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Rail Mergers To Become Tougher

June 11, 2001

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The federal government has made mergers tougher for trucking’s biggest competitor.

The Surface Transportation Board issued new rules Monday that will force rail operations with more than $250 million in annual revenue to prove that mergers will increase competition and not lead to service disruptions.
The decision will put an end next month to a 16-month ban on rail mergers put in place by the board following the meltdown in service when Union Pacific bought Southern Pacific Rail in 1996 and the purchase of Conrail in 1998 by CSX and Norfolk Southern. Also a pending merger between Canadian National and Burlington Northern has been put on hold.
STB said it made the decision to make rail mergers more difficult because of an oversupply of rail cars for cargo no longer exists and recent mergers were hampered with service problems, costing the American economy $4 billion. Many trucking companies benefited from those service problems, as frustrated customers switched their freight from rail to truck.
The current rail merger standards have been in place for 20 years and only required companies to demonstrate they would preserve existing competition.

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Railroad industry reaction was harsh and swift. Association of American Railroads President, Edward Hamberger said, “We continue to believe that new rail mergers should not be subject to a standard requiring enhancement of competition but instead should remain subject to the test of whether a merger preserves competition, the same test that applies to other industry under antitrust laws.”

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