American voters may have divided on the tariff, but increasingly they agreed on the need for federal regulation of the railroads and federal legislation to curb the power of the “trusts” (a term loosely applied to all large business combinations). As early as the 1870s, angry farmers in the Midwest who suffered from the unfair shipping practices of the railroads organized to fight for railroad regulation. The Patrons of Husbandry, or the Grange, founded in 1867 as a social and educational organization for farmers, soon became an independent political movement. By electing Grangers to state office, farmers made it possible for several midwestern states to pass laws in the 1870s and 1880s regulating the railroads. At first, the Supreme Court ruled in favor of state regulation (Munn v. Illinois, 1877). But in 1886, the Court reversed itself, ruling that because railroads crossed state boundaries, they fell outside state jurisdiction (Wabash v. Illinois). With more than three-fourths of railroads crossing state lines, the Supreme Court’s decision effectively quashed the states’ attempts at railroad regulation.

Anger at the Wabash decision finally led to the first federal law regulating the railroads, the Interstate Commerce Act, passed in 1887 during Cleveland’s first administration. The act established the nation’s first federal regulatory agency, the Interstate Commerce Commission (ICC), to oversee the railroad industry. Railroad lobbyists worked furiously behind the scenes to make the new agency palatable to business leaders, many of whom felt a federal agency would be more lenient than state regulators. In its early years, the ICC was never strong enough to pose a serious threat to the railroads. For example, it could not end rebates to big shippers. In its early decades, the ICC proved more important as a precedent than effective as a watchdog.

Concern over the growing power of the trusts led Congress to pass the Sherman Antitrust Act in 1890. The act outlawed pools and trusts, ruling that businesses could no longer enter into agreements to restrict competition. It did nothing to restrict huge holding companies such as Standard Oil, however, and proved to be a weak sword against the trusts. In the following decade, the government successfully struck down only six trusts but used the law four times against labor by outlawing unions as a “conspiracy in restraint of trade.” In 1895, the conservative Supreme Court dealt the antitrust law a crippling blow in United States v. E. C. Knight Company. In its decision, the Court ruled that “manufacture” did not constitute “trade.” This semantic quibble drastically narrowed the law, in this case allowing the American Sugar Refining Company, which had bought out a number of other sugar companies (including E. C. Knight) and controlled 98 percent of the production of sugar, to continue its virtual monopoly. Yet the Court insisted the law could be used against labor unions.

Both the ICC and the Sherman Antitrust Act testified to the nation’s concern about corporate abuses of power and to a growing willingness to use federal measures to intervene on behalf of the public interest. As corporate capitalism became more and more powerful, public pressure toward government intervention grew. Yet not until the twentieth century would more active presidents sharpen and use these weapons effectively against the large corporations.