Elkins Act
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. 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. Background 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. 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 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. Carriers found guilty of price discrimination, moreover, could appeal the ICC decision to federal courts, delaying punishment for years. 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. 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. By reducing the severity of punishment, legislators hoped to encourage firms to testify against each other, and promote stricter enforcement of the law. Impact 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. 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