Five Class Is to STB: CP-KCS merger would harm competition

BNSF Railway Co., CN, CSX, Norfolk Southern Railway and Union Pacific Railroad on Monday filed their "comments and request for conditions" with the Surface Transportation Board (STB) on the proposed merger of Canadian Pacific and Kansas City Southern.

In their comments, the five Class Is laid out their reasons why they believe the CP-KCS merger would negatively affect competition to the detriment of rail customers if certain conditions are not met. Each Class I also detailed their concerns for how the merger would impact their own operations, as well as the conditions they believe the STB should impose to protect competition if it approves the merger.


Following are selected points made in each of the five Class Is' comments filed Feb. 28, as well as links to their documents.

BNSF: The merger is driven by CP's desire to acquire KCS's Mexican operations. The transaction would result in "substantial" lessening of competition and restrain freight service across the U.S.-Mexico border at Laredo, Texas. BNSF plays a "unique role" in Mexico's transportation market, serving as the replacement for competition that would have been lost when Southern Pacific merged into UP in 1996. As a result, the STB must ensure that the combined CP-KCS does not control transportation in and out of Mexico via the Laredo gateway. The board must put in place concrete and enforceable open-gateway measures and remedies. BNSF’s filing can be downloaded here.

CN: CP-KCS application for a "virtually unconditioned" merger falls short and contains errors, omissions and unreasonable assumptions. The application does not show that the two railroads have planned for the type of service disruptions that have followed other recent rail mergers. If approved, CP's acquisition of KCS will undermine KCS's existing incentives to interchange traffic with other railroads on commercially reasonable terms. CN wants the STB to address various conditions, including divestiture of the Springfield Line to CN. CN’s comments are available in filing No. 304039 at stb.gov.

CSX: The board must assure that the merger would not “enshrine the existing but never sanctioned restrictions on competition for the movement of traffic over the line between Meridian, Mississippi, and Shreveport, Louisiana, owned by a joint venture controlled by KCS and the Alabama Great Southern Railroad Co., a subsidiary of NS." The board also should deny any NS application seeking to expand its rights under the Meridian Speedway agreements. CSX's comments can be read here.

NS: Although CP and KCS say no shipper will face reduced competition as a result of the merger, “the underlying details of their application convey a different picture—one that may lead to significant potential for harm to competition and the public interest with respect to applicants’ post-merger actions around current CPKC gateways especially, with respect to the Meridian Speedway and the Meridian-Wylie route,” NS officials wrote. If CP and KCS follow the operating plan as outlined in their merger application,”there is a very real, imminent threat of harm to competition and the public interest.” A link to NS’s comments is here.

UP: The public interest requires CPKC to bear the costs of new capacity that will be necessary to implement the merged railroads’ operating plan. The merger likely would result in less competition for traffic moving via the Laredo and other gateways; and CPKC “would have the incentive and ability to use its control of KCS de Mexico (KCSM) to deprive shippers of the price and service benefits of UP-KCSM routings. The board should require CPKC to offer shippers “commercially reasonable” rates to gateways and require CPKC to comply with KCS’s promises regarding Laredo Gateway operations and the Laredo bridge. UP’s comments can be read here.