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RR antitrust exemption, switch rules under Senate’s scrutiny
Illinois Correspondent

WASHINGTON, D.C. — Proposed changes in freight rail service regulations and practices have gathered steam during 2013, with legislation proposed to protect freight rail shippers from railroad monopoly power, and changes to current competitive line switching rules being considered by the federal Surface Transportation Board (STB).

On March 21, U.S. Sen. Amy Klobuchar (D-Minn.), chair of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, along with Sen. David Vitter (R-La.), introduced legislation intended to eliminate railroads’ monopoly powers and increase competition by removing the industry’s broad exemptions from federal antitrust laws.

The bill, known as the Railroad Antitrust Enforcement Act of 2013, quickly gained the support of freight rail watchdog group Consumers United for Rail Equity (CURE), which supports a national coalition of rail-dependent shippers.

“The bill by Senators Klobuchar and Vitter proposes appropriate and long-overdue action to better protect shippers and American consumers, by placing the nation’s freight railroads on the same footing as their customers with respect to the nation’s antitrust law. This is simple fairness,” said Steve Sharp, president of the Washington, D.C.-based CURE.

“Consumers ultimately pay the freight for railroad monopoly power in terms of inflated prices for electricity, food and the goods they purchase. Shippers are strongly committed to building the support necessary to pass this legislation in this Congress.”

Earlier in March, the National Grain and Feed Assoc. (NGFA) and eight other national agricultural organizations issued a 62-page statement to the STB urging the board to replace railroads’ current competitive switching rules. The group used the statement to voice its displeasure with a proposal submitted to the STB by the National Industrial Transportation League (NITL) regarding switching rules.
The NITL proposal falls “far short of providing relief to agricultural shippers,” according to the letter to the STB, which urged more competitive reciprocal switching between Class I railroads.

“Rail carriers should not have a free hand to cut off existing access to markets through absolute closures of intersection points or by establishing switch charges beyond a reasonable level,” the NFGA and other groups wrote.

“Because switching movements are a major conduit to maintaining a national freight rail network, railroads should not have the degree of pricing freedom on switch movements that they currently are given on long-haul rates. To allow such autonomy on switching will have a negative impact on the competitive fabric of the nation’s economy.”

With freight rail’s cost-determination systems under the microscope from the ag industry and others, the STB decided to extend the public comment and reply due dates associated with proposed changes to railroads’ Uniform Railroad Costing System (URCS), their primary cost-determination model.

The date was extended to May 6 after requests were received from the Assoc. of American Railroads (AAR), American Chemistry Council (ACC), The Fertilizer Institute and the NITL.

Under consideration by the STB are adjustments in the manner in which the URCS calculates charges in order to more accurately reflect actual movement costs. The URCS allows the STB to determine a railroad’s variable costs to provide service, determine jurisdictions in rate disputes and decide whether challenged rates are reasonable.

In other freight rail developments, in February Sen. Al Franken (D-Minn.) urged President Obama to address freight rail monopolies through the U.S. Department of Transportation’s newly formed Freight Policy Council. He also urged the president to direct the U.S. Department of Commerce’s Advisory Committee on Logistical Supply Chain Competitiveness to examine the impact of freight rail competition on consumers and shippers, among other suggestions.
The AAR responded to Franken’s letter to Obama by arguing freight rail is already subject to almost all antitrust laws, including laws prohibiting collusion in price setting, allocating markets or unreasonably restraining trade in any manner. But the AAR’s comments came on the heels of a January report issued by the ACC documenting how a lack of freight rail competition is costing U.S. chemical companies billions of dollars in excess shipping costs each year.

“While these new findings focus on chemical and plastic shipments, the problem is just as dire for farmers, electric utilities, lumber and other manufacturers who depend on rail for shipping and who, together, make up a broad swath of the U.S. economy,” said Glenn English, CURE chair, on the ACC-funded study. “Congress can fix this problem.”