(The following story by Heide B. Malhotra appeared on the Epoch Times website on September 22.)
WASHINGTON, D.C. — Rep. Tammy Baldwin (D-WI) recently introduced the Freight Railroad Antitrust Enforcement Act of 2007, which seeks to create more competition in the U.S. railroad industry.
“This legislation is long overdue and absolutely necessary to begin to end the railroad monopolies that are driving consumer prices up and service down. This virtual monopoly by the freight rail industry is unnecessary, unfair and unacceptable,” said Rep. Baldwin in a recent press release.
The bill would remove anti-trust exemptions granted to the railroad industry under the Staggers Rail Act of 1980. The amendment of the act would provide the U.S. Justice Department and Federal Trade Commission with the tools to combat anti-competitive behavior by the railroad industry.
In 1980, there were forty Class I (railroads with revenue greater then $340 million) railroads. Today, due to subsequent mergers, there are only a few railroads responsible for moving 90 percent of all freight shipped by rail. Four major transcontinental railroads control rail shipping in the United States: Union Pacific and Burlington Northern Santa Fe (BNSF) Railway in the Midwest and Western United States, while CSX Transportation and Norfolk Southern Railway control the Eastern United States.
“This legislation is needed because there is a lack of competition in the national freight rail system today,” according to a recent report by Sen. Patrick Leahy (D-VT).
Proponents of the Act argue that the proposed changes would level the playing field for companies that rely on the railroad industry to transport their goods, such as the chemical and electric power industries.
The Wisconsin Dairyland Power Cooperative, an electric power distributor, testified before the House Antitrust Subcommittee that its freight railroad costs increased by $35 million (93 percent) in just one year. As a result, the Cooperative had to increase its prices to over 600,000 households by 20 percent.
With only four major players in the United States, the railway industry has all but eliminated competition.
“While railroads are enjoying record profits, rail customers are paying more and getting less,” said Nelle P. Hotchkiss, Senior VP at the North Carolina Electric Membership Corp.
Freight customers claim that the railway industry has established a monopoly position that has become untenable.
Re-Regulating the Railroads?
However, the majority of shipping companies surveyed who rely on the U.S. railway system have no complaints with the freight service and pricing, according to a recent survey conducted by Morgan Stanley. Only less than a quarter of those surveyed are angling for antitrust legislation.
Railroad industry advocates, among them the Association of American Railroads (AAR), claim that the U.S. government is attempting to re-regulate its industry.
The railroad industry maintains that other movers of products in the United States receive subsidies, while the railroad industry has to “invest billions of dollars to construct and maintain their tracks and other infrastructure, and pay hundreds of millions of dollars in property taxes [land that are crossed by railroad tracks],” according to AAR on its Web site.
AAR asked Congress to reject legislation that calls for regulating the way the industry is doing business. Regulation prevents the industry from making enough profits to invest in railroad expansion.
“Under re-regulation, rail earnings, and therefore rail spending on infrastructure and equipment, would plummet, the industry’s existing physical plant would deteriorate, critical new capacity would not be added, and rail service would become slower, less responsive, and less reliable,” rebuked Edward R. Hamberger, President and CEO of AAR, in a May press release.
Others feel that deregulation should mean more competition, not less.
“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,” said Rep. Baldwin in the recent press release.