Houston, East & West Texas Railway Co. v. United States

Background

In 1911 the Louisiana railroad regulator complained that three railroads charged higher interstate rates from Shreveport, Louisiana, to Texas points than the same carriers charged from Dallas and Houston for similar distances, harming Shreveport’s trade. The carriers challenged an Interstate Commerce Commission order of March 11, 1912. After hearings the Commission found substantial, injurious rate differences and set maximum class rates similar to Texas intrastate scales.

Reasoning

The central question was whether the federal agency could correct an unfair pricing scheme that arose from the relation of intrastate to interstate charges. The Court held that Congress’s power to protect interstate commerce is broad and that the law forbidding undue preference reaches discrimination that injures interstate trade even when caused by intrastate rates. Reading the statute and its proviso together, the Court found the Commission acted within its authority in ordering carriers to stop charging higher Shreveport rates and in fixing reasonable maximum class rates, so long as interstate rates were not forced below what the Commission deemed fair.

Real world impact

Rail carriers serving Shreveport, Texas shippers, and state regulators were affected: carriers must change pricing practices that injure interstate movement or face federal orders. The decision makes clear federal regulators can examine relations between intrastate and interstate charges and require remedies to remove discriminatory effects. States cannot authorize carriers to continue intrastate practices that effectively discriminate against interstate commerce.

Dissents or concurrances

Two Justices (Lurton and Pitney) dissented from the majority opinion, but the Court affirmed the Commerce Court’s decree.