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11/7/2008



Rail News: Rail Industry Trends

STB seeks public feedback on rail competition study


The Surface Transportation Board (STB) is soliciting public comments on a rail competition study recently completed by Christensen Associates Inc. The board will accept comments until Dec. 21.

Entitled “A Study of Competition in the U.S. Freight Railroad Industry and Analysis of Proposals that Might Enhance Competition,” the study was commissioned by the STB in September 2007 and released on Nov. 3. The study analyzes various freight-rail issues, including competition, capacity and the interplay between the two, and examines various regulatory policy alternatives.

Among the findings: Class Is’ rate increases in recent years are the result of “declining productivity growth” and higher costs rather than the railroads exercising their market power; shippers with no or very limited transportation options tend to pay higher rates than shippers with the same shipment characteristics; and current market conditions suggest that providing significant rate relief to certain groups of shippers likely will result in rate increases for other shippers or threaten railroads’ financial viability.

However, the study provides “solid evidence” of railroads’ abuse of monopoly power, which has resulted in higher rates and higher prices for American consumers, according to rail shipper coalition Consumers United for Rail Equity (CURE).

The study shows railroads are abusing their unique exemption from antitrust law to exert anti-competitive business practices, such as by charging rates 500 percent to 700 percent above cost and refusing to provide adequate service to captive shippers, CURE said.
 
“In ruling after ruling, the STB has denied captive rail shippers their due process for reasonable rates and fair treatment by the railroads, even though that was the charge given the board when Congress created it in 1995,” said CURE Executive Director Bob Szabo in a prepared statement. “Now, there is clear evidence of the problem from research they commissioned, in addition to dozens of shipper filings over the years, and continuous input from groups representing shippers, consumers, industry and agriculture.”


Contact Progressive Railroading editorial staff.

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