Antitrust Law Daily Wrap Up, ANTITRUST NEWS: ‘Collective action’ to knock railroad acquisition off track reported to Justice Department, (Jan 20, 2016)

By Jeffrey May, J.D.

Canadian Pacific Railway is asking the Department of Justice Antitrust Division to look into whether major U.S. railroads are engaging in an antitrust conspiracy to block the company’s planned takeover of Norfolk Southern Corp. In a January 19 letter addressed to top Antitrust Division officials, counsel for Canadian Pacific contended that unnamed U.S. railroads “appear to have begun a concerted effort to block CP's proposed acquisition through a widespread campaign of meetings and solicitations with customers, the media, and other interested parties.”

In November, Canadian Pacific announced its plan to acquire Norfolk Southern to “create a transcontinental railroad with the scale and reach to deliver improved levels of service to customers and communities while enhancing competition and creating significant shareholder value.” Among other things, Canadian Pacific has argued that the acquisition would “create new markets and options for customers across North America.” Despite Norfolk Southern's continued rejection of the suitor's advances, Canadian Pacific's takeover efforts keep chugging along.

The attempts to acquire Canadian Pacific follow Canadian Pacific's unsuccessful bid for CSX Corp., which was announced in 2014. At that time, Sen. Amy Klobuchar (D-Minn.), chair of the Senate Judiciary Committee’s Antitrust Subcommittee, expressed her concerns about that proposal and railroad consolidation generally.

In its letter to the Antitrust Division, Canadian Pacific contended that major U.S. railroads are trying to block the proposed combination of Canadian Pacific and Norfolk Southern because they are concerned that the transaction will lead to a more competitive industry. According to Canadian Pacific, the alleged “agreement to collectively work together to prohibit the introduction of competition by a new competitor . . . is akin to a group boycott in principle and intended effect.”

Moreover, the conduct is not protected by the Noerr-Pennington doctrine, Canadian Pacific contended. The collective action arose before there was any need to protect freedom of speech or guarantee access to government. It began prior to any agreement on a transaction and before there was any government proceeding or review. Canadian Pacific also suggested that the conduct involved an agreement to influence private parties not protected by the Noerr-Pennington doctrine.

If the deal moves forward, the Surface Transportation Board will review the transaction to determine if it is in the public interest. The Department of Justice lacks full authority to review railroad combinations under the Clayton Act. Instead, the Antitrust Division would offer its antitrust analysis to the Board.

Attorneys: Kevin J. Arquit and Matt J. Reilly (Simpson Thacher & Bartlett LLP) for Canadian Pacific Railway Ltd.

Companies: Canadian Pacific Railway Ltd.; Norfolk Southern Corp.; CSX Corp.

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