(The following story by Dan Browning appeared on the (Minneapolis) Star Tribune website on March 27.)
MINNEAPOLIS, Minn. — Agricultural giant Archer Daniels Midland filed a federal antitrust lawsuit in Minneapolis, made public Wednesday, accusing the five largest U.S. railroads of a price-fixing conspiracy.
ADM named BNSF Railway Co. of Fort Worth; Union Pacific Railroad Co. of Omaha, Neb.; CSX Transportation of Jacksonville, Fla.; Norfolk Southern Railway Co. of Norfolk, Va.; and Kansas City Southern Railway Co. of Kansas City, Mo.
According to ADM’s lawsuit, the railroads got together through their membership in the American Railroad Association and agreed to a scheme that fixed fuel surcharges. The surcharges are supposed to help railroads recover unanticipated costs when fuel prices spike. But ADM alleges that the railroads used them to extract profits from shippers.
ADM joins a growing chorus of companies that have filed such claims against the railroads since last year.
ADM, based in Decatur, Ill., is one of the world’s largest processors of agricultural products. ADM says it has paid the railroads more than $250 million in fuel surcharges since 2003, and it’s seeking treble damages in the lawsuit.
The CEOs of the five railroad companies sit on the board of the Association of American Railroads. ADM alleges that the defendants used the association “as an instrument to develop, organize and conduct their conspiracy.”
David Gelfand, a Washington, D.C., attorney representing the association declined to comment on any litigation.
BNSF spokesman Patrick Hiatte told The Associated Press that “the allegations in this case do not have any merit, and we intend to vigorously defend.”
CSX spokesman Garrick Francis didn’t have any direct comment. A Union Pacific spokesman said the railroad had not seen the suit. Representatives for the other two railroads did not immediately return phone messages left by The Associated Press.
ADM says the railroads selected nearly identical factors to trigger surcharges. It included a chart showing nearly identical surcharge triggers for the two Western railroads between July 2003 and March 2007. A similar chart showed near-identical triggers for the three Eastern railroads between March 2004 and March 2007.
“The similarities between the railroads’ fuel surcharges are both too precise and too comprehensive to have been independent responses to any common market phenomenon,” the suit says.
ADM says the railroads changed their past practice of negotiating discounts for some shippers on rail freight rates and said that fuel surcharges were “not negotiable.” The railroads refused to lower prices even when doing so might have increased their market share, the suit says.
Congress deregulated the railroad industry in 1980, allowing the carriers to set their own hauling rates. The number of Class I railroads dropped to seven from the 35 that operated before deregulation, the lawsuit says.
ADM notes that the Surface Transportation Board issued an administrative decision that described the railroads’ method for calculating fuel charges as unreasonable.
The legal actions against the railroads began in May, when Dust-Pro filed a federal class-action lawsuit in New Jersey. Dust-Pro accused the rail companies of violating the antitrust laws known as the Sherman Act and Clayton Act by conspiring to fix, raise, maintain or stabilize prices of rail freight services through fuel surcharges.
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Lawsuit at a glance
Plaintiff: Archer Daniels Midland, Decatur, Ill.
Defendants: Five largest U.S. railroads, including BNSF Railway in Fort Worth.
Key allegations: The railroads conspired to raise rates through their membership in a trade group. While earlier rates were negotiable, raised rates under the label fuel surcharges were not.
Damages: ADM is asking for treble damages of the $250 million it has paid in fuel surcharges since 2003.