Interstate Commerce Commission v. Diffenbaugh

Background

A railroad (the Union Pacific) had contracts to pay local grain elevators, including Peavey & Co., for transferring and weighing grain at Omaha, Council Bluffs, and Kansas City. The payments were per hundred pounds and did not add a charge to shippers. After initial approval, the federal regulator (Interstate Commerce Commission) revisited the practice and first reduced the payment to three-quarters of a cent, then issued a broader order forbidding payments to elevator owners when the grain was treated or not reshipped within ten days.

Reasoning

The central question was whether the regulator could broadly prohibit payments to elevator owners who also owned the grain. The Court said Congress expressly recognized that services and facilities used in transportation may be paid for, and the only statutory limit is that such payments be reasonable. The Court found the broad ban was based on a mistaken view of the law, but it accepted the Commission’s determination of a reasonable maximum. As a result, the Court refused to uphold a universal prohibition but allowed the reduced three-quarters-cent payment and the rule limiting allowances to grain reshipped within ten days.

Real world impact

Railroads may continue to pay reasonable compensation to elevators, including those owned by grain dealers, but payments are capped and subject to the ten-day reship limitation. The ruling affects rail carriers, local elevators, grain dealers, and regional market competition by forbidding a blanket nationwide ban while preserving modest regulatory limits.

Dissents or concurrances

Two Justices dissented, arguing the statute should not mix transportation with merchant services and that allowing elevator owners to treat their grain creates unlawful preference.