Photo: Canadian Pacific Railroad

Mar 01, 2022

NGFA Encourages Pro-Competition Rail Mergers

Speaking before the STB regarding the CP-KCS rail merger, NGFA wants to ensure competitive opportunities remain

In comments submitted to the Surface Transportation Board (STB) on February 28, the National Grain and Feed Association (NGFA) encouraged the STB to ensure competitive opportunities for rail shippers continue under the merger of Canadian Pacific Railway and Kansas City Southern Railway.

“The NGFA generally does not oppose the merger of CP and KCS, but the board should be proactive in conditioning any approval of the merger with conditions that strictly hold the railroads to their commitments concerning competition and service, and to generally preserve and encourage additional rail-to-rail competition,” the comments stated.

STB announced it had accepted the merger application for consideration in November 2021.

CP and KCS serve separate regions, so their proposed merger would not pose the same problem as past major railroad mergers, which reduced shippers’ options from two Class I railroads to one, or three railroads to two, NGFA noted.

“However, despite the efforts of the STB to preserve rail-to-rail competition when evaluating and conditioning the approval of prior mergers between Class I railroads, the consolidation of the rail industry into essentially two rail duopolies in the Western and Eastern United States has resulted in the overall diminishment of rail-to-rail competition systemwide,” NGFA noted.

Therefore, the board should practice “proactive vigilance” when it comes to imposing meaningful conditions on the merger designed to maintain competitive opportunities for rail shippers. Several areas in which the Board could do so include:

  1. Establishing or directing the railways to establish reasonable terms for the continued use of existing gateways post-merger
  2. Clarifying that parties may challenge the reasonableness of Rule 11 rates established by the merged railroad at its interchanges with other railroads
  3. Conditioning merger approval on the applicants agreeing to enter into reciprocal switching arrangements at certain locations
  4. Enabling rail shippers and other customers of the merged railroad to seek payment of money damages for service failures that result from the railways failing to adhere to their representations concerning service levels post-merger

The board also should maintain oversight over the implementation of the merger transaction for at least five years, consistent with prior merger proceedings, NGFA noted.

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