Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Senator Klobuchar raises concerns over potential CSX-Canadian Pacific Railway merger, (Oct 17, 2014)

By Linda O’Brien, J.D., LL.M.

Sen. Amy Klobuchar (D-Minn.), chair of the Senate Judiciary Committee’s Antitrust Subcommittee, stated yesterday that one of the most concerning aspects of the potential merger between CSX Corp. and Canadian Pacific Railway Ltd. is that railroads’ current antitrust exemption prevents the U.S. Department of Justice (DOJ) from blocking mergers even if they would harm competition.

“Given recent concerns about shipping delays and ongoing concerns about anticompetitive conduct in the railroad industry, any further consolidation would prompt significant concern,” Klobuchar wrote in a letter to Attorney General Eric Holder and Surface Transportation Board Chairman Daniel Elliott. “Should CSX and Canadian Pacific agree to merge, I expect your agencies to fully review the competition implications of such a combination. Until the Department of Justice is given the full authority to independently review the legality of railroad mergers under the Clayton Act, I ask that the Surface Transportation Board give full weight to the antitrust analysis of the Antitrust Division.”

Klobuchar and Sen. David Vitter (R-La.) introduced legislation to address “captive shipping” and help promote fairness and competition in the railroad industry. The “Railroad Antitrust Enforcement Act” (S 638) would repeal the anticompetitive antitrust exemption for railroads and makes railroad mergers subject to antitrust scrutiny by the DOJ.

Klobuchar said that, without access to competition, rail customers are often in a “take it or leave it” position with respect to price and service. Under current law, the DOJ has no independent authority to review and, if appropriate, block or condition a railroad merger. The DOJ can play only an advisory role to the Surface Transportation Board, which holds sole authority to approve railroad mergers if it finds them “consistent with the public interest.” Costs for shippers and recent significant shipping delays experienced by agricultural producers and energy consumers are examples of why more railroad competition is needed.

Should CSX and Canadian Pacific agree to merge, Klobuchar urged the Surface Transportation Board to fully review the competition implications of such a merger and give full weight to the antitrust analysis of the DOJ.

“We can all agree that competition is an effective way to ensure low prices, high quality service, and innovation,” she said. “I am pleased that the Surface Transportation Board has launched an inquiry into competition in the railroad industry. However, more can be done to promote competition, including making railroad mergers subject to full antitrust scrutiny by the Department of Justice and subjecting the entire industry to the antitrust laws.”

News: AcquisitionsMergers Antitrust