The first gun in this fight for railroad regulation was fired in Illinois. As early as 1869, after several years of agitation, the legislature passed an act declaring that railroads should be limited to "just, reasonable, and uniform rates," but, as no provision was made for determining what such rates were, the act was a mere encumbrance on the statute books. In the new state constitution of 1870, however, the framers, influenced by a growing demand on the part of the farmers which manifested itself in a Producers' Convention, inserted a section directing the legislature to "pass laws to correct abuses and to prevent unjust discrimination and extortion in the rates of freight and passenger tariffs on the different railroads in this State." The legislature at its next session appears to have made an honest attempt to obey these instructions. One act established maximum passenger fares varying from two and one-half to five and one-half cents a mile for the different classes into which the roads were divided. Another provided, in effect, that freight charges should be based entirely upon distance traversed and prohibited any increases over rates in 1870. This amounted to an attempt to force all rates to the level of the lowest competitive rates of that year. Finally, a third act established a board of railroad and warehouse commissioners charged with the enforcement of these and other laws and with the collection of information.
The railroad companies, denying the right of the State to regulate their business, flatly refused to obey the laws; and the state supreme court declared the act regulating freight rates unconstitutional on the ground that it attempted to prevent not only unjust discrimination but any discrimination at all. The legislature then passed the Act of 1873, which avoided the constitutional pitfall by providing that discriminatory rates should be considered as prima facie but not absolute evidence of unjust discrimination. The railroads were thus permitted to adduce evidence to show that the discrimination was justified, but the act expressly stated that the existence of competition at some points and its nonexistence at others should not be deemed a sufficient justification of discrimination. In order to prevent the roads from raising all rates to the level of the highest instead of lowering them to the level of the lowest, the commissioners were directed to establish a schedule of maximum rates; and the charging of rates higher than these by any company after January 15, 1874, was to be considered prima facie evidence of extortion. Other provisions increased the penalties for violations and strengthened the enforcing powers of the commission in other ways. This act was roundly denounced at the time, especially in the East, as an attempt at confiscation, and the railroad companies refused to obey it for several years; but ultimately it stood the test of the courts and became the permanent basis of railroad regulation in Illinois and the model for the solution of this problem in many other States.
The first Granger law of Minnesota, enacted in 1871, established fixed schedules for both passengers and freight, while another act of the same year provided for a railroad commissioner. In this instance also the companies denied the validity of the law, and when the state supreme court upheld it in 1873, they appealed to the Supreme Court of the United States. In the meantime there was no way of enforcing the law, and the antagonism toward the roads fostered by the Grange and the Anti-Monopoly party became more and more intense. In 1874 the legislature replaced the Act of 1871 with one modeled on the Illinois law of 1873; but it soon discovered that no workable set of uniform rates could be made for the State because of the wide variation of conditions in the different sections. Rates and fares which would be just to the companies in the frontier regions of the State would be extortionate in the thickly populated areas. This difficulty could have been avoided by giving the commission power to establish varying schedules for different sections of the same road; but the anti-railroad sentiment was beginning to die down, and the Legislature of 1875, instead of trying to improve the law, abandoned the attempt at state regulation.
The Granger laws of Iowa and Wisconsin, both enacted in 1874, attempted to establish maximum rates by direct legislative action, although commissions were also created to collect information and assist in enforcing the laws. The Iowa law was very carefully drawn and appears to have been observed, in form at least, by most of the companies while it remained in force. In 1878, however, a systematic campaign on the part of the railroad forces resulted in the repeal of the act. In Wisconsin, a majority of the members of the Senate favored the railroads and, fearing to show their hands, attempted to defeat the proposed legislation by substituting the extremely radical Potter Bill for the moderate measure adopted by the Assembly. The senators found themselves hoist with their own petard, however, for the lower house, made up largely of Grangers, accepted this bill rather than let the matter of railroad legislation go by default. The rates fixed by the Potter Law for many commodities were certainly unreasonably low, although the assertion of a railroad official that the enforcement of the law would cut off twenty-five per cent of the gross earnings of the companies was a decided exaggeration. Relying upon the advice of such eminent Eastern lawyers as William M. Evarts, Charles O'Conor, E. Rockwood Hoar, and Benjamin R. Curtis that the law was invalid, the roads refused to obey it until it was upheld by the state supreme court late in 1874. They then began a campaign for its repeal. Though they obtained only some modification in 1875, they succeeded completely in 1876.
The contest between the railroads and the farmers was intense while it lasted. The farmers had votes; the railroads had money; and the legislators were sometimes between the devil and the deep sea in the fear of offending one side or the other. The farmers' methods of campaign were simple. Often questionnaires were distributed to all candidates for office, and only those who went on record as favoring railroad restriction were endorsed by the farmers' clubs and committees. An agricultural convention, sometimes even a meeting of the state Grange, would be held at the capital of the State while the legislature was in session, and it was a bold legislator who, in the presence of his farmer constituents, would vote against the measures they approved. When the railroads in Illinois refused to lower their passenger rates to conform to the law, adventurous farmers often attempted to "ride for legal fares," giving the trainmen the alternative of accepting the low fares or throwing the hardy passengers from the train.
The methods of the railroads in dealing with the legislators were most subtle. Whether or not the numerous charges of bribery were true, railroad favors were undoubtedly distributed among well disposed legislators. In Iowa passes were not given to the senators who voted against the railroads, and those sent to the men who voted in the railroads' interest were accompanied by notes announcing that free passes were no longer to be given generally but only to the friends of the railroads. At the session of the Iowa Legislature in 1872, four lawyers who posed as farmers and Grange members were well known as lobbyists for the railroads. The senate paid its respects to these men at the close of its session by adopting the following resolution:
Whereas, There have been constantly in attendance on the Senate and House of this General Assembly, from the commencement of the session to the present time, four gentlemen professing to represent the great agricultural interest of the State of Iowa, known as the Grange; and—
Whereas, These gentlemen appear entirely destitute of any visible means of support; therefore be it—
Resolved, By the Senate, the House concurring, that the janitors permit aforesaid gentlemen to gather up all the waste paper, old newspapers, &c., from under the desks of the members, and they be allowed one postage stamp each, The American Agriculturist, What Greeley Knows about Farming, and that they be permitted to take with them to their homes, if they have any, all the rejected railroad tariff bills, Beardsley's speech on female suffrage, Claussen's reply, Kasson's speech on barnacles, Blakeley's dog bill, Teale's liquor bill, and be given a pass over the Des Moines Valley Railroad, with the earnest hope that they will never return to Des Moines.
Once the Granger laws were enacted, the railroads either fought the laws in court or obeyed them in such a way as to make them appear most obnoxious to the people, or else they employed both tactics. The lawsuits, which began as soon as the laws had been passed, dragged on, in appeal after appeal, until finally they were settled in the Supreme Court of the United States. These suits were not so numerous as might be expected, because in most of the States they had to be brought on the initiative of the injured shipper, and many shippers feared to incur the animosity of the railroad. A farmer was afraid that, if he angered the railroad, misfortunes would befall him: his grain might be delivered to the wrong elevators or left to stand and spoil in damp freight cars; there might be no cars available for grain just when his shipment was ready; and machinery destined for him might be delayed at a time when lack of it would mean the loss of his crops. The railroads for their part whenever they found an opportunity to make the new laws appear obnoxious in the eyes of the people, were not slow to seize it. That section of the Illinois law of 1873 which prohibited unjust discrimination went into effect in July, but the maximum freight rates were not fixed until January of 1874. As a result of this situation, the railroads in July made all their freight rates uniform, according to the law, but accomplished this uniformity by raising the low rates instead of lowering the high. In Minnesota, similarly, the St. Paul and Pacific road, in its zeal to establish uniform passenger rates, raised the fare between St. Paul and Minneapolis from three to five cents a mile, in order to make it conform to the rates elsewhere in the State. The St. Paul and Sioux City road declared that the Granger law made its operation unprofitable, and it so reduced its train service that the people petitioned the commission to restore the former rate. In Wisconsin, when the state supreme court affirmed the constitutionality of the radical Potter law, the railroads retaliated in some cases by carrying out their threat to give the public "Potter cars, Potter rails, and Potter time." As a result the public soon demanded the repeal of the law.
In all the States but Illinois the Granger laws were repealed before they had been given a fair trial. The commissions remained in existence, however, although with merely advisory functions; and they sometimes did good service in the arbitration of disputes between shippers and railroads. Interest in the railroad problem died down for the time, but every one of the Granger States subsequently enacted for the regulation of railroad rates statutes which, although more scientific than the laws of the seventies, are the same in principle. The Granger laws thus paved the way not only for future and more enduring legislation in these States but also for similar legislation in most of the other States of the Union and even for the national regulation of railroads through the Interstate Commerce Commission.
The Supreme Court of the United States was the theater for the final stage of this conflict between the railroads and the farmers. In October, 1876, decisions were handed down together in eight cases which had been appealed from federal circuit and state courts in Illinois, Wisconsin, Iowa, and Minnesota, and which involved the validity of the Granger laws. The fundamental issue was the same in all these cases—the right of a State to regulate a business that is public in nature though privately owned and managed.