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The Interstate Commerce Act of 1887 created the Interstate Commerce Commission (ICC), the U.S. government's first regulatory agency. The initial purpose of the ICC was to control railroads and their unfair business practices. The U.S. government had to become a regulator because in 1886 the Supreme Court had ruled in the case of Wabash Railroad v. Illinois that states could not control interstate commerce.

Railroads presented some special problems because they were capital-intensive, had high maintenance costs, and had two types of rail lines. This led to unfair pricing practices. For

major trunk lines, where there was competition, the railroads charged lower rates and even gave rebates. For spur lines, where there was a monopoly, the railroad charged higher rates for the same type of cargo.

Even with the federal government taking charge of regulating railroads, the Interstate Commerce Commission still got off to a rocky start. In its first sixteen court actions, the ICC only won one case; and the Supreme Court had several judgments against the ICC which limited its power. However, later legislation gave the ICC rulings more power. The Elkins Act of 1903 was aimed at unfair competitive methods, and the Hepburn Act of 1906 eliminated the necessity of a court order to make ICC rulings binding and gave the ICC control of gas and water pipelines.

The Motor Carrier Act of 1935 placed the emerging trucking industry under ICC jurisdiction. Typical ICC duties included holding hearings to investigate complaints, approving transportation mergers, and overseeing consumer-protection programs.

By the 1960s, the ICC had grown into a massive bureaucracy, peaking at 2400 employees. Shortly thereafter, the agency came under severe criticism. Some groups argued that, because of regulation, the country's transportation was inefficient and perhaps corrupt. The major criticism—that regulation created artificially high rates—led to pressure for deregulation and signaled the beginning of the demise of the ICC. First, the Railroad Revitalization and Regulatory Reform Act of 1976 curtailed the ICC power to regulate rates unless the railroad had a monopoly on certain routes. In 1977, air cargo deregulation and the reforms taking place in the trucking industry further eroded the power of the ICC. After the early rocky years of deregulation, the transportation industry had become more efficient thanks to innovative technology, thereby reducing costs. The final act of deregulation came in 1994, when the ICC lost most of its control over the trucking industry.

By this time, the ICC had dropped from a high of 2400 employees to 300 and was constrained by a severely reduced budget. The Republicans, who had wanted to eliminate the ICC for a number of years, took control of Congress in 1995. As a first step, the fiscal 1996 spending bill (HR2002-FL 104-50) gave the ICC no budget. Then the House Transportation and Infrastructure Committee approved HR2539, and the debate began. The major objection from the Democratic side was centered on protection for railroad workers who might lose their jobs because of mergers. After ironing out their differences, Congress sent President Clinton legislation to terminate the ICC (HR2539-PL 104-88). On December 29, 1995, the 108-year-old Interstate Commerce Commission was disbanded.