In the aftermath of the Great Depression and World War II, many railroads were driven out of business by competition from the Interstate highways and airlines. The rise of the automobile led to the end of passenger train service on most railroads. Trucking businesses had become major competitors by the 1930s with the advent of improved paved roads. After the war, they expanded their operations as the highway network grew and acquired increased market share of the cargo business. Railroads continued to be regulated by the Interstate Commerce Commission and a complex system for setting shipping rates. The Staggers Act followed the Railroad Revitalization and Regulatory Reform Act of 1976, which reduced federal regulation of railroads and authorized implementation details for Conrail, the new northeastern railroad system. The 4R reforms included allowance of a greater range for railroad pricing without close regulatory restraint, greater independence from collective rate making procedures in rail pricing and service offers, contract rates, and, to a lesser extent, greater freedom for entry into and exit from rail markets. Although the 4R Act established the guidelines, the ICC at first, did not give much effect to its legislative mandates. As regulatory change began to appear from 1976 to 1979, including the phasing in of the loss of collective ratemaking authority, most major railroads shifted away from their effort to maintain the historic regulatory system and came to support greater freedom for rail pricing, for higher and lower rail rates. Major railroad shippers also continued to believe that they would be better served by more flexibility to arrive at tailored arrangements that were mutually beneficial to a particular shipper, and to the carrier serving a particular shipper. The judgments supported a second round of legislation.
Summary
The major regulatory changes of the Staggers Act were as follows:
A rail carrier could establish any rate for a rail service unless the ICC were to determine that there was no effective competition for rail services.
Rail shippers and rail carriers would be allowed to establish contracts subject to no effective ICC review unless the Commission determined that the contract service would interfere with the rail carrier's ability to provide common carrier service.
The scope of authority to control rates to prevent "discrimination" among shippers was substantially curtailed.
Across-the-board industry wide rate increases were phased out.
The dismantling of the collective rate making machinery among railroads begun in 1976 was reaffirmed, with railroads not allowed to agree to rates they could perform on their own systems and were not allowed to participate in the determination of the rates on traffic in which they did not effectively participate.
The Act also had provisions allowing the Commission to require access by one railroad to another railroad's facilities if one railroad had effective "bottleneck" control of traffic. The provisions dealt with "reciprocal switching" and trackage rights. However, the provisions did not have as much effect as the others mentioned.
Studies of the rail industry showed dramatic benefits for both railroads and their users from the alteration to the regulatory system. According to studies by the Department of Transportation's Freight Management and Operations, railroad industry costs and prices were halved over a ten-year period, the railroads reversed their historic loss of traffic to the trucking industry, and railroad industry profits began to recover, after decades of low profits and widespread railroad insolvencies. In 2007 the Government Accountability Office reported to Congress, "The railroad industry is increasingly healthy and rail rates have generally declined since 1985, despite recent rate increases.... There is widespread consensus that the freight rail industry has benefited from the Staggers Rail Act." The Association of American Railroads, the principal railroad industry trade association, stated that the Staggers Act has led to a 51 percent reduction in average shipping rates, and $480 billion has been reinvested by the industry into their rail systems.
