Today, U.S. Senator Herb Kohl offered the Railroad Antitrust Enforcement Act, bipartisan legislation to repeal the obsolete antitrust exemptions protecting freight railroads from competition, as an amendment to the Senate Surface Transportation Bill. These exemptions deny rail consumers antitrust protections available to consumers in virtually every other industry. Kohl offered the amendment in response to concerns that freight railroads are abusing their dominant market power and raising rates for those who rely on them to ship dozens of vital commodities, including coal and agricultural products. Kohl is chairman of the Senate Antitrust, Competition Policy and Consumer Rights subcommittee.
"The antitrust exemption for the railroad industry is hurting businesses that are often forced to use a single rail provider and are charged vastly increased rates with no recourse." Kohl said. "It is time that we stop this predatory practice. The railroad industry should be governed by the same antitrust rules and consumer protections as other industries."
Rapid consolidation in the railroad industry has resulted in only four Class I railroads providing nearly 90 percent of the nation's freight rail transportation, as measured by revenue. Three decades ago there were 42.
Many industries -- known as "captive shippers" -- are served by only one railroad. These captive shippers have faced constantly rising rail rates. In many cases the ordinary protections of antitrust law are unavailable to these captive shippers -- instead, the railroads are protected by a series of exemptions from the normal rules of antitrust law to which all other industries must abide.
As an example, Dairyland Power in La Crosse serves the electricity needs of more than 575,000 people. Several years ago, Dairyland was hit with a 93% rate increase - resulting in about $35 million of increased cost.
Current antitrust law protects a wide range of railroad industry conduct from scrutiny by antitrust enforcers. Railroad mergers and acquisitions are exempt from antitrust law and are reviewed solely by the Surface Transportation Board. Railroads that engage in collective ratemaking are also exempt from antitrust law. Private parties have no right to obtain injunctions to halt anti-competitive practices. Kohl's amendment will eliminate these and other antitrust exemptions by allowing the federal government, state attorneys general and private parties to file suit to enjoin anti-competitive business practices, mergers and acquisitions. It will restore the review of these mergers to the agency where they belong, the Justice Department's Antitrust Division. And it will eliminate the antitrust exemption for railroad collective rate making.