Delivery to the Customer's Door: Efficiency, Regulatory Policy, and Integrated Rail-Truck Operations, 1900–1938

Abstract

During the first third of the twentieth century, U. S. railroad executives offered local collection and delivery trucking operations. Railroad managers claimed, with justification, that these services were necessary to reduce congestion at urban freight terminals, and to increase the operating efficiency. Yet, executives also employed collection and delivery practices to discriminate against shippers and communities, and to draw business away from rival carriers, in violation of the 1887 Interstate Commerce Act, the 1903 Elkins Act, and the Transportation Act of 1920. During the 1920s, as competition from independent truckers became more intense, railroad managers used their inherent advantage in line-haul service to cross-subsidize local delivery services, to the detriment of independent motor carriers—an issue of considerable concern to Interstate Commerce Commission (ICC) commissioners, following the passage of the 1935 Motor Carrier Act. The railroads' emphasis on the productive efficiency associated with local trucking operations conflicted with the allocative efficiency advocated by federal courts and by the ICC. Commissioner Joseph B. Eastman, in particular, emphasized both the potential benefits and the potential dangers associated with coordinated rail-truck service. More broadly, the status of that service, as one of the few forms of transportation that lay beyond the ICC's authority, stemmed from a complex interaction, over several decades, between all three branches of the federal government. By 1938, the ICC commissioners had concluded that the railroads' local delivery operations occupied a nebulous region between rail and truck regulation. While lawful, they did not serve as a model for post-1945 efforts to achieve integrated, multi-modal transportation services.