[Congressional Record Volume 147, Number 33 (Tuesday, March 13, 2001)]
[Extensions of Remarks]
[Page E350]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   INTRODUCTION OF THE RAIL MERGER REFORM AND CUSTOMER PROTECTION ACT

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                           HON. EARL POMEROY

                            of north dakota

                    in the house of representatives

                        Tuesday, March 13, 2001

  Mr. POMEROY. Mr. Speaker, I am pleased today to introduce the Rail 
Merger Reform and Customer Protection Act. This legislation would 
extend the reach of the antitrust laws to the railroad industry while 
providing the Surface Transportation Board (STB) with additional 
criteria on which to evaluate future railroad mergers.
  For virtually every business in the United States, mergers and 
acquisitions in excess of $10 million are subject to antitrust review 
by the Antitrust Division of the Department of Justice. Railroads, 
however, are treated differently. Under current law, the STB has 
exclusive jurisdiction over most matters concerning rail transportation 
including mergers and acquisitions. In exercising that authority, the 
STB has approved a series of mergers over the past 20 years since 
passage of the Staggers Act which has resulted in widespread 
consolidation in the rail industry. This consolidation has reduced the 
number of rail carriers from 63 Class I railroads to just 7, resulting 
in significant service disruptions, negative impacts on shippers and a 
reduction in competition.
  Mr. Speaker, believe it or not, the railroad industry is the only 
industry, except for America's favorite pastime, baseball, that is 
almost entirely exempt from the substance of the antitrust laws. With 
the rail industry now consolidated to seven major railroads, and the 
stage set for a possible final consolidation, there is an increased 
potential for the rail industry to exercise market power and monopoly 
abuse against shippers. In order to protect shippers and promote true 
competition, it makes sense to treat the railroads like other 
industries and subject them to the jurisdiction of the Department of 
Justice and full application of antitrust laws.
  Currently, the Department of Justice can only comment on proposed 
mergers. In previous mergers the recommendations of DOJ were ignored. 
For example, the Department of Justice pegged the Union Pacific-
Southern Pacific merger ``most anti-competitive rail merger in 
history.'' In that merger, the STB ignored not only the concerns 
expressed by Department of Justice, but also the concerns of rail 
customers, organized labor, and the United States Department of 
Agriculture. I believe that the Department of Justice, an agency that 
can objectively evaluate the impact of mergers and protect shippers 
from the continual decrease in competition, needs to have a strong 
voice in mergers reviewed by the Surface Transportation Board.
  My legislation would require both the Department of Justice and the 
STB to review and approve future rail mergers. Under this proposed 
regulatory framework, the DOJ would approve a merger unless it 
substantially restrains commerce in any section of the country or tends 
to create a monopoly in any line of commerce. The STB would still be 
required to review and approve a merger under a similar standard but it 
would also judge the proposed merger by a broader public interest 
standard. However, my legislation would not allow a merger to move 
forward without approval from both Department of Justice and Surface 
Transportation Board.
  In this day and age, there is no public policy reason to justify the 
industry's special treatment, particularly since the railroads have 
enjoyed considerable deregulation under the Staggers Act and the 
Interstate Commerce Commission (ICC) Termination Act. The passage of 
these laws which reduced the scope and effectiveness of the regulatory 
agency, makes it more necessary than ever for shippers to have the full 
panoply of remedies available against monopolistic activities.
  Under my legislation, the STB would also be required to examine 
several additional criteria before approving a merger. Future mergers 
and consolidations would not be approved unless it was shown that the 
merger: (1) provides additional rail to rail competition and 
competitive options for rail customers; (2) improves service to 
customers; and (3) will not reduce competitive rail routes available to 
current railroad customers. Additionally, the legislation ensures that 
relief can be sought under the current regulatory framework or through 
the antitrust laws.
  I am pleased that the Alliance for Rail Competition, the Consumers 
United for Rail Equity, National Farmers Union, American Farm Bureau 
Federation, National Association of Wheat Growers, the American Forest 
and Paper Association, the Transportation Intermediaries Association, 
Otter Trail Power, Minnesota Power, the National Association of 
Chemical Distributors, and the American Chemistry Council have endorsed 
this legislation.
  I urge my colleagues to join me in this effort to ensure that the 
railroad industry is subject to the same laws as every other industry. 
It is in the public interest to raise the bar for review of the last 
few remaining mergers and to have oversight by the Department of 
Justice on the actions of the railroads.

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