The Elkins Act (1903) strengthened the law with respect to personal discrimination (in rates and service) and rebates. It also contained the important commodities clause, prohibiting railroads from transporting goods and products that they owned; and a provision that orders of the ICC should take effect not less than 30 days after their issuance, as prescribed by it, unless set aside by court order. In 1906 the Hepburn Act gave the ICC power to set maximum rates and to establish joint rates, divisions, and through routes. It also clarified the power of the ICC to award reparations and rendered such an accessorial service as storage subject to the act. The Hours of Service Act, passed in 1907, established limits on the amount of continuous service to be performed by employees engaged in, or connected with, the movement of any train.
In 1910 Congress passed the Mann-Elkins Act, which gave the ICC power to suspend proposed changes in rates, to prosecute inquiries on its own initiative, and to establish freight classifications. The long-and-short haul clause also was strengthened by this act.
From December 1917 to March 1920, during and after World War I, the government operated and controlled the railroads under the Federal Control Act. This came about for a variety of reasons, including depleted financial resources of the railroads due to rate cuts ordered by regulatory commissions, poor conditions of roadways and equipment amid wartime traffic loads, and inability of railroads to coordinate their operations because of antitrust laws. Among the results of government control was standardization of locomotive designs and labor contracts.
The Transportation Act of 1920 dealt with many phases of regulation. The most important provision was the rule of rate making, which directed the ICC to fix a level of rates sufficient to produce a fair return on the entire railroad investment. The act also provided for the so-called recapture of earnings in excess of a prescribed rate of return; that is, for the taking over of such earnings by the government. These recaptured earnings were to be put into a fund from which loans were to be made to assist financially weak carriers. Moreover, the commission was empowered by the act to override state action in cases in which the state had fixed the level of intrastate rates so low as to discriminate against interstate commerce. In addition, the act relaxed restrictions on pooling and acquisition of other roads, and directed the ICC to formulate a plan for voluntary consolidation of railroads into a limited number of systems in order to strengthen the railroad industry.
In 1926 the important Railway Labor Act was passed. This act provided for the use of labor-management conferences, mediation by a permanently established board, arbitration, and fact-finding in railway labor disputes. See Railroad Labor Organizations.
Many railroads enjoyed some degree of prosperity during the 1920s. These railroads, however, had weak credit structures, which had been badly impaired during the period of federal operation, and too great a degree of enforced competition, requiring maintenance of duplicate facilities, rendered numerous railroads incapable of withstanding the financial depression of the 1930s. Competition from automobiles, buses, water carriers, trucks, and airplanes increased steadily. The closely regulated railroads, which could not obtain authority from state and federal regulatory bodies to adjust their services and rates to meet the new competition, except after long delays, were seriously hurt. Railroads throughout the nation went into receivership.