[Congressional Record Volume 141, Number 188 (Tuesday, November 28, 1995)]
[Senate]
[Pages S17584-S17590]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               INTERSTATE COMMERCE COMMISSION SUNSET ACT

  The Senate continued with the consideration of the bill.
  Mr. EXON. Mr. President, the Senator from North Dakota is about to 
offer an amendment, as I understand it, that he has shown me, and I am 
opposed to it. But, to accommodate this Senator and the time 
constraints that I have this afternoon, I wish to make a few 
appropriate remarks about why, in my opinion, we should not adopt the 
amendment that is going to be offered by the Senator from North Dakota.
  Mr. President, this amendment seeks to change the way mergers are 
handled by curtailing the current ICC rail merger review process.
  Under the current process, and the process in the bill before us--the 
bill by the chairman of the committee and this Senator from Nebraska--
the so-called Intermodal Surface Transportation Board will approve, 
disapprove, or condition rail mergers based on the public interest 
standard currently used by the ICC, not a narrow, Department of 
Justice-type of antitrust analysis. The public interest standard--which 
is part of the bill offered by the chairman of the committee and 
myself--allows the board to weigh the public benefits of a merger 
against its competitive harms. This standard allows the board to 
condition and approve mergers that are in the public interest even 
though they might violate some of the existing antitrust laws. This 
review has served my farmers, the farmers of South Dakota, and other 
farmers as well. This concept must be kept as part of our overall 
transportation network if we want it to run efficiently, especially 
with regard to rural areas.
  The current process provides for the input of the Department of 
Justice. Let me repeat that. The bill before us, the Pressler-Exon 
bill, provides for the input of the Department of Justice. This 
amendment goes beyond that and gives the Department of Justice the 
final say--or the veto, if you will--on rail mergers.
  Even though a merger might be approved by the Board because it is in 
the public interest, is protection of captive shippers, and is in the 
best interest of the transportation system, the Department of Justice 
with all of the lawyers, or some other third party, could still bring 
suit and force divestiture based on antitrust laws under the Dorgan 
amendment that is going to be proposed.
  Mr. President, this amendment erodes the jurisdiction of the Commerce 
Committee, and the new ISTB board because it invests too much authority 
in the Department of Justice.
  Lawyers are a very important part of our society, depending on your 
point of view. It seems to me, Mr. President, that, if we are going to 
turn the Department of Justice into a veto authority which they did not 
have under the Interstate Commerce Commission and take away the 
independent functioning of the board that we are setting up with the 
Pressler-Exon measure in the Department of Transportation, we are 
taking a significant step backward. I see nothing whatsoever wrong with 
the Department of Justice being the lawyer-adviser to the new board 
that is created. They should be consulted as to whether or not there is 
a serious violation of antitrust laws. But customarily in business, in 
my experience in business, and my experience as an individual, I have 
never let my lawyer make decisions for me. I consult with my lawyer, if 
I need one. I listen to his counsel and advice as to what is right 

[[Page S 17585]]
and what is wrong. But I think the decision has to rest with me. 
Likewise, for the newly independent board that is created under the 
Pressler-Exon bill, which vests in a new department under the 
Department of Transportation, we do not need to hamstring that board 
and their efforts with regard to what should and should not be done 
with regard to mergers.
  So I hope if the amendment offered by the Senator from North Dakota 
comes to a vote the Senate will overwhelmingly oppose it.
  The Senator from North Dakota was involved in a similar effort with 
regard to the FCC legislation wherein he and some others felt that the 
Department of Justice should have the final say so in matters before 
the Federal Communications Commission. That measure was turned down 
overwhelmingly by the U.S. Senate because, if we have supposedly 
independent operating boards, such as the Federal Communications 
Commission, they should not be hamstrung or dictated to by the 
Department of Justice. It seems logical as to why we should not accept 
the amendment being offered by the Senator from North Dakota because it 
would essentially do the same thing that the Senate voted down with 
regard to the Federal Communications Commission.
  Therefore, I hope that we will give these new independent boards the 
authority that they obviously need to make decisions based upon the 
public interest. If turned over to the Justice Department, I believe 
that too much of the decisions would be made on legal technicality 
rather than that it is in the best interest of the public, in this case 
transportation, especially with regard to small States.
  I yield the floor.
  Mr. DORGAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from North Dakota is recognized.


                           Amendment No. 3064

 (Purpose: To establish certain competition standards with respect to 
                     mergers by railroad carriers)

  Mr. DORGAN. Mr. President, I send an amendment to the desk, and I ask 
for its consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from North Dakota (Mr. Dorgan), for himself and 
     Mr. Bond, proposes an amendment numbered 3064.

  Mr. DORGAN. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 319, strike lines 1 through 9 and insert in lieu 
     thereof the following--
       (3) striking subparagraph (E) of subsection (b)(1) and 
     inserting in lieu thereof the following--
       ``(E) whether the proposed transaction will not 
     substantially lessen competition, or tend to create a 
     monopoly in any line of commerce in any section of the 
     country.'';
       (4) striking paragraph (2) of subsection (b) and striking 
     ``(1)'' in the first paragraph of subsection (b);
       (5) striking subsection (c) and inserting in lieu thereof 
     the following--
       ``(c) The Commission shall approve and authorize a 
     transaction under this section when it finds the transaction 
     is consistent with the public interest. In making the 
     findings under subsection (b)(1)(E), the Transportation 
     Board--
       ``(1) shall request an analysis by the Attorney General of 
     the United States and shall accord substantial deference to 
     the recommendations of the Attorney General and shall approve 
     the transaction only if it finds that transaction does not 
     violate the standards set forth in subsection (b)(1)(E). The 
     transaction may not be consummated before the thirtieth 
     calendar day after the date of approval by the Transportation 
     Board. Action under the antitrust laws arising out of the 
     merger transaction may be brought only by the Attorney 
     General, and any action brought shall be commenced prior to 
     the earliest time under this subsection at which a merger 
     transaction approved under this subsection may be 
     consummated. The commencement of such an action shall stay 
     the effectiveness of the Transportation Board's approval 
     unless the court shall otherwise specifically order. In any 
     such action, the court shall review de novo the issues 
     presented. Upon consummation of a merger transaction in 
     compliance with this subsection and after termination of any 
     antitrust litigation commenced within the period prescribed 
     in this section, or upon the termination of such period if no 
     such litigation is commenced, the transaction may not 
     thereafter be attacked in any judicial proceeding on the 
     ground that it alone and of itself constituted a violation of 
     any antitrust laws other than section 2 of Title 15, but 
     nothing in this subsection shall exempt any rail carrier 
     resulting from a merger transaction approved under this 
     subsection from complying with the antitrust laws after the 
     consummation of such transaction;
       ``(2) may impose conditions governing the transaction, 
     including the divestiture of parallel tracks or requiring the 
     granting of trackage rights. Any trackage rights conditions 
     imposed to alleviate anticompetitive effects of the 
     transaction shall provide for compensation levels to ensure 
     that such effects are alleviated;
       ``(3) may approve and authorize the transaction only if it 
     finds that the guaranty, assumption, or increase is 
     consistent with the public interest, when the transaction 
     contemplates a guaranty or assumption of payment dividends or 
     of fixed charges or will result in an increase of total fixed 
     charges; and
       ``(4) may require inclusion of other rail carriers located 
     in the area involved in the transaction if they apply for 
     inclusion and the Transportation Board finds their inclusion 
     to be consistent with the public interest.'';
       (6) striking the last two sentences of subsection (d);
       (7) striking subsection (e); and
       (8) notwithstanding any other provisions of this Act, 
     amendments under this section shall apply to all applications 
     pending before the Transportation Board.
  Mr. DORGAN. Mr. President, I listened with interest to the statement 
of the Senator from Nebraska [Mr. Exon]. He is always persuasive and 
never in doubt. He makes an interesting case on this amendment. He 
pointed out that I offered a similar amendment on the 
telecommunications bill, and he is correct about that. I would offer a 
similar amendment if I had the opportunity dealing with airlines. I 
wish to explain that because it is the reason I offer this amendment 
today dealing with railroads.
  Let me go to the subject of airline mergers just for a moment. Since 
deregulation of the airline industry, we have had more and more 
mergers. We now have five or six very large airlines in America 
controlling most of the air transportation in our country.
  Prior to 1989, when two airlines wanted to merge, the Department of 
Transportation determined whether they are able to merge or not. They 
gave the approval. The Justice Department was allowed to comment on it 
in terms of the antitrust effects: whether the merger would be good for 
the country and whether it would be good for competitiveness. But the 
Department of Justice is only allowed to comment. Then the Department 
of Transportation makes the judgment. And so often the judgment is made 
on issues other than whether this is good for the country in terms of 
competition.
  In fact, I would make the case that a number of the airline mergers 
that have occurred have not been good for this country. And if you 
established an antitrust standard that was worthy, you probably would 
not have had a couple of these mergers and would not have a couple that 
will occur in the future. But we have a circumstance where those 
mergers were approved by the Department of Transportation and Justice 
is only asked to give its opinion.
  With respect to the previous bill that came before the Senate on 
telecommunications, the Federal Communications Commission will 
determine when there is competition in the local exchange with the 
regional Bell systems. I and several of my colleagues said, well, what 
we would like to do is have the people who know about competition and 
who know about these standards establish the Clayton Act test over in 
the Department of Justice about whether or when there is competition.
  That is why we have antitrust lawyers in this country. We have, 
incidentally, about 1,000 antitrust attorneys working for the Federal 
Government, or we used to have. There have been some cutbacks. One 
thousand of them. I used to at least threaten to put their pictures on 
the sides of milk cartons because I swore that despite the fact there 
were 1,000 antitrust lawyers, you could see no evidence that they 
lived. You could see no evidence they did anything. You could see no 
evidence that they cared at all whether there was antitrust activities 
in this country. In fact, the fewer companies competing, the better, 
according to some in our Government. I happen to think the more 
companies that are competing, the better for our free-market system.
  Some speak of a regulating mechanism that is good in a free market 
economy. Well, I have felt this way about airline mergers. I felt this 
way 

[[Page S 17586]]
about the competition issues with the telecommunications bill, and I 
feel this way about the legislation before the Senate today.
  Let me begin by saying I support the legislation brought to the floor 
of the Senate by the Senator from Nebraska and the Senator from South 
Dakota. I commend the two of them as well as Senator Hollings for 
writing a piece of legislation that I think has great merit and that I 
support.
  I would like to make a change, which is the reason I am offering this 
amendment. I would like to make an addition to it, but that does not 
diminish the fact I think all three have done a good job and I 
compliment them for their work.
  This piece of legislation in its larger form abolishes the Interstate 
Commerce Commission and creates a board over in the Department of 
Transportation that assumes many of the functions that the old ICC used 
to have. It does it in a thoughtful way, and it does it in the right 
way, and I support most of what the Senators have brought to the floor.
  I said during the Commerce Committee consideration of the legislation 
that I have made the case for some years the Interstate Commerce 
Commission had died from the neck up, and then I found myself mourning 
its passage. When people said, ``Let's kill it,'' I worried that if you 
do not put something in its place, all you have are larger and larger 
railroads, and then a bunch of shippers out here trying to deal with 
something that is closer to a monopoly than it is to pure competition. 
It seems to me that we need a regulatory mechanism in between, and that 
is the purpose for which this board is created in this legislation.
  For that I commend Senator Pressler, Senator Exon, and Senator 
Hollings and fully support them. I come to the floor with this 
amendment to say I think this bill would be improved with one addition, 
and the addition is offered in my amendment which provides that the 
Justice Department would have an opportunity using the Clayton Act 
standard on defining competition to review mergers of railroads.
  I recognize that the Interstate Commerce Commission has had the sole 
purview for reviewing mergers for some 70 years. I understand that. In 
my judgment, that does not make it right. I would prefer to see the 
authority given to the Justice Department and the antitrust folks in 
the Justice Department to evaluate: Is this merger something that makes 
sense for our country, or, with the Clayton standard, will the proposed 
merger substantially lessen competition, or would it tend to create a 
monopoly in any line of commerce in any section of the country? That is 
the Clayton 7 standard which I would like the Justice Department to be 
able to apply.
  My amendment provides that the Justice Department would make that 
judgment and offer its assessment using that standard to the Department 
of Transportation. And that the Board in the Transportation Department 
would give substantial deference to the Justice Department antitrust 
analysis. The amendment also provides that if the Justice Department 
antitrust lawyers who evaluate this determine, using the Clayton 
standard, that it would lessen competition substantially, it would tend 
to create a monopoly, et cetera, and it is not in the public interest 
to proceed and the board would proceed anyway. This establishes a 
provision by which the Justice Department or the Attorney General would 
be able to bring an action for a stay.
  That is essentially what this amendment does and what it is.
  The amendment says that notwithstanding any other provision of this 
act, amendments under this section shall apply to all applications 
pending before the transportation board.
  I would like to just talk for a moment about the consequences of 
this. There are some who are concerned because there is a very large 
proposed merger that has been filed or will be filed that deals with 
two very large railroad companies. I have no interest in that question 
at all. I do not have any of those companies in North Dakota. In fact, 
if the larger railroad company that serves our State were involved in a 
merger right now, I would still be in the chamber offering it, and I 
would not care what the larger railroad company that serves our State 
thinks about it. My interest is making sure that we have a seabed of 
competition that is enforced by evaluating a standard that is 
reasonable for ensuring competition. Because only in that manner will 
consumers, shippers and others reliant on a competitive system, only in 
that manner will they be able to see that this market system works to 
their advantage as well.
  I wish to say that I was approached by a representative of one of the 
railroads today asking why I was doing this, and I explained it had 
nothing to do with their company. In fact, it is interesting in that 
one of the companies--and I shall not name the companies--involved in 
this that is very concerned about it is a company that I have great 
fondness for because when I was a State tax commissioner many years ago 
and we put together, through an interstate compact, joint auditing 
around the country of companies, which made a lot of sense from the 
taxpayers' standpoint but which angered a lot of big companies. That 
particular rail company which I shall not name was almost alone in 
standing up in this country saying what the tax administrators around 
the country are doing on behalf of many States makes good sense and we 
support it.
  This company exhibited some strength and courage in doing that, so I 
have some fondness for this company because they stood up and said this 
was the right thing to do when almost all other corporations in the 
country were squealing and were angry because finally the States were 
getting from them the taxes that they had legitimately owed for many, 
many years.
  I say that only to demonstrate that I do not offer this because there 
is any merger pending or because there is any railroad that has an 
interest in one thing or the other. I offer this because I offered the 
amendment on the telecommunications bill, and I would offer the same 
amendment on a piece of legislation dealing with airline mergers.
  It seems to me that we ought not continue a circumstance where the 
regulatory body, that is the old ICC and now the transportation board, 
will make decisions about whether a merger is in the public interest 
based on a range of factors that is spelled out in current law, which 
include, for example, the effect of the transaction on the adequacy of 
transportation, the effect on the public interest of including or 
failing to include other rail carriers, the total fixed chargers that 
result from the proposed transaction, the interest of carrier employees 
affected by the proposed transaction, and whether the proposed 
transaction would have an adverse effect on competition among rail 
carriers in the affected region.
  These are the criteria that the Board itself will use. But the Board 
might decide to give substantial weight to two or three of the top 
criteria when, in fact, you might have a Clayton 7 standard here which 
clearly on its face is demonstrated not to be in the public interest 
with respect to this merger. I am not talking about this particular 
merger that I referred to earlier. I am talking about any merger. The 
Justice Department might evaluate that and say, ``This is not in the 
public interest if you use the Clayton standard.'' And yet the 
regulatory Board might say, ``Well, we view the top three areas here, 
top three factors, as having sufficient weight, so that we think this 
makes sense for our country.''
  My point is that I want those who are experts in our Government in 
the area of antitrust enforcement to have a valid and legitimate role 
in measuring whether a proposed merger in the railroad industry meets 
the test, meets the test for all Americans and for consumers. Is this 
in the public interest? Will it substantially lessen competition and 
tend to create a monopoly in any line of business in any section of 
this country? If so, in my judgment, it should not happen. It might be 
good for a couple companies now or in the future. But if that is the 
case, if it does not meet that test, then it should not happen.
  I want the Justice Department to be able to take that measure and 
provide that information to the transportation board, and to have 
substantial weight and deference given to the Justice Department's 
recommendation. That is all this does. It does not do any more than 
that. I hope that, as we talk 

[[Page S 17587]]
through this here in the next half-hour or hour, colleagues will see 
fit to support it.
  The Senator from Nebraska is correct, I offered a similar amendment 
to the telecommunications bill on essentially this same kind of issue. 
He is correct about that. But it is, in my judgment, the right thing to 
do for our country, the right thing to do to ensure vibrant competition 
in a free market system. I hope people will look at this amendment and 
think it has merit and decide today to support it.
  Mr. President, I would be happy to yield the floor at this point. I 
see my colleague, Senator Bond from Missouri, is seeking the floor. Let 
me yield the floor to him.
  Mr. BOND addressed the Chair.
  The PRESIDING OFFICER. The Senator from Missouri.
  Mr. BOND. I am very pleased to rise in support of the amendment by my 
friend and colleague from North Dakota. I have a very clear-cut 
philosophy on economic issues. Government regulation is the least 
desirable and the least effective way to make sure that the customers--
you and I as customers; we may be customers down the line--but as 
customers of businesses which are buying from other businesses or 
seeking services from them, we are all best served if the free market, 
rather than Government regulation, tells us how the service or products 
are delivered, what cost they are, and how readily available they are.
  Now, to achieve this, it requires there be competition. You cannot 
rely on the marketplace to regulate provision of services or goods or 
their cost if there is no competition. We have in law the Clayton Act, 
section 7 of the Clayton Act, which requires mergers in almost any 
other industry to be judged, and they cannot go forward if the proposed 
transaction would substantially lessen competition or tend to create a 
monopoly in any line of commerce in any section of the country. That is 
basic American philosophy going back almost 100 years. We need in this 
country to have the marketplace work. And the marketplace works when 
there is competition.
  Right now we have a situation in rail mergers under the Interstate 
Commerce Act that competition is not necessarily a criteria. The role 
of competition in rail mergers, in my view, should be the same as its 
role in any other mergers. If it does not leave a marketplace which can 
work, then we should not permit it. That is why we have laws against 
monopolization in section 2 of the Sherman Act and section 7 of the 
Clayton Act. That is why we have the FTC. That is why we have the 
Department of Justice. That is why we have access to the Federal 
courts.
  The amendment proposed by the Senator from North Dakota would just 
say that we have to apply this same test when it comes to rail mergers. 
It seems to me to make a lot of sense.
  Mr. President, I really got involved in this when shippers in my 
State expressed concern about their ability to both ship grain out in 
small lots of several cars, not unit trains, and purchasers who 
purchase inputs coming in by rail said, ``Hey, we need to have 
competition so we can get the best service at the best price.''
  We had our second joint hearing of the Senate and House Small 
Business Committees on November 8 in the House Office Building. I 
thought I would just share with my colleagues a couple of the points 
made by the witnesses. Obviously, we did not have jurisdiction over 
this, but as a matter affecting small business, we advised the 
distinguished chairman and my predecessor in the Republican slot on the 
Small Business Committee that we wanted to hear from the shippers and 
others affected. We tried the get a good cross-section. But several of 
the points made by those witnesses I think should be called to the 
attention of my colleagues.
  Prof. Curtis Grimm, who is professor and chair of the Transportation, 
Business, and Public Policy, College of Business and Management at the 
University of Maryland, College Park, said:

       Under current standards, the ICC could approve a 
     significantly anticompetitive merger, based on claims of 
     speculative efficiency gains which would outweigh competitive 
     harms.

  Mr. President, just because two companies want to merge and they say 
they can be more efficient, it does not necessarily mean that 
competition and the people they serve are going to benefit if we wind 
up with a monopoly situation. Sure, a lot of people would merge if they 
could take care of all their competition and be the only supplier in 
the marketplace. We have seen that before.
  We have seen that in transportation. Did you ever try to buy a ticket 
on an airline flight between two cities where there is only one 
carrier? Wow. It is usually cheaper to go around the world, no matter 
how close those two cities are. There was a time when only one carrier 
served Kansas City and St. Louis. You had to mortgage the home to fly 
back and forth. When competition comes in, you are going to find the 
best price and the best service. The same thing ought to be true, I 
believe, in other forms of transportation and, in this instance, in 
rail mergers.
  One of the witnesses testifying before us, Ed Emmett, is the 
president of the National Industrial Transportation League, the trade 
association representing over 1,000 shippers. He said:

       We are at a critical juncture in U.S. rail transportation 
     policy. It is essential that the Congress act now to change 
     the standards for judging rail mergers to focus more on 
     competition.

  A fellow who relies on rail transportation for his inputs and his 
products, James F. Jundzilo, transportation manager, Tetra Chemicals in 
Texas, testified:

       We must put more focus on competition, involve anti-trust 
     laws, competition in the public interest will then be 
     maintained and protected.

  A manager of Lange Co. of Conway Springs, KS, William F. York, said:

       The current merger standards should be revised to focus 
     more on the loss of competition and less upon so-called 
     ``efficiency gains'' or allow the Department of Justice to 
     review rail mergers as they do for other modes, including 
     airlines.

  Finally, one other private sector witness, Fredrick D. Palmer, 
General Manager and CEO of Western Fuels Association, said:

       I submit that a virtually deregulated railroad system in 
     serving a virtually deregulated electric utility industry 
     cries out for the sorts of antitrust regulation to which both 
     the electric utility and telecommunication industries are 
     subjected.

  Finally, we were pleased to have testify before us the Secretary of 
Agriculture, the Honorable Dan Glickman, who said:

       If this latest railroad consolidation is approved, there 
     will only be two major rail carriers west of the Mississippi. 
     This could have serious implications for the rates and 
     availability of rail transportation for the agriculture 
     industry because of the reduced level of competition.

  It is for that reason that we should provide the Clayton Act section 
7 standards to judge rail standards. I am advised the groups supporting 
this amendment include the National Industrial Transportation League, 
the Society of Plastics, the American Farm Bureau, Western Fuels 
Association, AFL-CIO, Railway Labor, Western Shipper's Coalition, the 
Chemical Manufacturer's Association, and I believe that the 
administration also supports this amendment.
  Mr. President, I think as we move toward a leaner and more efficient, 
more streamlined Federal Government, many functions of the Federal 
Government are excess, we do not need them. And there is one real area 
where we can get rid of a lot of regulation. It is where the 
marketplace forces competing suppliers of services or goods to compete 
on the quality of the service and the price.
  You do not need Government bureaucracies. You do not need rate 
setting. You do not need the whole plethora of rules and regulations 
for Government to run it if to make a buck they have to provide better 
service or better products at a better price than their competitors.
  That is the way we get the best deal. That is where our country has 
been most successful in making progress. I urge my colleagues to 
support this amendment.
  Mr. President, I yield the floor.
  Mr. PRESSLER addressed the Chair.
  The PRESIDING OFFICER. The Senator from South Dakota is recognized.
  Mr. PRESSLER. Mr. President, I rise in opposition to the Dorgan 
amendment. Let me make some general remarks on the issues surrounding 
antitrust and some of the standards that are used.
  First, let me point out that this amendment is an attempt to change 

[[Page S 17588]]
  the way the ICC looks at the competition among rail carriers, 
particularly whether the reduction in number of railroads at any one 
point is harmful.
  Changing the standards by which rail mergers are judged is very 
complicated. The current public interest standard is well established 
and has been in place for 75 years. Changing them now, particularly 
while two class one railroads are in a merger proceeding, without fully 
understanding how these changes affect railroads, shippers, States and 
even the financial markets, is not the approach this committee should 
take without fully understanding what we are doing. Unintended 
consequences could easily result.
  We have one of the most efficient, if not the most efficient, 
transportation system in the world. A large part of the system is the 
level of competition that exists between the transportation modes and 
within the modes. Merely trying to guarantee competition in the rail 
industry by changing how the ICC looks at competition could easily 
backfire.
  In the last 15 years, there have been roughly a dozen rail mergers, a 
tremendous increase in concentration when just measured by the number 
of railroads. However, at the same time, real rates have fallen up to 
50 percent with the decreases occurring every year across all major 
commodity groups and in all major geographic areas.

  This cannot just be attributed to deregulation, because without 
ongoing effective competition, the productivity gains that deregulation 
made possible for the railroads would not have been passed through to 
the shippers.
  Without fully understanding what we are doing in this area, we could 
easily turn back this trend, even though we have the best intentions. 
As a result, I urge that this amendment be defeated. I urge my 
colleagues to vote against it as well.
  Now specifically, the ICC does not apply or follow antitrust law, 
though it pays very close attention to competitive issues. The rail 
system is the underpinning of our entire economy, and many rail 
efficiencies can be achieved only through mergers. The ICC applies a 
public interest standard, under which the public benefits, competitive 
or otherwise, of a merger, are balanced against any detriments, again 
competitive or otherwise, of a merger. This process allows the 
Commission to approve consolidations, even if they otherwise would 
violate antitrust laws.
  Rather than applying a narrow DOJ-type antitrust analysis, the 
Commission has consistently looked at all factors in deciding the 
competitive impact of rail mergers and has found pure concentration 
measures, such as the number of railroads serving a point, to be too 
simplistic a standard.
  The UP/MKT merger is a good example. In that case, a number of 
markets went from three railroads to two. Various parties, including 
the Justice Department, argued that there would be a reduction in 
competition in those markets and that conditions should be imposed to 
introduce additional rail competition in them. The Commission rejected 
these arguments, finding that the continued competition from a strong 
second railroad, the increase in competition from the merged system's 
introductions of new single-line routes and other service improvements 
and other competitive constraints, such as modal and source 
competition, would keep competition vigorous.
  In fact, the Commission was right. Union Pacific, at the request of 
an agency in California, had studied the rates in these 3-to-2 markets 
before and after the UP/MKT merger which was consummated in 1988.
  What they found was that in all cases, rates had decreased 
significantly, confirming the Commission's conclusion that competition 
would be intensified by moving from three railroads--one of which, MKT, 
was a weak third--to two strong rail competitors.

  The evidence is overwhelming that a mere reduction in the number of 
railroads does not stifle competition and, in fact, can enhance it 
where the effect is to add to the efficiency of the merged carriers and 
to their ability to offer new services.
  Furthermore, there is ample proof all across the country that where 
markets are served by two railroads with broad, equivalent networks, 
rail competition is intense. Perhaps the best example is a precipitous 
drop in Powder River Basin, WY, coal rates following the entry of CNW 
into the basin as a competitor, in partnership with UP against 
Burlington Northern.
  This experience of huge declines in the rates for the transportation 
of Powder River Basin coal is flatly incompatible with any theory that 
two railroads in a market will collude to keep prices at or near the 
level where other constraints, such as truck or product competition, 
would cause a loss of traffic. Other examples are the intense two-
railroad competition throughout the Southeast, between Norfolk Southern 
and CSX, and for Seattle/Tacoma and other Washington and Idaho traffic 
between BN and UP.
  The number of railroads alone is not what matters, it is the effect 
of the merger on competition. Absent some compelling reason for change, 
which has yet to appear, the current process should stand.
  Mr. President, let me make a few more remarks, and if other Senators 
come to the floor, I will certainly yield to them, but I want to 
continue to state my opposition to the Dorgan amendment.
  Since 1920, due to the unique place railroads hold in our economy, 
Congress has consistently found that applying a pure antitrust standard 
to rail mergers is inappropriate.
  Railroads carry roughly 40 percent of the freight in this country. 
These include 67 percent of new autos, 60 percent of coal, 68 percent 
of pulp and paper, 55 percent of household appliances, 53 percent of 
lumber and 45 percent of all food products. Much of this material is 
delivered on a just-in-time basis.
  What is impressive about these numbers is that, unlike the trucking, 
ship, barge, and aviation industries, which operate over national 
systems and which are built and/or maintained by Government and open to 
all operators, the goods that move by rail are transported over fixed, 
regional systems. Due to the regional nature of railroads, much more 
interchange occurs than in other modes of transportation. That is, 
railroads hand off cargo to one another while other modes of 
transportation have very little of this type of interchange--truck to 
truck, barge to barge.
  As a consequence, there are natural efficiencies in these other modes 
that do not readily occur in the rail industry. To achieve these types 
of efficiencies in the rail industry, there must be consolidations. 
Mergers and consolidations allow the rail industry to maximize the use 
of its tracks, cut down on interchange points, get the most out of 
switching yards, consolidate terminals and, in short, provide better 
service to its customers at the lower cost.
  In the past, Congress has recognized that rail consolidations cannot 
occur if rails are subject to the normal antitrust tests imposed on 
other businesses. What makes the ICC test different? There are three 
major components.
  The first is the use of the public interest standard. When looking at 
a merger, the Department of Justice focuses almost exclusively on 
possible reductions in competition. Under a pure antitrust review, the 
Justice Department could deny all rail mergers, which is what happened 
before the public interest standard was adopted. The ICC, on the other 
hand, takes into account both the public benefits of a merger, in terms 
of increased efficiencies, better service and enhanced competition, and 
any harms, in terms of reduced competition and loss of service.
  The ICC also has the power to condition mergers to take care of 
anticompetitive concerns, while the Department of Justice could try to 
negotiate conditions, it does not have the same power and discretion as 
the ICC. As a result, the ICC can condition and approve mergers that 
are in the public interest but might normally fail a review by the 
Department of Justice.

  The second is the open and well-developed process the ICC has for 
reviewing rail mergers. The process includes discovery, the development 
of a detailed record and a full and fair opportunity for all affected 
parties, including Federal agencies, States, localities, shippers and 
labor to be heard.
  The DOJ process, on the other hand, is a closed informal ex parte 
process in 

[[Page S 17589]]
which DOJ speaks with only those persons it chooses to and hears only 
the evidence it chooses to. There is no opportunity for discovery and 
no opportunity to learn and to respond to what others are saying.
  Taken together, these first two points are extremely important. 
Railroads cannot be duplicated. The lines that exist today are 
essentially it. While spur lines and short lines may be built, there 
will be no more railroads built from Chicago to Los Angeles or New York 
to St. Louis, not in the near future at least.
  A fair, impartial system bound by rules and precedent where all 
parties can be heard is important in deciding how these systems are 
rationalized. A DOJ review is far more subjective. All parties may not 
be heard and DOJ can decide which types of traffic patterns to look at, 
thereby making the process unpredictable from one case to another, from 
one administration to another.
  So I think, in looking at this, we have to look at what we are 
dealing with in the uniqueness of railroads. We will not have more 
railroad lines built in this country in terms of major routes from 
Chicago to Los Angeles or New York to St. Louis. We will have those 
remaining. But the question is a public interest standard allows some 
flexibility on the part of the rulemaking body which will now be in the 
Department of Transportation.
  The third component is the actual approval. The Department of Justice 
does not approve mergers, it merely indicates whether or not the 
Government will bring suit to stop it. I think now under the Hart-
Scott-Rodino standard, companies can get an opinion before they 
actually go to the expense of getting together.
  The ICC process brings with it a formal approval and preemption of 
other laws. This is important for a number of reasons. Without formal 
approval, abandonments or line sales contemplated by a merger will have 
to be approved by another agency. State laws designed to prevent or 
hinder mergers will not be preempted. This is particularly important to 
the free flow of interstate commerce. Further, private parties would 
not be prohibited from bringing suit to seek conditions or block the 
transaction.

  Finally, the Rail Labor Act would not be preempted. This is critical. 
Most railroads have 13 different unions with hundreds of different 
contracts. Absent the preemption of the Rail Labor Act and the 
imposition of labor protection conditions, the merging carriers would 
be forced to negotiate implementation agreements with each union under 
the Rail Labor Act. Because rail transportation is so vital to the 
economy, this act was created ``to avoid any interruption to 
commerce.'' The act achieves this goal by obligating management and 
labor to negotiate using a long, drawn-out process. Using this act to 
negotiate the implementation of a merger would take years. As a result, 
without a formal approval, even if a merger were approved by the 
Department of Justice it would more than likely be years, if ever, 
before it could be implemented.
  At the heart of this debate is, What is best for transportation 
policy? The more than 500 railroads that are in existence today are an 
integral part of our country's transportation system and are a linchpin 
in our economy. We have the best rail system in the world. The long-
established national railroad merger policy has served our country 
well. Absent some compelling reason, there is no basis for gambling 
with the future of an industry that is so important to our Nation. That 
is an important point.

  The second point is, the Senator from South Dakota spoke of 
deregulation. I am probably much less a fan of deregulation than he or 
some others in this Chamber. There are certain areas in our country 
where regulation, I think, is critical, where, without regulation, you 
get price gouging, you get pricing outside of a free market that 
disadvantages consumers. I will give some examples of that.
  While I say this, I am not opposed to all deregulation. Some of it 
has been just fine. But the Senator from South Dakota and I come from 
States that are sparsely populated, and we often, especially in the 
area of transportation, suffer the consequences of a deregulated 
environment in which, without competition, they extract prices that are 
unreasonable.
  I used an example of the airline industry in the Commerce Committee 
that the Senator from South Dakota will recall. I held up a picture of 
a big Holstein milk cow, called Salem Sue. It is the world's largest 
cow. It happens to be metal, but it is the largest cow. It sits on a 
hill about 25 or 30 miles from the airport in Bismarck, ND, if you 
drive down Interstate 94. I pointed out, if you get on a plane here in 
Washington, DC--and I admit, there are probably not a lot of folks who 
have an urgent desire to go see the world's largest cow just for the 
sake of going to see the largest cow--but if your desire is to go from 
Washington, DC, to see the world's largest Holstein cow, 30 miles from 
the Bismarck airport, you will pay more money for that trip than if you 
get on an airplane in Washington, DC, and fly to London to see Big Ben.
  Or, let us decide you want to see Mickey Mouse and decide to fly to 
Disneyland in Los Angeles. You fly twice as far and pay half as much as 
getting on an airplane here and flying to Bismarck. Question: Why would 
that be? Answer: Because we do not have substantial competition. We do 
not have the kind of competition in the airline industry that you have 
if you are in Chicago or Los Angeles. There, if you show up at the 
airport you have dozens of choices, all competing against each other, 
and the result is attractive choices at lower prices. But, with 
deregulation in the airline industry, we have fewer carriers, fewer 
choices, and higher prices.
  Now, deregulation is not always a boon to areas of the country that 
are sparsely populated. When you talk about deregulation with respect 
to railroad carriers, you must find a way, it seems to me, to provide 
protections for consumers. My concern about all of this is that the 
consumers be afforded an opportunity to have a price in the open market 
system or the free market system that is a fair price. We can foresee 
circumstances, and we have already seen some in this country, where the 
prices charged in areas where there is not substantial competition are 
prices far above those that should be charged.
  I mentioned earlier that my amendment is not directed at any carrier 
or any company or any merger. I mentioned I was interested in the 
telecommunications legislation, and I rose to offer an amendment 
including the Department of Justice there. I also have been involved in 
similar issues.
  About 3 weeks ago, I asked the Banking Committee in the Senate to 
hold hearings on bank mergers. This is not a newfound interest of mine. 
I was on a program awhile back and they asked me about my interests in 
having hearings on bank mergers. We were talking about a specific 
merger where two very large banks were combining and merging to be a 
much, much larger bank. They said, ``Does that not make sense? Two 
banks become one and you are able to get rid of a lot of overhead and 
lay off 6,000 or 8,000 people. Does it not make sense to be more 
efficient?"
  I said, ``Following that logic, it makes sense to have only one bank 
in America, just one. That way you do not have any duplication. Of 
course, you do not have any competition either.''
  Following this to its extreme, this notion of efficiency without 
caring much about what it does to the free marketplace and without 
caring much about what violation occurs to the issue of competition, I 
suppose you could make a case that in every industry the fewer 
companies the better, because the fewer companies the more efficient 
you are going to become. You can lay off people. Of course, it would 
not be very efficient for consumers, because you can then engage in 
predatory pricing and no one can do very much about it.
  The point I am making is, I am not here because of a railroad or a 
merger. I have been involved in the issue of bank mergers, calling for 
hearings at the Senate Banking Committee in recent weeks on that. I 
have been on the floor on several other merger issues. I hope that the 
Senate will take a look at this and decide this makes sense. If it does 
not, at the next opportunity I will again raise this issue.
  Frankly, there are not many people in the Senate, or the House, for 
that matter, who care to talk much about antitrust issues. First of 
all, it puts most people to sleep. You know, it is 

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better than medicine to put people to sleep. Nobody cares much about 
it. Nobody understands it much. It is, to some people, just plain 
theory. But, if you are a shipper and you are somewhere along the line 
someplace and the company that has captured the competition and is now 
the only opportunity for you to ship says to you, ``By the way, here is 
my price; if you do not like it, tough luck,'' all of a sudden, this 
has more meaning than theory.
  If you are a traveler on an airline and you have no competition when 
you used to, but now the only remaining carrier that bought its 
competition and became one says to you, ``By the way, here is my price; 
if you do in the like it, do not travel,'' then this is more than 
theory.
  That is what persuades me to believe that in a free market system, if 
you preach competition but do not care very much about whether 
meaningful competition exists, or whether we have adequate enforcement 
of antitrust standards, then in my judgment you do no favor to the free 
market economy.
  I hope people will consider this on its merits and consider that it 
would be wise for our country and for public policy to ask that this 
legislation be amended with the amendment I have offered, along with 
Senator Bond.
  Mr. President, I yield the floor. I make the point of order a quorum 
is not present.
  The PRESIDING OFFICER (Mr. Thompson). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mrs. HUTCHISON. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. HUTCHISON. Mr. President, I rise to speak against the Dorgan 
amendment.
  I do very much appreciate the chairman of the committee putting 
forward this legislation. Our budget resolution envisions that the ICC 
will go out of existence. I think it is important that we pass this 
legislation. But I do not think it was the intent of the committee to 
change all the rules under which we have been operating as it concerns 
mergers in this area. I think turning over the power to the Department 
of Justice and changing the criteria that are being used for antitrust 
purposes would not be a very good thing for us to do, and there is no 
reason to do it. We are talking about saving money here. We are talking 
about doing away with the duplication of administration. I do not think 
we have to also change all of the rules and the precedents that have 
been set for the last 70 years in railroad mergers.
  There are many people who have legitimate concerns about some of the 
railroad mergers that are being considered right now. But these were 
brought into play before we brought this bill to the floor. And I think 
to change the rules is not necessary, nor desirable. I think we have 
the capabilities to judge any mergers. We have the ability to judge the 
issues under the standards that we have had before in transferring that 
to the Department of Transportation.
  The second reason I think it is important to keep the standards we 
have is that the Department of Transportation and the new Board that 
will be created will have the transportation background. They will 
specialize in this area. That will be their area of expertise and 
concern. I do not think it does us any good to go to the Department of 
Justice, which has so many other areas of interest, and I do not think 
that having this transfer does anything for the merits of the issue, 
and it could hurt by changing precedent that has been in place.
  One of the things that is so important in our judicial system is the 
value of precedent. We place a great deal of emphasis on being able to 
determine from what has happened in the past what will be allowed in 
the future. That is one of the ways that businesses make their 
decisions. They would look at a merger, they would look at a precedent, 
and they would make a business decision if this is something that would 
go through and what the concerns would be.
  I think it is important we keep that value of precedent so that we 
will have an orderly business climate that allows people to make good 
business decisions without disrupting 70 years of precedent in this 
area.
  So I hope that we can defeat the Dorgan amendment and stick with the 
committee bill. I think it is a good bill. It has many merits. It is 
certainly going to save money.
  We are on the road to eliminating the ICC because it is not 
necessary. Let us not throw out the value of what has gone on in the 
past just because we are putting it into a more efficient system. I 
think it could cost us much more in the long run and certainly cost 
competitiveness and cost to customers if we increase the regulatory 
environment and therefore cause people to have to raise prices. So I 
hope we can defeat this amendment, and I yield the floor.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. INHOFE. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. INHOFE. Mr. President, I ask unanimous consent that I be 
recognized as if in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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