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7/6/2006



Rail News: Rail Industry Trends

Sen. Kohl aims antitrust enforcement act at rail industry


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Another bill seeking to remove railroads’ antitrust exemptions and offer relief to captive shippers has entered the U.S. Senate.

Last week, Sen. Herb Kohl (D-Wis.) introduced the Railroad Antitrust Enforcement Act of 2006 (S. 3612), which proposes to repeal antitrust exemptions that enable freight railroads to “abuse their dominant market power and raise rates for those who rely on them to ship dozens of vital commodities, including coal and agricultural products,” said Kohl — who serves as senior democrat of the Senate Judiciary Committee’s Antitrust, Competition Policy and Consumer Rights panel — in a prepared statement.

Currently, railroad mergers and acquisitions are exempt from antitrust law and reviewed by the Surface Transportation Board. In addition, railroads engaging in collective ratemaking are exempt from antitrust review. The bill would eliminate those exemptions by allowing the federal government, state attorneys general and private parties to file suit to enjoin anti-competitive mergers and acquisitions. S. 3612 also would restore the power of the U.S. Justice Department’s Antitrust Division and Federal Trade Commission to review railroad mergers. Co-sponsored by Sen. Russ Feingold (D-Wis.), the bill was referred to the Committee on the Judiciary.

Facing continually rising rail rates, captive shippers have been the “victim of monopolistic practices and price gouging by the single railroad that serves them, price increases which they are forced to pass along into the price of their products and, ultimately, to consumers,” said Kohl. For example, Dairyland Power Cooperative’s rates increased 93 percent Jan. 1 after a three-year rail contract expired. Now, the LaCrosse, Wis.-based cooperative will spend about $75 million to ship $30 million worth of coal, Kohl said.

“All those who rely on railroads to ship their products … deserve the full application of the antitrust laws to end the anti-competitive abuses all too prevalent in this industry today,” said Kohl.

However, a recent Government Accounting Office report showed rail rates declined during the past 20 years, including a 35 percent drop in coal shippers’ rates, according to the Association of American Railroads (AAR).

“Railroads move tens of thousands of rail cars to and from thousands of origins and destinations every day, at rates that shippers elsewhere in the world would love to have,” said AAR President and Chief Executive Officer Edward Hamberger.

The Kohl bill follows the Railroad Competition Act of 2006 (S. 2921), which was introduced to the Senate in May and — similar to the Railroad Competition Act of 2005 (S. 919) — proposes to re-regulate the rail industry. S. 2921 aims to promote “effective rail competition” at origins and destinations; maintain “reasonable” rates in the absence of effective rail competition; and require railroads to provide “consistent and efficient rail transportation service, including the timely provision of rail cars requested by shippers.” The AAR and U.S. railroads oppose re-regulation legislation.


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