(The following story by John Gallagher appeared on The Journal of Commerce website on May 19, 2009.)
WASHINGTON, D.C. — A study released May 19 by the Consumer Federation of America claims railroads overcharge consumers $3 billion a year as a result of monopoly pricing power.
The study, “Bulk Commodities and the Rails: Still Crazy After All These Years,” was timed to coincide with a U.S. House Judiciary subcommittee hearing on the Railroad Antitrust Enforcement Act of 2009, which seeks to hold railroads to stricter antitrust standards, which CFA supports.
CFA was formed in 1968 as an advocacy and research group to support pro-consumer policy on issues before Congress, the White House, and federal and state agencies.
“With only a handful of companies providing freight rail service, many rail customers have access to just one railroad and are, therefore, ‘captive’ to that railroad,” the study said. “This enables the railroads to set prices well above costs, essentially extracting monopoly rents from shippers, and creates little incentive for railroads to provide consistent and reliable service.”
CFA said captive shippers pay a premium of 75 to 100 percent compared to similar movements in competitive markets.
The study also calls for greater oversight by the Surface Transportation Board, the agency charged with regulating freight railroads. It calls on the STB to change its procedures for calculating railroad costs and the reasonableness of rail rates to more fairly estimate shipper costs.