#United States #Washington #Norfolk Southern #Union Pacific #Rail Customer Coalition

Rail Customers Warn of Potential Concerns Over UP-NS Merger

In a disconcerting development for the rail industry, the Rail Customer Coalition (RCC) has voiced strong concerns regarding Union Pacific's (UP) proposal to merge with Norfolk Southern (NS). This merger is poised to be the most scrutinized case in the history of the Surface Transportation Board (STB), as stakeholders fear it could significantly undermine competition in the freight rail sector.

The proposed union between UP and NS marks a historic moment in American railroading, potentially resulting in the largest consolidation of railroads in U.S. history. As the RCC pointed out, American businesses are still contending with the fallout from previous mergers that concentrated market power in the hands of a few companies. Currently, just four rail corporations handle a staggering 90% of the freight rail traffic in the country, leading to considerable price hikes and service disruptions for customers.

According to RCC's statement, if the merger is approved, it would grant a single entity control over nearly half of all rail traffic in the U.S. This level of concentration could effectively erase the thin layer of competition that still exists, translating to increased costs for manufacturers, farmers, energy producers, and ultimately, consumers nationwide. The merger's proposed price tag of $85 billion raises further questions, as this cost is likely to be passed down to American businesses and individuals, compounding existing economic pressures, particularly amidst rising inflation.

Questions About Service Improvements

Union Pacific has argued that the merger will bring about improved service, efficiency, and expanded networks. However, the RCC argues these benefits do not justify creating a monopoly. They point to the recent collaboration between BNSF and CSX as an example of how rail service can be enhanced through partnership rather than consolidation.

Moreover, the STB’s updated merger standards, adopted in response to earlier failed consolidation attempts, mandate that any merger must clearly demonstrate how it will enhance competition and service. The RCC contends that the current application submitted by UP and NS does not meet these criteria.

Growing Opposition to the Merger

The opposition to the merger is gaining momentum as more stakeholders scrutinize the implications of this consolidation. A bipartisan coalition of 18 U.S. Senators has joinced the call for the STB to undertake a thorough assessment of the merger proposal, emphasizing the already limited competitive options available to producers reliant on rail services. They warn that further consolidation could exacerbate existing challenges, including lesser routing flexibility and reduced network smoothness.

In addition, a coalition of nine Republican State Attorneys General and 54 Republican legislative leaders have expressed their trepidations about the potential merger, reinforcing the notion that maintaining competition within the freight rail sector is essential for protecting American businesses and consumers.

The Call for Competition

As the railroad landscape becomes increasingly exclusive, the RCC strongly advocates for heightened competition in the sector. They argue that it is vital for keeping costs low, bolstering supply chains, and ensuring stable employment opportunities in the U.S. The coalition is poised to thoroughly examine the merger application as the STB embarks on its evaluation process.

Industry representatives have shared their thoughts through numerous statements, highlighting the critical role that competitive rail service plays in the success of various sectors. From agricultural endeavors to energy production, stakeholders are calling for a robust review process to prevent detrimental ramifications from prioritizing consolidation over competition.

Chris Jahn, President of the American Chemistry Council, expressed concerns that the merger would prioritize imports over American-made goods at a time when inflation and living costs are already pressing issues. Similarly, agricultural representatives indicated that artificial cost increases resulting from a lack of competition could significantly impact operational viability for farmers.

For various sectors reliant on dependable and affordable rail service, the stakes are high. A merger approval that fails to prioritize competitive practices could jeopardize the integrity of the entire supply chain and engender further discontent among stakeholders.

Conclusion

As the STB prepares to evaluate the UP-NS merger application, it faces the substantial responsibility of ensuring that the lessons of past mergers are not ignored. A decision must prioritize the enhancement of rail-to-rail competition, safeguarding the interests of shippers and the numerous industries reliant on freight rail networks. The voices from the RCC and other stakeholders highlight the growing demand for a rigorous and transparent review process, emphasizing the essential need for competition in the rail industry as turmoil mounts in the broader economy.