Bill to repeal roads’ antitrust exemption passes Senate committee; railroads, shippers might seek compromise on rate/competition dispute

By Jeff Stagl, managing editor

Early last month, the Senate Judiciary Committee approved the Railroad Antitrust Enforcement Act of 2009 (S. 146). At the time, a companion bill (H.R. 233) was pending in the House Judiciary Committee and the legislation — which proposes to repeal railroads’ antitrust exemption — was gaining momentum on Capitol Hill.

But by late March, H.R. 233 remained stalled in the House committee and there were rumblings that bill-opposing railroads and bill-backing shippers were working on different compromise legislation.

Introduced earlier this year by Sen. Herb Kohl (D-Wis.) and Rep. Tammy Baldwin (D-Wis.), S. 146 and H.R. 233 would permit the U.S. Department of Justice and Federal Trade Commission to review mergers under antitrust law; ensure Surface Transportation Board (STB) rulings and regulations conform to antitrust laws; and enable state attorneys general and private parties to sue for treble damages and pursue court orders to halt “anti-competitive rail conduct.”

“Our bill will ensure that railroads play by the same rules as all businesses in our economy and give those injured by anti-competitive conduct strong remedies under antitrust law,” said Kohl in a prepared statement.

CURE: Four roads equal a monopoly

Consumers United for Rail Equity (CURE), which long has sought legislative relief for captive shippers, backs the bills.

“Railroads have used this exemption to consolidate the country’s rail shipping down to four regional monopolies, giving these corporate behemoths tremendous monopoly pricing power that results in record profits at the expense of captive shippers,” CURE officials said in a statement.

However, the legislation “creates an unprecedented and confusing regulatory scheme that could alter current economic oversight of the railroads,” Association of American Railroads (AAR) officials believe.

“We face two disparate schemes that spell nothing but confusion for the railroads and those charged with enforcing the regulations,” said AAR President and Chief Executive Officer Edward Hamberger. “Congress should be promoting policies that help jumpstart the economy and regain consumer confidence, not overburden an industry that stands ready to get America back on track.”

STB will retain oversight, analyst says

Despite the opposing views, U.S. freight railroads likely will remain under the STB’s regulatory authority because there’s scant evidence that broad railroad rate “re-regulation” is “absolutely needed,” Stifel Nicolaus analyst John Larkin wrote in a research note last month.

“In fact, railroads may ultimately benefit from their inherent relative energy efficiency and environmental friendliness to become a larger part of the nation’s developing integrated plan to transport freight over the coming decades,” Larkin wrote. “Shippers, given the broad fragmentation of the railroad customer base, seem to have trouble mounting a compelling, cohesive message in support of their position.”

As of press time, railroads, shippers, legislators and rail labor union representatives were reportedly trying to hammer out a different bill or agreement that would address all parties’ concerns.

Chicago-based free-lance writer Desiree J. Hanford contributed to this report.