Case Name: Houston, East & West Texas Railway Co. v. United States
Citation: 234 U.S. 342 (1914)
Issue: Whether Congress can regulate pricing of a rail line completely within the borders of Texas in order to protect fair competition in interstate commerce.
Facts: Shreveport competed with Dallas for shipments from East Texas, but the skewed price structure (mandated by the Texas Railroad Commission), greatly favored shipments to and from Dallas over Shreveport. The Interstate Commerce Commission, acting on a complaint from the Railroad Commission of Louisiana, found that “an unlawful and undue preference and advantage” was thereby given to the Texas cities, ordered the company to change the rate structure to end discriminatory pricing.
In effect, the Interstate Commerce Commission was attempting to set the rate that the railroad could charge from Dallas to Marshall, a section of rail line completely within the borders of Texas. The railroads argued that “Congress is impotent to control the intrastate charges of an interstate carrier.”
Holding: Congressional authority “necessarily embraces the right to control… operations in all matters having a close and substantial relation to interstate traffic, to the efficiency of interstate service, and to the maintenance of conditions under which interstate commerce may be conducted upon fair terms.” In other words, the Court allowed Congress to regulate intrastate transactions because of their impact on interstate commerce.
Reasoning: “Congress does possess the power to foster and protect interstate commerce, and to take all measures necessary or appropriate to that end, although intrastate transactions of interstate carriers may thereby be controlled.”