[Federal Register Volume 64, Number 90 (Tuesday, May 11, 1999)]
[Notices]
[Pages 25392-25394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11877]
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DEPARTMENT OF TRANSPORTATION
Surface Transportation Board
[STB Finance Docket No. 33685]
Coach USA, Inc.--Petition for Exemption--Intra-Corporate Family
Merger and Consolidation Transactions
AGENCY: Surface Transportation Board, DOT.
[[Page 25393]]
ACTION: Request for comments.
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SUMMARY: The Surface Transportation Board (Board) is seeking comments
on a petition by Coach USA, Inc. (Coach) to be exempted from 49 U.S.C.
14303 and the regulations at 49 CFR part 1182 concerning the merger or
consolidation of motor carriers of passengers controlled by Coach.
DATES: Comments are due on June 10, 1999.
FOR FURTHER INFORMATION CONTACT: Beryl Gordon, (202) 565-1600. [TDD for
the hearing impaired: (202) 565-1695.]
SUPPLEMENTARY INFORMATION: Coach has filed a petition for exemption
requesting that it be exempted from the prior approval requirements of
section 14303 for mergers or consolidations of motor carriers of
passengers Coach already controls. Under its proposal, Coach would file
a notice similar to the one applicable for class exemptions for
railroad intra-corporate family transactions that do not result in
significant operational changes, adverse changes in service levels, or
a change in the competitive balance with carriers outside the corporate
family. See 49 CFR 1180.2(d)(3) and 1180.4(g).
When the petition was filed, Coach, a noncarrier holding company,
stated that it controlled, inter alia, 73 motor carriers of passengers
subject to federal regulation (Operating Carriers). Coach states its
plans to transfer direct control of the Operating Carriers to several
new, wholly owned, primarily regionally-based subsidiaries (Management
Companies), which would manage closely the Operating Carriers assigned
to them. 1 As relevant here, each Management Company
evidently would examine the Operating Carriers it controls to determine
whether consolidations, mergers or other intra-family corporate
transactions involving these carriers are warranted.
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\1\ Tentative approval has been given to these applications.
See Coach USA, Inc., and Coach USA North Central, Inc.--Control--
Nine Motor Passenger Carriers, STB Docket No. MC-F-20931; Coach USA,
Inc., and Coach USA Northeast, Inc.--Control--30 Motor Passenger
Carriers, STB Docket No. MC-F-20932; Coach USA, Inc., and Coach USA
South Central, Inc.--Control--Eight Motor Passenger Carriers, STB
Docket No. MC-F-20933; Coach USA, Inc., and Coach USA Southeast,
Inc.--Control--Seven Motor Passenger Carriers, STB Docket No. MC-F-
20934; Coach USA, Inc., and Coach USA West, Inc.--Control--14 Motor
Passenger Carriers STB Docket No. MC-F-20935; Coach USA, Inc., and
Yellow Cab Service Corporation--Control--Four Motor Passenger
Carriers, STB Docket No. MC-F-20936 (STB served Nov. 19, 1998); and
Coach USA, Inc. and Coach Canada, Inc.--Control and Continuance in
Control--Autocar Connaisseur, Inc., Erie Coach Lines Company, and
Trentway-Wagar, Inc., STB Docket No. MC-F-20938 (STB served Dec. 17,
1998).
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Coach asserts that there are currently two procedures available for
seeking Board approval for mergers/consolidations. First, Coach can
file an application under 49 CFR part 1182 for merger authority. Under
this procedure, an accepted application will be published in the
Federal Register within 30 days of filing as a tentative grant of
authority, with comments due within 45 days. 2 If no adverse
comments are timely filed, the tentative grant becomes effective
automatically. If opposing comments are filed, the applicant can reply
within 60 days of the filing of the application. The Board will then
determine whether to issue a decision on the record developed or to
receive more evidence before issuing a decision. 3
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\2\ A tentative grant does not give the applicant the right to
consummate the transaction before the end of the comment period. 49
CFR 1182.5(a).
\3\ Under the statute, evidentiary proceedings are to be
concluded within 240 days of publication of the application. The
Board must issue a decision within 180 days after the close of the
evidence. Time periods may be extended, in total, for up to 90 days.
49 U.S.C. 14303(e).
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In the alternative, a party can file a petition for exemption under
49 U.S.C. 13541 seeking an individual exemption from the prior approval
requirements of 49 U.S.C. 14303 for the merger or consolidation. Coach
argues that these proceedings take 3 or 4 months from the filing of the
petition to complete. We have indicated that we would normally process
exemptions as we do applications: we would publish the exemption
request within 30 days of filing, and, after the comment period had
expired, we would issue a decision on the merits of the petition. See
Revision to Regulations Governing Finance Applications Involving Motor
Passenger Carriers, STB Ex Parte No. 559 (STB served July 8, 1997) at
6. 4
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\4\ This option is made possible by the ICC Termination Act of
1995, Pub. L. 104-88, 109 Stat. 803 (1995) (ICCTA). Under former 49
U.S.C. 11343(e), the Interstate Commerce Commission could only grant
exemptions for finance transactions involving motor carriers of
property. Id. at 6, n.10.
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Coach contends that, under present procedures, it takes a minimum
of two and one half months to be approved or exempted: ``During this
hiatus, the transaction could not be consummated and the benefits that
would have accrued from the merger or consolidation would not be
available to the traveling public or the merged/consolidated entity.''
Petition at 2.
Coach proposes that the exemption for Coach intra-corporate family
transactions would be similar to the rail exemption for intra-corporate
family transactions. Coach and/or one of its subsidiaries would file a
verified notice of exemption with the Board for the merger or
consolidation of at least two Coach-controlled carriers, which could be
consummated no sooner than 7 days after the filing of the notice.
Included in the notice would be a summary of the transaction and the
purpose of the transaction, of any contracts being entered into
concerning the transaction, and of the effects, if any, on employees. A
copy of the notice would be sent simultaneously to the Federal Highway
Administration (FHWA) 5 and, when the carriers provide
intrastate service, to the applicable state regulatory body. Coach
proposes that the Board would publish the notice of exemption in the
Federal Register within 30 days of filing. Coach also proposes that, if
the notice contains false or misleading information that is brought to
our attention, we could revoke the exemption and order divestiture.
Coach also submits that petitions for revocation could be filed at any
time pursuant to 49 U.S.C. 13541(d).6
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\5\ Also, approval from FHWA, if needed, for any transfer of
operating authorities, would be sought.
\6\ This provision states that the Board ``may revoke an
exemption . . . on finding that the application of a provision . . .
is necessary to carry out the transportation policy of section
13101.''
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Coach notes that, under 49 U.S.C. 13541(a), the Board must exempt a
transaction or service from regulation when we find that: (1)
Regulation is not necessary to carry out the transportation policy of
49 U.S.C. 13101; (2) either (a) regulation is not necessary to protect
shippers from the abuse of market power, or (b) the transaction or
service is of limited scope; and (3) exemption is in the public
interest.
Transportation Policy. Coach claims that the operational and
efficiency advantages of its intra-corporate merger/consolidation
transactions will further the transportation policy goals of 49 U.S.C.
13101(a)(2). The benefits of these transactions ``include consolidated
management, streamlined operational procedures, elimination of
redundancies and better coordinated planning, safety and other
management services that will enable the companies to operate more
economically and efficiently * * *'' Id. at 10. Coach also maintains
that granting an exemption will produce expeditious decisions,
enhancing the efficiency of regulation, and is thus consistent with 49
U.S.C. 13101(a)(2)(B).
Abuse of Market Power. Coach argues that there will be no risk of
an abuse of market power from the intra-corporate family transactions,
because they will not reduce competition: ``None of the Operating
Carriers today competes to any significant degree, if at all, with any
of the other Operating Carriers.'' Id. at
[[Page 25394]]
11. These companies allegedly face significant competition from other
bus carriers, private cars, and other modes of transportation. Coach
contends that the Board has already approved Coach mergers in
connection with control transactions.7 Finally, Coach
submits that competitive issues are more appropriately considered in a
control proceeding because carriers under common control will be
unlikely to compete with each other, than in a situation where the
controlled carriers are seeking to merge for, according to Coach,
``there should be no loss of competitive options available to the
traveling public.'' Id. at 13 (citations omitted).
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\7\ See Coach USA, Inc. and Leisure Time Tours-Control and
Merger Exemption-Van Nortwick Bros., Inc, et al., STB Docket No.
33428 (STB served Nov. 3, 1997) and Coach U.S.A., Inc. and K-T
Contract Services, Inc.--Control and Merger Exemption--Gray Line
Tours of Southern Nevada, STB Docket No. 33421 (STB served Dec. 4,
1997).
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Limited Scope. Coach contends that the proposed exemption is of
limited scope because it involves carriers already under common
control. Because, allegedly, the carriers share centralized management,
the merger/consolidation ``transactions will accordingly be more
focused on corporate form than on substantive operational changes.''
Id. at 14.
Coach submits that most of the Operating Carriers it controls are
relatively small. More than half of them have annual revenues of less
than $8 million, few have annual revenues of more than $20 million, and
most of the Operating Carriers have fleets of less than 75 buses. Coach
argues that, consistent with the standards for rail intra-corporate
family transactions at 49 CFR 1180.2(d)(3), in the merger or
consolidation of its Operating Carriers ``there will be no adverse
change in service levels, no significant operational changes that would
adversely impact the traveling public and no diminution in the level of
competitive service available to the public.'' Id. at 15.
Public Interest. The exemption is in the public interest, according
to Coach, because it will increase regulatory efficiency by reducing
potentially burdensome regulatory practices. Such efficiency, Coach
alleges, would save the resources of both petitioners and the Board.
In addition to these stated regulatory benefits, Coach claims that
there are also commercial reasons for determining that an exemption is
in the public interest. By reducing from two and a half months to 7
days the period for consummating a transaction after a filing, the
period that the two merged companies are in limbo would be
significantly reduced, lowering the danger that the petitioner will
miss out on commercial opportunities for improving service. Coach also
claims that, under an exemption, the public and the Operating Carriers
would sooner enjoy the benefits of the intra-corporate family
transaction. Finally, Coach asserts that reducing the regulatory
waiting period will lessen uncertainty in vendors and passengers.
Discussion
As Coach's petition raises issues of first impression, we are
seeking comment on Coach's petition. Commenters should address whether
an exemption for intra-corporate family transactions is warranted and,
if so, whether it should be available solely to Coach.
As a preliminary matter, we do not see how a class exemption could
apply only to one party. If the exemption criteria are satisfied for
Coach, they would also presumably apply to other parties, if any are
similarly situated. Parties should address this issue.
We also question whether the concerns raised by Coach cannot be
addressed under our current rules at least in those cases where there
is a demonstrated need for quick action by the Board. Under 49 U.S.C.
14303(i), pending the Board's consideration of an application, we may
grant interim approval to the operation of properties sought to be
acquired for not more than 180 days ``when it appears that failure to
do so may result in the destruction of or injury to those properties or
substantially interfere with their future usefulness in providing
adequate and continuous service to the public.'' See also 49 CFR
1182.7. If the interim approval request is submitted when the
application is filed, the Board will issue its decision with the notice
accepting the application, i.e., within 30 days. Section 1182.7(d)(1).
This is quicker than the two and one half months that Coach claims is
too long and only 23 days longer than the effective date under Coach's
proposal.
Accordingly, commenters should address these issues, as well as the
general issue of whether the exemption Coach proposes is in the public
interest. Also, a copy of this request for comments will be served on
the Department of Justice, Antitrust Division, 10th Street &
Pennsylvania Avenue, NW., Washington, DC 20530.
This action will not significantly affect either the quality of the
human environment or the conservation of energy resources.
Decided: May 4, 1999.
By the Board, Chairman Morgan, Vice Chairman Clyburn, and
Commissioner Burkes.
Vernon A. Williams,
Secretary.
[FR Doc. 99-11877 Filed 5-10-99; 8:45 am]
BILLING CODE 4910-00-P