## Facts

- Louisiana’s railroad commission complained that freight rates from Shreveport, Louisiana to points in Texas were unreasonably high compared with intrastate Texas rates from Dallas and Houston to the same Texas destinations.
- Shreveport, near the Texas border, competed with Dallas and Houston for commerce in intermediate Texas markets served by the same interstate carriers.
- The carriers’ rate structure favored Texas origins, including examples where a much longer haul within Texas carried a lower rate than a shorter haul from Shreveport to Texas.
- The Interstate Commerce Commission (ICC) found the disparity created an undue preference for Texas localities and corresponding prejudice against Shreveport and other Louisiana points.
- The ICC ordered the carriers to end the discrimination by adjusting rates so the interstate Shreveport-to-Texas traffic would not be disadvantaged, even if compliance required raising intrastate Texas rates set under state authority.
- The railroads sued to set aside the order, arguing the ICC lacked statutory and constitutional power to regulate intrastate rates and that such federal action violated state authority reserved by the Tenth Amendment.
- The Commerce Court dismissed the railroads’ petitions, and the railroads appealed to the Supreme Court.

## Issues

1. Whether Congress may authorize the ICC to regulate intrastate railroad rates when those rates, in relation to interstate rates, discriminate against or injure interstate commerce.
2. Whether the ICC may require carriers to raise intrastate rates (rather than only lowering interstate rates) as a remedy for discrimination affecting interstate commerce.
3. Whether federal correction of discriminatory intrastate rate structures impermissibly intrudes on state regulatory authority under the Tenth Amendment.

## Decision

- The Supreme Court affirmed the judgment upholding the ICC’s order.
- Congress’s commerce power permits control of intrastate transactions of interstate carriers to the extent those intrastate practices have a close and substantial relation to interstate traffic and create unjust discrimination against interstate commerce.
- The ICC could require modification of intrastate Texas rates when necessary to remove discriminatory effects on interstate commerce; Congress was not limited to lowering interstate rates to match intrastate rates.
- State authorization of intrastate rates could not shield a discriminatory scheme that burdened interstate commerce; federal authority is dominant within the national field.
- The Court accepted the ICC’s factual findings of discriminatory impact and sustained the remedy absent legal misapplication.

## Legal Principles

- Federal power to regulate interstate commerce includes authority to control intrastate operations of interstate carriers when intrastate and interstate rate structures are so related that regulating interstate commerce effectively requires regulating the intrastate component.
- Congress may prevent undue preferences and prejudices affecting interstate commerce, and may do so through delegation to an administrative body empowered to investigate and order corrective rate adjustments.
- When intrastate regulation materially disadvantages interstate commerce, federal law is controlling, and a state may not authorize conduct that Congress may forbid to protect interstate commerce.
- Remedial authority to eliminate discrimination may include raising intrastate rates, not merely reducing interstate rates, when that is the necessary method to end the unlawful disparity.

## Conclusion

The Court held that the ICC could require intrastate rate changes to eliminate discriminatory effects on interstate commerce, confirming that Congress’s commerce power reaches intrastate practices of interstate carriers when those practices bear a close and substantial relation to fair and efficient interstate commerce.


Houston, E. & W. Tex. Ry. Co. v. United States, 234 U.S. 342 (1914)