Press Releases :: September 16, 2009

Railroad Monopoly Power Nearing End of Line

Baldwin Leads Judiciary Committee to End Antitrust Exemption

Led by Congresswoman Tammy Baldwin (D-WI), the House Judiciary Committee today passed by voice vote the bipartisan Railroad Antitrust Enforcement Act of 2009 (H.R. 233), legislation that eliminates antiquated railroad antitrust exemptions enjoyed, unfairly, by freight railroads.

Currently, due to dramatic consolidation, only four major Class 1 railroads carry 90% of our nation’s freight, often providing unreliable service at exorbitant fees. The legislation, authored by Baldwin, and joined by Congressmen Rodney Alexander (R-LA), Earl Pomeroy (D-ND), and Tim Walz (D-MN) will, finally and fairly, place the rail industry under the same antitrust laws that apply to other industries, including telecommunications, energy, trucking, and aviation.

“This legislation is long overdue and absolutely necessary to begin to end the railroad monopolies that are driving consumer prices up and service down,” said Congresswoman Baldwin. “This virtual monopoly by the freight rail industry is unnecessary, unfair, and unacceptable. It’s time for Congress to apply our antitrust laws more equitably and I’m delighted to see this legislation move down the track toward a vote by the full House,” Baldwin said.

A March 2009 letter from 20 state Attorneys General to the House and Senate Leadership had asked Congress to remove the railroad antitrust exemption. In addition, the American Bar Association, Antitrust Division, formally supports this action. Rail shippers in all parts of the country, held captive by the current lack of competition, were elated by today’s Committee vote.

"This is a tremendous step forward for rail customers,” said Bob Szabo, Executive Director and Counsel, CURE, a national rail customer advocacy organization. “Now both the House Judiciary Committee and the Senate Judiciary Committee have said that the railroad industry should abide by the antitrust laws like everybody else. This will ensure more rail customers access to competition and reduce the cost of electricity, food and other consumer goods for American consumers. We are very grateful to Congresswoman Tammy Baldwin (D-WI) for her leadership in moving this bill through the committee and to Chairman Conyers (D-MI) for his support, without which this would not have been possible. We believe that this Congress now has a chance to help the consumers of America by enacting the Railroad Antitrust Enforcement Act of 2009," Szabo said.

For years, captive shippers have been reporting spiking rail rates and unreliable service. In Wisconsin, for example, Dairyland Power, is a rural cooperative providing electricity for approximately 575,000 people in Wisconsin, Minnesota, Iowa, and Illinois. Dairyland’s three coal-fired power plants typically consume a little more than 3 million tons of coal per year, roughly 75 percent of which comes by rail from the Powder River Basin coal mines in Wyoming. Railroad rate increases have more than doubled in the past four years for Dairyland, and this has translated into 5 to 20 percent increases in electricity rates for Dairyland Power customers.

Consumers also face increased rates from other captive shippers – including chemical companies, the manufacturing industry, agricultural sector, forest and paper companies, among others. And consumers pay the increased costs of the electricity consumed by restaurants, hospitals, dry cleaners, and other producers of goods and services.

Baldwin’s bill repeals the railroad antitrust exemptions in antitrust and transportation statutes, so that antitrust law fully covers railroads. The bill will permit the Justice Department and Federal Trade Commission to review railroad mergers under antitrust law and it will eliminate antitrust exemptions for mergers, acquisitions, collective ratemaking and coordination among railroads. The bill also will allow state Attorneys General and other private parties to sue for treble damages and to sue to halt anticompetitive conduct, both of which are not currently allowed under federal law.

The bill has wide support from utilities, agricultural groups, chemical companies, the cement and steel industries, paper and forestry companies, and consumer groups.

The nation’s railroad system was designed to transport goods and products from rural areas and cities to distribution points across the nation. In 1980, the railroad industry found itself in poor financial health, overbuilt and failing. Seeking a remedy, Congress removed much of the regulatory oversight over the industry and merger authority was placed under the industry’s sole regulator – the Surface Transportation Board (STB). Unfortunately, in 1980, Congress did not remove the antitrust exemptions that the industry had accumulated through various acts of Congress during the 1900s.

Free from government oversight by the Department of Justice or Federal Trade Commission, the rail industry has undergone dramatic consolidation, to levels never envisioned by Congress in 1980. And, over the years, while railroads have profited tremendously, the effect on shippers with little or no access to transportation competition along their route has been damaging and largely ignored by the STB.

Baldwin explained, “Opponents argue that by subjecting the railroads to our nation’s antitrust laws, we will somehow be ‘re-regulating them.’ Our legislation does nothing of the sort. Subjecting the railroads to antitrust laws is about competition…not re-regulation. This bill will not fix all of the problems with the railroad industry. But, it will be a starting point for good faith negotiations between the rails and shippers. And, it will restore some of the public interest responsibilities to our nation’s rail system.”

A companion bill to H.R. 233, S. 146, introduced by Sen. Herb Kohl (D-WI), Chairman of the Senate Antitrust Subcommittee, is awaiting floor action.