Rockefeller to introduce antitrust regulation against rails

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West Virginia Senator Jay Rockefeller is poised to introduce the first major railroad industry regulations in nearly three decades. Transportation trade publication The Journal of Commerce reports that the long-serving Democrat, who chairs the Senate, Commerce, Science, and Transportation Committee, may present a bill within days.

This could be bad news for the rail giants like Union-Pacific (UNP) and Burlington Northern (BNI), which are only just beginning to recover from the nation's deep recession.

For those of you who find it ironic that a Senator named Rockefeller plans to push antitrust laws, don't be too surprised. He's been a determined supporter of re-regulation of railroads for years. What's changed is that in a Democrat-controlled Congress, such a bill might have a chance.

It's the latest battle in the centuries-long conflict between the oligopolistic freight rail industry and regulators. The most recent era of tensions began in 1980, when the rail lobby steamrolled through Congress the Staggers Act, designed to deregulate the industry and keep railroad companies in business, while keeping prices reasonable. The [un?]intended outcome was massive consolidation, from 63 Class-I railroads operating in the U.S. in 1976 to less than a dozen today. The market share of the big four (the other two are CSX and Norfolk Southern) is around 90 percent.

So if I'm in charge of, for instance, a small Louisiana utility cooperative that ships coal, or a materials conglomerate Dow that ships chemicals, and I think Union-Pacific is charging me too much money, I can't take my business elsewhere. I probably can't sue, either, as the industry is largely exempt from antitrust challenges in court. I can appeal to the government-run Surface Transportation Board, but that may cost hundreds of thousands of dollars and -- re-regulation advocates like Rockefeller say -- I'll likely lose.

Based on the content of an earlier bill, tabled in June, Rockefeller's new rules will probably beef up the regulatory power and budget of the Surface Transportation Board, and might strip some antitrust exemptions. Such changes could lead to millions of dollars in decreased revenue for the rail industry, so look for a fierce (albeit low-profile) Capitol Hill fight between rail lobbyists, antitrust regulators, and shipper advocates in the coming months.

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