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Yesterday, Association of American Railroads (AAR) officials told members of a House judiciary subcommitee that the Railroad Antitrust Enforcement Act of 2009 (H.R. 233/S. 146) would not serve the public interest and would “severely distort” the relationship between regulation and antitrust laws.

Introduced earlier this year by Sen. Herb Kohl (D-Wis.) and Rep. Tammy Baldwin (D-Wis.), S. 146 and H.R. 233 would repeal railroads’ antitrust exemption; 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.

"Congress should take a step back and consider the harmful impacts this measure would have on not only railroads, but also our customers and American consumers," said AAR President and Chief Executive Officer Edward Hamberger, according to a press release. “If enacted, H.R. 233 could drag us back to pre-deregulation days of weak investment and withering rail networks."

Union Pacific Railroad Senior Vice President of Law and General Counsel J. Michael Hemmer also urged subcommittee members not to consider H.R. 233 in isolation. If Congress wants to address rail transportation policies, it should work with colleagues in other committees of jurisdiction to craft a coherent, national rail policy that integrates regulation with antitrust jurisprudence, he said.

"This bill is not just about antitrust law, it is an attempt to overturn long-established regulatory policies that have provided enormous benefits to shippers and American consumers," said Hemmer.  "The bill even creates new regulatory law on matters unrelated to antitrust — and in doing so, treats railroads differently than other regulated industries."
 
Several provisions of the bill would allow the Federal Trade Commission to regulate railroads, but not other carriers, thereby creating a glaring conflict with the STB, he said. In addition, the legislation would be retroactive, potentially leading to antitrust attacks on the continuing operation of every federally approved transaction in rail history, said Hemmer.  

However, “rampant consolidation” and a lack of regulatory oversight in the U.S. freight-rail industry have “allowed railroads to abuse their monopoly pricing power and overcharge consumers and shippers $3 billion per year,” according to a report released yesterday by the Consumer Federation of America (CFA), a non-profit association of 300 pro-consumer groups that supports H.R. 233.

"Consumers pay a large part of those overcharges in their electricity bills because coal is the dominant fuel for power generation in the U.S. and two-thirds of all coal shipments delivered to utilities have only one rail transport supplier," said CFA Director of Research Mark Cooper, who authored the report. "Farmers, chemical companies and other shippers of heavy bulk commodities are also the victims of rail pricing abuse, which costs the economy output and jobs."  

Shippers without rail-competitive options pay 75 percent to 100 percent more for rail shipments compared with similar movements in competitive markets, and captive shippers’ costs have been rising substantially over the past five years, according to CFA.

"Congress should pass legislation to restore competition in the rail sector and strengthen federal regulatory oversight of freight railroads by restoring the consumer and shipper protection provisions of the Staggers Act of 1980, which partially deregulated the industry,” said Cooper.