Regulation of the transportation industry has its origins in earliest days of the United States, when the states regulated transportation. At the time of the nation’s declaration of independence, the country was sorely in need of roads. President George Washington publicly supported the construction of roads, to foster settlement of the American west. Raising taxes to fund construction of roads seemed to the states to be an unviable option. However, the eighteenth-century English practice of financing roads through bonds, shifting the roads’ costs to the travelers who used them, appeared to be feasible option. The states began chartering turnpike corporations in the 1790s. These were semi-public projects; they were financed by private citizens for the purpose of providing a public good. The investors were permitted to turn a profit but prohibited from charging more than a lawfully established rate. Public commissioners set regulations on the quality of construction and maintenance. The first such turnpike corporation was the Lancaster Turnpike, chartered by Pennsylvania in 1792.

The regulation of interstate transportation came to a head in 1886, with the Supreme Court’s ruling in Wabash, St. Louis & Pacific Railway Company v. Illinois. In Wabash, the Court ruled as unconstitutional by the Commerce Clause an Illinois statute prohibiting discrimination of long and short haul rates by railroad companies. Railroad monopolies faced no competition for short-haul routes. This allowed them to set the price however they pleased. The companies discriminated in rates by providing price cuts to large long-haul shippers. This created an unfair situation for smaller customers, harming farmers in particular.

Congress responded to the Wabash decision with the Interstate Commerce Act of 1887. This resulted in the railroads being the first industry to become holden to federal regulation. The Act created the Interstate Commerce Commission and regulated how railroads could conduct business. Notably, it called for “just and reasonable” rates.

In 1935, Congress expanded the Commission’s sphere of regulation to include the trucking industry. Around that same time, local taxi industries came under regulation from state and local governments through the issuance of “medallions.” Medallions operate as licenses and are a way for regulators to artificially cap the number of operating taxis. Regulation evolved to set uniform standards for vehicle aesthetics and service quality.