme Court as to make regulation positive and constructive. In regulating, Congress can promote inter-State commerce, and that, to an increasing extent, has been the policy of the Federal Government.
The interpretation of the commerce clause of the Constitution, through a long series of Supreme Court decisions, has tended to narrow the powers of the States and to broaden those of the Federal Government over inter-State, and indirectly over intra State commerce. Chief Justice Marshall laid a broad and secure foundation for Federal authority in 1824, in the case of Gibbons v. Ogden (9 Wheaton I). In this classic decision, denying to the State of New York the power to grant to a steamboat company a monopoly of steam navigation in the waters of the State to the exclusion of others owning vessels licensed by the United States, the chief justice enunciated the principle that has guided the Supreme Court in all subsequent interpretations of the commerce clause when he said :— "By virtue of the comprehensive terms of the grant, the authority of Congress is at all times adequate to meet the varying exigencies that arise, and to protect the national interests by securing the freedom of inter-State commercial inter course from local control." The extension of the power of Congress over inter-State (and incidentally intra-State) commerce by legislation and court deci sions has affected all four categories of commerce and carriers— commerce by waterways, railroads, highways and air.
These Supreme Court decisions negatived attempts of the States to burden the facilities of commerce. The legislative policy of Federal regulation has been a positive one. Harbours have been improved and inland waterways have been canalized and extended; the Shipping Act of 1916 and the Merchant Marine Acts of 1920 and 1928 provide both for aiding and for regulating shipping. Moreover, the Inter-State Commerce Act, particularly as amended by the Transportation Act of 192o, empowers the Inter-State Commerce Commission to establish through routes and rates by railroads and waterways and thus to promote the use of waterways by making them a part of a co-ordinated system of rail and water lines for the service of inter-State commerce.
Regulation of Inter-State Commerce by Rail.—The main carriers of inter-State commerce in the United States are the railroads. The Federal regulation of railroads which began with the Inter-State Commerce Act of 1887 has been extended in scope by subsequent laws until it now applies comprehensively to all such carriers engaged in inter-State commerce. Moreover, inter State and intra-State commerce and railroad services are so inter related that the Federal Government in exercising its plenary power over inter-State commerce incidentally limits in large meas ure the regulation of intra-State trade and traffic by the States. The U.S. safety laws apply to all railroad equipment ; railroad finances are regulated by the Inter-State Commerce Commission which must approve of the location and construction of proposed railroads and of the issue of securities; and the States may not establish intra-State rates that unreasonably discriminate against the inter-State charges fixed or authorized by the Federal Commission.
When the States began to regulate railroad rates, shortly after 187o, some of the States fixed rates on all railroad traffic including both that moving within and that crossing State boundaries, but in i886 the U.S. Supreme Court in Wabash v. Illinois (118 U.S. 557) held that the States could not fix the rates on inter-State traffic. To do so would be to regulate inter-State commerce over which the United States has jurisdiction. For 25 years after this decision by the Supreme Court no question was raised as to the power of the States to fix rates on intra-State traffic that were per se reasonable, but in 1911 the Railroad Commission of Lou isiana complained to the Inter-State Commerce Commission that the railroad rates fixed by the State authorities of Texas on traffic within that State were so much lower than the inter-State rates as to discriminate against traffic from Louisiana into Texas and to prevent Shreveport, La., from competing with Houston and
Dallas for the trade of north-eastern Texas. The commission de cided in favour of the complainant and ordered the railroads to cease the discrimination which they did by raising the rates that had been fixed by Texas. This order of the Inter-State Commission and this action of the carriers were sustained by the U.S. Supreme Court in 1914 in the so-called Shreveport decision (234 U.S. 342). The principle established by this decision was extended and strengthened in the Transportation Act of 192o by which the Inter-State Commerce Commission was given au thority to prescribe rates and fares to take the place of intra-State rates that the Commission has found to discriminate unjustly against inter-State or foreign commerce.
To carry out the rate-making provisions of the Transportation Act of 1920 and to enable the carriers to obtain a reasonable return on their property, the Inter-State Commerce Commission raised rates and fares on all railroad traffic, intra-State as well as inter-State. The State of Wisconsin had fixed passenger fares by statute at 2 cents a mile, and the Railroad Commission brought action in the Federal courts to test the power of the United States to substitute for those fares others fixed by the Inter-State Com merce Commission. The Supreme Court (257 U.S. 563) upheld the statute and the order of the Inter-State Commission. Like wise, on the same day that it handed down this decision, the Court, in New York v. the United States (257 U.S. 591), upheld the Inter-State Commerce Commission's order raising New York intra-State railroad rates and fares to the level of inter-State rates, and set aside a contract provision in the charter of the New York Central railroad which had limited the fare on the main line of that road between Albany and Buffalo to 2 cents a mile, the Court holding in effect that the State in requiring such a fare to be charged was unjustly discriminating against inter-State passenger traffic subject to a charge of 3.6 cents per mile.
Federal Authority over Inter-State Commerce by High ways.—The U.S. Supreme Court, in a series of decisions, has de fined the boundaries of State and Federal authority over highway carriers engaged in inter-State commerce, just as the powers of the States and the nation over commerce by railroads have been determined by judicial interpretation. In 1923 the State of Michi gan enacted a law requiring all motor carriers for hire upon the roads of the State to secure a certificate from the public utilities commission. The act also provided that such motor carriers for hire should be common carriers subject to the laws applicable thereto and should be required to carry insurance or furnish an indemnity bond. A motor carrier engaged solely in inter-State transport on a contract basis contested the validity of the law and the U.S. Supreme Court held that "It is a burden on inter-State commerce to impose on plaintiff (a private inter-State carrier) the . . . liability of a common carrier, and the obligation of furnish ing such indemnity bond" as conditions precedent to engaging in inter-State commerce. The Court also held that a State could not by legislative fiat convert a private carrier into a common carrier, "for that would be taking private property for public use without just compensation" (Duke v. Public Utilities Commission, 266 U.S. 57o).
A man desiring to operate a common carrier bus line between Seattle, Wash., and Portland, Ore., was granted an authorizing certificate by Oregon, but was refused one by Washington. The director of public works in Oregon ruled that there was no need for another carrier and denied the petition because "under the laws of the State, the certificate may not be granted for any territory which is already being adequately served." The Supreme Court, however, held that the law was a regulation of inter-State com merce forbidden by the commerce clause of the Federal Consti tution (Buck v. Kuykendall, 267 U .S. 307, March 2, 1925). How ever, in later decisions, particularly in Stephenson v. Binford (287 U.S. 251 decided Dec. 5, 1932) the Supreme Court has up held the power of the States to regulate the use of its highways for gain by contract as well as common carriers, and the States are thus able to regulate motor carriers thoroughly subject to the limitation that the States may not prevent, or unreasonably bur den, inter-State commerce.
These and other decisions of the Federal courts have given effect to a general definition of the powers of the States and of the United States respectively, which were clearly stated by the Supreme Court as early as 1915 in the case of Hendrick v. State of Maryland (235 U.S. 61o) when the Court declared that "In the absence of national legislation covering the subject, a State may rightfully prescribe uniform regulations necessary for the public safety and order in respect to the operation upon its high ways of all motor vehicles—those moving in inter-State commerce as well as others. . . . The reasonableness of the State's action is always subject to inquiry in so far as it affects inter-State com merce, and in that regard it is likewise subordinate to the will of Congress." The Air Commerce Act of 1926.—To encourage the develop ment of commerce by air, Congress passed a comprehensive Air Commerce Act, approved on May 20, 1926. The regulation of inter-State and foreign air commerce and of the aircraft employed therein is vested in the secretary of commerce and an additional assistant secretary of commerce provided for by the act. All civil aircraft operated inter-State or to foreign countries must be regis tered and rated by the secretary of commerce, who must examine and license airmen and establish air traffic rules. Provisions are made for the co-operation of the postmaster general, the secre tary of agriculture (through the weather bureau), and the secre tary of war with the secretary of commerce in the establishment and equipment of air routes, and the creation of emergency land ing fields and other facilities. The Government does not provide terminal landing fields or airports and does not operate aircraft of its own, other than military and naval aircraft, and the post master general contracts with private air transport companies for the carriage of mails. Formerly, especially under the Watres Air Mail Act of 193o, Congress paid liberally for the carriage of the mail. Its payments were in fact large air mail subsidies. That policy was changed in 1934, by an act that places the payment more nearly on a cost-of-service basis. The postmaster general negotiates contracts with air carriers, and the Inter-State Com merce Commission passes upon the contracts and their renewals.
The most helpful assistance now given to air commerce by the Federal Government is that made possible by the provision of the act of 1926 which authorizes the secretary of commerce "to designate and establish civil airways, and within the limits of available appropriations hereafter made by the Congress (1) to establish, operate and maintain along such airways all necessary air navigation facilities except airports; and (2) to chart such airways and arrange for publication of maps of such air ways, utilizing the facilities and assistance of existing agencies of the Government so far as practicable." The States and municipalities are establishing landing fields and airports in large numbers and the Federal Government is adding to and extending the established air routes, equipping them with temporary landing fields, with signal lights and radio apparatus. Conditions favourable to a rapid future development of inter State and foreign air commerce are being established.
Prohibition of Combinations in Restraint of Inter-State Commerce.—The Antitrust (Sherman) Act of July 2, 189o, as amended and strengthened by the Clayton Act of Oct. 15, makes illegal contracts or combinations in the form of trusts, or otherwise, in restraint of inter-State or foreign commerce. In 1896, in the case of the United States v. Trans-Missouri Freight Association (166 U.S. 29o), the Supreme Court held that the law applied to all combinations in restraint of inter-State or foreign commerce, including those that had previously been considered reasonable under the common law. This literal interpretation of the law hampered the development of large-scale organization in the conduct of commerce until 1911, when, in the Standard Oil company case (United States v. Standard Oil Co., 221 U.S. 1) the Supreme Court enunciated and applied the "rule of reason," the effect of which was to hold that the Sherman Act prohibits only such combinations and restraints as were illegal at common law. This decision was not satisfactory to those who favoured a stringent curb on combinations, and the Clayton Act was passed to define more specifically what combinations or restraints were prohibited and to extend the law more definitely to agreements made to fix prices for the purpose of lessening competition or creating monopoly. The act, however, exempted labour and agricultural organizations from the provisions of the antitrust laws. The Clayton Act did not, in fact, strengthen the Sherman Act of 189o, the general terminology of the original law having proved more comprehensive than the more specific definitions and specifications of the later act.
Railroad rate agreements and railroad consolidations, which by the decision of the Supreme Court in the Trans-Missouri Freight Association case in 1896 and the Northern Securities case in (Northern Securities Co. v. United States, 193 U.S. 197) had been brought under the prohibitions of the Antitrust Act, were, by the Transportation Act of 1920, made legal when approved by the Inter-State Commerce Commission.
Fair Competition in Inter-State Commerce.—In 1914, Congress enacted a law, approved on Sept. 26, "to create a Federal Trade Commission and to define its powers and duties." The pur pose of the act was "to prevent persons, partnerships, or cor porations, except banks, and common carriers subject to the acts to regulate commerce, from using unfair methods in commerce." The commission of five members is given ample powers of investi gation. If the commission finds that methods of competition pro hibited by law are being employed it may order the violator of the law to desist from such practices. If the order is not obeyed, the commission may apply to a U.S. circuit court of appeals to enforce the order. As the court has the power to affirm, modify or set aside the order, the Trade Commission is in reality more an investigating than a regulatory agency. It has, however, served a useful purpose, not only because it may proceed upon its own motion, but also for the reason that it may be called upon by the attorney-general to report upon the manner in which a corpora tion that has been found by a court to be violating the antitrust laws is carrying out the court's decree. The Trade Commission may also be directed by "the President or either house of Con gress to investigate and report the facts relating to any alleged violation of the Antitrust Acts by any corporation." By the so-called Webb Act, approved on April 1918, Con gress exempted from the provisions of the Sherman and Clayton Antitrust Acts "an association entered into solely for the purpose of engaging in export trade," provided such association does not restrain trade within the United States. Such associa tions are subject to the prohibitions against unfair methods of competition contained in the act creating the Federal Trade Com mission. The association must file with that commission full in formation regarding its organization and shall furnish such data concerning the conduct of its business as may be required by the commission, whose duty it is to inform the attorney-general of any violations of law by the association. Legislation enacted by Con gress in 1934 concerning the regulation of public utilities will, if found to be constitutional, increase the powers and duties, not only of the Federal Securities Commission, which has control of their financial management and their inter-corporate financial ar rangements, but also of the trade Commission which has authority over their business methods.
The U.S. domestic commerce, most of which is inter-State, is changing constantly with the evolution of industry and industrial processes, with the shifting of the major centres of production of the leading staples of manufacture, and with improvements in transport agencies and in methods of transport. Moreover, while commerce is increasing in volume, large-scale organization of business is more and more taking the place of small enterprises. For these reasons, inter-State commerce is the subject of frequent legislation and of an increasing measure of administrative regulation.