DOJ reiterates concerns over CP-KCS merger

In a Jan. 24 letter to the Surface Transportation Board, the U.S. Department of Justice reiterated its concerns about the potential "harm" the Canadian Pacific-Kansas City Southern merger could have on the rail industry.

DOJ Antitrust Division officials wrote that at a Sept. 28, 2022, hearing, CP and KCS stated that the STB "should infer" that the Antitrust Division does not believe the merger has the potential to "cause harm."

However, "no such inference should be drawn," the DOJ letter states.

In its initial comments to the board, the DOJ encouraged the board to thoroughly examine concerns about how the merger could harm competition, the letter adds.

"That filing made clear, among other things, that the Antitrust Division shares the board’s serious concerns about increasing consolidation in the industry," the letter states. "The consolidation of Class I railroads presents substantial concerns, including: lessened competition among Class I railroads to attract new industry locations; reduced incentive to invest in research and implementation of important new technologies such as positive train control; and the danger of industry-wide understandings and agreements that become more likely as the industry becomes more concentrated."

The DOJ letter can be read here.

In a Jan. 25 response filed with the STB, the two Class Is said they "agree with the DOJ's bottom line: that the board should pay careful attention to protecting competition in this important industry and thoroughly examine the competition concerns raised by commenters."

CP and KCS have taken seriously all concerns voiced about the merger's impact on competition, they said, according to their attorney's letter to the STB. CP and KCS did not mean to suggest the DOJ had concluded that any competition claim lacked merit or that the DOJ expressed support for the merger, the letter states.

"However, as the long-closed factual record developed in this case establishes, [CP and KCS] have demonstrated both that the effect of the transaction will be strongly procompetitive and that, especially in light of the commitments [CP and KCS] have made to the board and the public, the claims of commenters raising competitive concerns lack merit and do not warrant conditions beyond those [CP and KCS] have already accepted," the Class Is' attorney wrote.

To read the railroads' response, click here.

CP officials have said they anticipate the STB to issue its decision on the merger application early this year.