[Congressional Record Volume 142, Number 91 (Wednesday, June 19, 1996)]
[Senate]
[Pages S6542-S6543]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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    PROPOSED MERGER BETWEEN THE UNION PACIFIC AND SOUTHERN PACIFIC 
                               RAILROADS

 Mr. BOND. Mr. President, when Congress passed legislation last 
year transferring the authority to review proposed rail mergers from 
the former Interstate Commerce Commission to the Surface Transportation 
Board, a major issue of concern in the Senate was whether or not the 
Board should retain exclusive jurisdiction over ensuring that healthy 
competition is protected before any proposed merger is approved. That 
congressionally imposed responsibility is indeed important and its 
first major test will be seen soon when the Board issues its decision 
on the proposed merger of the Union Pacific and Southern Pacific 
Railroads.
  Never before has such a large consolidation of control over rail 
traffic been

[[Page S6543]]

proposed and never before have so many expressed such strong 
reservations about the dangers to competition posed by such a merger.
  The Board must discharge its responsibility to protect competition 
and in this case to do so, it must condition approval of the proposed 
merger with mandatory divestiture of the parallel lines created as a 
result of the merger to an independent rail competitor.
  This condition is essential to approve the proposed merger. Granting 
trackage rights alone is not sufficient to protect competition. In 
reviewing this question, the Board should consider the following:
  First, the proposed merger would leave two railroads in the West, the 
combined UP-SP and the BN-Santa Fe, with control of 90 percent of the 
rail traffic in the West, resulting in reduced competition, higher 
shipping rates, and reduced service.
  Second, the proposed merger will cause many shippers to go from three 
carriers to two, and many more from two carriers to only one. The 
Department of Justice's review estimates over $6 billion in shipping 
traffic would be affected by this reduced competition.
  Third, oddly enough, the competitive harm in this proposed merger is 
two times the competitive harm of the proposed Santa Fe-Southern 
Pacific merger proposed and rejected in the mid-1980's.
  It is not surprising that numerous shipping groups have publicly 
opposed the merger in its present form and favor divestiture to solve 
the competitive problems. These groups include the Society of Plastics, 
the NIT League, and the Gulf States of Texas and Louisiana. The 
American Farm Bureau, National Grange, and National Farm Bureau are 
among the many agriculture groups opposed to the merger and requesting 
conditions other than the BNSF-CMA agreement. Divestiture of parallel 
tracks and facilities will result in preservation of competitive 
options for all shippers who would otherwise see reduction in 
competition from two carriers to one, and for a significant number who 
would go from three to two.
  Mr. President, last fall I joined with the chairman of the House 
Small Business Committee, Congresswoman Jan Meyers, in convening a 
joint session of our Small Business Committees, to hear from small 
shippers who have been affected by mega-mergers like this in the past 
and who know what the consequences of this proposed merger, if approved 
in its current form, will be for them in the future. They were 
unanimous. They know that only actual, real competition protects them 
from the serious consequences of being captive to a single shipper. 
They have come out in droves to voice their fears in their public 
filing to the Board. Their interests collectively must be protected.
  Because of the intense interest in these parallel lines by competing 
carriers, divestiture would not force the applicants to sell any of 
these lines for less then their market value. Divestiture allows the 
merger to go forward and gives the UP and SP the benefits of end-to-end 
efficiency and the administrative-corporate consolidation that they 
want while protecting competition for shippers.
  Unfortunately, the trackage rights solution to these serious threats 
to competition will not resolve the problems. Even with added access, 
competitors operating over lines controlled by an aggressively 
competitive owner are inferior to the owner of the line who uses 
control of access to place the competitor at a serious disadvantage. 
Trackage rights alone do not constitute available competition, only 
access to actual moving traffic does. That can be achieved only by 
mandatory divestiture of parallel lines.
  The Departments of Justice, Transportation, and Agriculture oppose 
the current proposed merger due to these competitive problems. Numerous 
shippers groups and many of the affected States have voiced concerns as 
well. Mr. President, I believe Congress wants the Board to discharge 
its duty to protect competition. We will see this decision as the 
crucial test whether it will or will not.
  Congress explicitly recognized divestiture as a viable condition 
available to the Board when it passed the ICC Termination Act creating 
the Surface Transportation Board. Congress specifically wrote 
divestiture into the new law with this need in mind. Divestiture to the 
highest bidder certainly promotes free-market competition. The Board 
clearly has this authority and should use it to protect 
competition.

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