1. Houston E. & W. Texas Ry. Co. v. United States (The Shreveport Rate Case), (1914)
2. Facts: The railroad had rail lines both within Texas, and between Texas and Louisiana. As an incentive to promote Texas suppliers to sell to Texas manufacturers, the railroad maintained lower rates for traffic within the state of Texas, while charging disproportionately high rates for traffic to Louisiana.
3. Procedural Posture: The Interstate Commerce Commission (ICC) set rates for the transportation of goods from Texas to Louisiana, and ordered the railroad to end its discriminatory practice of maintaining lower rates for traffic within the state. The railroad challenged that order, appealing to the Supreme Court.
4. Issue: Whether Congress, through the ICC, has the power to set the intra-state railroad cargo rates of a carrier that has both intra-state and inter-state lines, if such intra-state rates represent an unjust discrimination against inter-state commerce.
5. Holding: Yes. “Whenever the interstate and intrastate transactions of carriers are so related that the government of one involves the control of the other, it is Congress, and not the State, that is entitled to prescribe the final and dominant rule, for otherwise Congress would be denied the exercise of its constitutional authority.”
6. ∏ Argument: Congress has not power to regulate the intra-state rates.
7. ∆ Argument: Congress has the power to regulate intra-state rates if they affect interstate commerce.
8. Majority Reasoning: Congressional authority extends to interstate carriers as instruments of interstate commerce. This necessarily includes the right to control all of their operations that have a “close and substantial” affect on interstate commerce. The fact that the carrier has intra-state business as well does not diminish Congress’ power to regulate the interstate portion by preventing injury to it. Otherwise, the commerce power would have no bite among carriers with both lines. Furthermore, Congress had the power to affect the intrastate lines in other areas, such as safety because it also had an interstate commerce component. Thus, Congress has the power to foster and protect interstate commerce, and to take all measures necessary and appropriate to that end, although intrastate transactions may be thereby controlled.
9. Notes: The “current of commerce” notion has also been invoked as a practical consideration to allow Congress to regulate portions of interstate commerce that appear to be solely intrastate. In Stafford v. Wallace, the Supreme Court held that individual purchases by middlemen of meat destined for the cities was a part of the “current of commerce.” The purchase by the middlemen was local to the state that they were in, but they were simply a part of a greater flow of meat from the West to the East. The many transactions, viewed as a whole, represented interstate commerce on a major scale. If the middlemen were unregulated, their actions could become an obstacle to free trade.
