The Interstate Commerce Act of 1887 marked the beginning of federal regulations on the free enterprise system. It was the result of railroad barons profiting heavily from monopolistic practices. Although the federal government did not impose specific rates, it required the railroad industry to offer "fair and just" rates that had to be published for the public.

Railroads were the most powerful industry and controlled the fastest mode of transportation in the late nineteenth century. Due to lack of competition, a short list of railroad companies were able to dominate the transportation market, creating the nation's first multi-millionaires. The rise of the US railroad industry began in the 1820s with the Army Corps of Engineers assisting private entrepreneurs looking to model rail systems after the emerging developments in the UK.

Railroads began to proliferate across the country over the next several decades. The development of the First Transcontinental Railroad in the 1860s was a milestone that introduced coast to coast travel. It was the nation's largest engineering project at the time.

A major factor behind this railroad expansion was labor imported from China. In 1867, many Chinese railroad workers went on strike in the west, petitioning for the Central Pacific Railroad to grant them equal pay, shorter workdays, and better working conditions. Although they were not granted these demands, it marked the beginning of national strikes that eventually led to worker rights and improved labor conditions.

The call for railroad regulation came more from midwestern merchants and wholesalers who felt financially victimized by railroad industry practices. An activist organization known as the Grange persuaded Congress to create the Interstate Commerce Commission (ICC) in 1887. As the nation's first national regulatory body over an industry, the ICC regulated common carriers. In addition to forbidding unreasonable rates, the commission put restrictions on the practice of overcharging for short distances.

The ICC's powers, however, were weakened by Supreme Court decisions. Nevertheless, the Grange still worked at passing legislation to limit railroad abuses, such as the Elkins Act of 1903, which forbade railroads from issuing rebates to large companies. This law was strengthened by the Hepburn Act of 1906, allowing the ICC to establish maximum freight rates. Tougher industry regulations were crystalized by the Transportation Act of 1920.