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Transportation: Trust But Anti-Trust

by WWC Staff
Wheat Life, June 2008

Joining the Senate Judiciary Committee, the House Judiciary Committee passed the bipartisan Railroad Antitrust Enforcement Act of 2007 on April 30. "this is a tremendous step forward for rail customers," said Bob Szabo, executive director and counsel for SURE, a national rail customer advocacy organization. "Now both the House Judiciary committee and the Senate Judiciary committee have said the railroad industry should abide by the antitrust laws like everybody else." The bill repeals antitrust exemptions accumulated by the railroads through various acts of Congress during the early part of the 20th Century. If passed by congress and signed by the president the bill will permit the Justice department and the Federal Trade Commission to review railroad mergers under antitrust law and eliminate exemptions for mergers, acquisitions, collective ratemaking and coordination among railroads. The bill will also allow state attorneys general and other private parties to sue for treble damages and to sue to halt anticompetitive conduct, both of which are not allowed under current federal law. Industry observers believe the bill is a huge first step toward disciplining railroad's egregious pricing behavior, but it does not solve the entire problem. See below.

No Additional Freedom for Railroads to Refuse or Reduce Service

Testifying before the Surface Transportation Board on behalf of the Washington wheat industry and other agricultural entities, terry Whiteside argued the statute, not the railroads should determine what the common carrier obligation requires. "The railroad already has too much leeway to refuse service, or to refuse service on reasonable terms, to shippers who require rail service. there is no sound legal, policy or economic reason for preserving the existing discretion of railroads to violate their legal obligations, let alone increasing that discretion."

He went on to say that, "Even if the Board begins to take long overdue steps to limit excessive rates, charges and rage increases on captive traffic, the railroads have been enjoying record revenues and profits due to higher pricing of non-jurisdictional 'competitive' shipments. Under the circumstances, the railroads need to do more to meet demand for service, not less, and the common carrier obligation should be strengthened, not weakened."

Capacity constraints that can be self-inflicted by railroads cannot justify allowing wholesale marketing or rationing by price. The law limits the ability of regulated electric utilities to deny service to smaller and more isolated customers in their service areas. Likewise, railroads must not be allowed to decide unilaterally, based on their own self-interest, to force consolidation of electric generation simply because it would be more efficient for the railroads if the nation's need for electricity were met by fewer, larger coal-fired generation stations located where most economically served by unit trains of coal. the same is true for grain. "Left to their own devices, the railroads could have the power to distort the larger economy in ways that disserve the public interest."

There is growing concern and outright frustration and rising cost implications as the railroads are pushing against hauling anhydrous ammonia (NH3) citing self-serving citizen safety concerns and capacity constraints (which allow them to pick and choose what is hauled by rail). Growers would be directly affected by NH3 rail restrictions.

Whiteside called for the Board to resist calls to weaken the railroad's common carrier obligation. Not only should it clarify that the obligation to serve remains an important responsibility of the nation's rail system, with public interest implications that are not necessarily the same as the railroad's economic interest, but the common carrier obligation should be strengthened to limit further restructuring of the rail system and the economy driven by major railroad's economic interests.

WWC Staff
Transportation: Trust But Anti-Trust
Wheat Life, June 2008

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