Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Legislation to End Railroad Industry Antitrust Exemption Re-Introduced, (Mar 22, 2013)

By E. Darius Sturmer, J.D.

Senator Amy Klobuchar (D, Minnesota) introduced legislation in the Senate yesterday to remove the railroad industry’s exemption from the antitrust laws. The proposed “Railroad Antitrust Enforcement Act of 2013” (S. 638) is intended not only to promote fairness and competition in the industry in general, but specifically to address “captive shipping,” a concern in rural communities across the country where businesses and agricultural producers have access to only one rail company to ship their goods to market.

The bill has bipartisan support, as it is co-sponsored not only by fellow Democratic Senators Tammy Baldwin (Wisconsin), Al Franken (Minnesota), Patrick J. Leahy (Vermont), and Jon Tester (Montana) but by Republican Sen. David Vitter (Louisiana).

According to Sen. Klobuchar, who chairs the Senate Judiciary Committee’s Antitrust Subcommittee, the measure would result in more competitive pricing that helps keep costs down for shippers and customers alike. Only four Class I railroads provide more than 90 percent of the nation’s rail transportation, resulting in constant increases in rail rates for companies that rely on those railroads for their shipping needs, Sen. Klobuchar noted. Klobuchar pointed out that one such customer, which has a paper factory in Minnesota, actually pays less to ship its products to the Southeastern states from an overseas plant than it does to ship to those same locations from its domestic mill along a captive rail line.

Sen. Vitter similarly added: “Many of Louisiana’s unique businesses rely on efficient shipping using railroads, and our bill will ensure they are not punished with higher rates, especially those in more rural areas or areas suffering from higher rail captivity.”

A 2009 study by the Consumer Federation of America estimated that rail rates were $3 billion higher for captive shippers than they would be if the market were competitive. The excess charges “can cost consumers as much as $100 per year per household,” the study found.

Similar legislation was introduced in 2011 by then-chair of the Antitrust Subcommittee, former Senator Herb Kohl of Wisconsin. Sen. Kohl’s bill (S. 49) passed the Judiciary Committee, as identical measures had in the previous two Congresses, but went no further. Kohl’s effort to insert the bill as an amendment to the Senate’s Surface Transportation bill last year was also rebuffed.

News: Antitrust